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EXHIBIT 10.07 PURCHASE AND SALE AGREEMENT                 THIS PURCHASE AND SALE AGREEMENT (this “Agreement”) is executed as of February 7, 2006 (the “Execution Date”), by and between AMLI at Castle Creek, L.P., a Delaware limited partnership, and AMLI Residential Properties L.P., a Delaware limited partnership (together, “Seller”), and NTS Realty Holdings Limited Partnership, a Delaware limited partnership (“Buyer”). W I T N E S S E T H:                 In consideration of the mutual covenants and agreements set forth herein Seller and Buyer agree as follows: ARTICLE 1 - DEFINITIONS                 As used herein, the following terms shall have the following meanings:                 “business day” shall mean any day other than Saturday, Sunday, any Federal holiday, or any holiday in the State of Indiana. If any period expires on a day which is not a business day or any event or condition is required by the terms of this Agreement to occur or be fulfilled on a day which is not a business day, such period shall expire on or be extended to, as the case may be, the next succeeding business day.                 “Buyer’s Reports” shall mean the results of any examinations, inspections, investigations, tests, studies, analyses, appraisals, evaluations and/or investigations prepared by or for or otherwise obtained by any Buyer’s Representatives in connection with Buyer’s Due Diligence.                 “Buyer’s Representatives” shall mean Buyer and any officers, directors, employees, agents, representatives and attorneys of Buyer.                   “Closing” shall mean the closing of the Transaction.                 “Closing Date” shall mean March 23, 2006.                 “Closing Documents” shall mean all documents and instruments executed and delivered by Buyer or Seller pursuant to the terms of this Agreement in connection with the Closing, including (without limitation) the documents and instruments required pursuant to the terms of Article 7.                 “Confidential Materials” shall mean any records or files (whether in a printed or electronic format) that consist of or contain any of the following: attorney or accountant work product; attorney-client privileged documents; internal correspondence of Seller, any direct or indirect owner of any beneficial interest in each respective Seller, or any of their respective affiliates and correspondence between or among such parties; or other information in the possession or control of Seller, each Seller’s respective property manager or any direct or indirect owner of any beneficial interest in each respective Seller which such party deems proprietary or confidential.                 “Contracts” shall mean those service, supply, maintenance, and utility agreements, equipment leases, and other contracts and agreements relating to the Real -------------------------------------------------------------------------------- Property and the Personal Property that are identified in Exhibit B attached hereto and incorporated herein by this reference, together with any additional contracts and agreements entered into in accordance with the terms of Section 10.2 hereof, as the same may be modified or terminated in accordance with the terms of Section 10.2.                 “Deposit” shall mean the sum(s) to be deposited by Buyer in accordance with the terms of Section 3.1 hereof.                 “Documents” shall mean the documents and instruments applicable to the Property or any portion thereof that any of the Seller Parties deliver or make available to any Buyer’s Representatives prior to Closing or which are otherwise obtained by any Buyer’s Representatives prior to Closing, including (without limitation) the Title Commitment, the Survey, the Title Documents, the Property Documents, the Financial Data and any Rent Roll.                 “Due Diligence” shall mean examinations, inspections, investigations, tests, studies, analyses, appraisals, evaluations and/or investigations with respect to the Property, including (without limitation) examination and review of title matters, applicable land use and zoning Laws and other Laws applicable to the Property, the physical condition of the Property, and the economic status of the Property.                 “Due Diligence Period” shall mean the period commencing on the Letter Date and expiring at 5:00 p.m. EST on February 25, 2006.                 “Financial Data” shall mean unaudited income statements relating to the operation of the Property for calendar years 2003, 2004 and 2005 and year to date 2006.                 “Intangible Property” shall mean, collectively, Seller’s interest in and to all of the following, if and only to the extent the same may be assigned or quitclaimed by Seller: (i) the Contracts, to the extent that the same are in effect as of the Closing Date, (ii) any licenses, permits and other written authorizations necessary for the use, operation or ownership of the Real Property, (iii) any guaranties and warranties in effect with respect to any portion of the Real Property or the Personal Property as of the Closing Date, and (iv) the right to use the name Castle Creek and Lake Clearwater in connection with the Real Property, but specifically excluding any trademarks, logos, trade colors, service marks, and trade names of Seller, including all derivations of the name “AMLI”.                 “Laws” shall mean all municipal, county, state or federal statutes, codes, ordinances, laws, rules or regulations applicable to the Property.                 “Leases” shall mean all leases of all or any part of the Real Property in effect on the Closing Date and identified in the Assignment of Leases (as that term is defined in Section 7.3 hereof).                 “Letter Date” shall mean January 26, 2006, the date on which the letter of intent with regard to this Transaction was executed by Seller and Buyer.                 “Liabilities” shall mean any and all claims, demands, liabilities, damages, obligations, fines, penalties, costs and expenses, including (without limitation) reasonable attorneys’fees and disbursements. --------------------------------------------------------------------------------                 “Major Damage/Condemnation” shall mean:                           (a)    any condemnation or eminent domain proceeding that occurs after the Execution Date, if and only if the portion of the Real Property that is the subject of such proceedings has a value in excess of Five Hundred Thousand Dollars ($500,000.00) for the Real Property known as AMLI at Castle Creek or Five Hundred Thousand Dollars ($500,000.00) for the Real Property known as AMLI at Lake Clearwater, as reasonably determined by Buyer; and                           (b)    any damage or destruction that occurs after the Execution Date, if and only if either (i) the damage or destruction is an uninsured casualty, unless Seller, in its sole and absolute discretion, elects to give Buyer a credit at Closing for the cost of repair or restoration, which cost shall be agreed to (if at all) within the ten (10) business day period within which Buyer may terminate this Agreement pursuant to Section 12.1, or (ii) the portion of the Real Property or Personal Property that is damaged or destroyed has a cost of repair that is in excess of Five Hundred Thousand Dollars ($500,000.00) for the Real Property known as AMLI at Castle Creek or Five Hundred Thousand Dollars ($500,000.00) for the Real Property known as AMLI at Lake Clearwater, as reasonably determined by Buyer.                 “Owner’s Title Policy” shall mean an ALTA owner’s title insurance policy in the amount of the Purchase Price.                 “Permitted Exceptions” shall mean and include all of the following: (a) applicable zoning, building and land use laws, ordinances, rules and regulations, (b) the lien of non-delinquent taxes and assessments, (c) any matters caused by any Buyer’s Representative, (d) the rights of the tenants under the Leases, (e) all matters enumerated in Schedule B of the Title Commitment and all matters shown on the Survey other than those matters specified in Section 4.2 which Seller is obligated to satisfy at Closing and those Title Objections which Seller has elected in writing to Remove as provided in Section 4.2, and (f) any easement, restriction, covenant, agreement, or other matter affecting title to the Property executed by Seller after the date hereof with the approval (or deemed approval) of Buyer as provided in Section 4.2.                 “Personal Property” shall mean, collectively, (a) the machinery, equipment and other tangible personal property owned by Seller that is located on the Real Property and described in Exhibit C attached hereto and made a part hereof, and (b) all records and files of Seller relating to the operation and maintenance of the Real Property or to the Leases, but specifically excluding from the items described in clause (b) any Confidential Materials, all invoices, cancelled checks and bank statements relating to any period prior to the Closing Date, tax records of Seller and any computer software that is licensed to Seller.                 “Property” shall mean, collectively, the Real Property, the Personal Property, Seller’s interest as landlord in all Leases, and the Intangible Property.                 “Property Documents” shall mean, collectively, the Leases and the Contracts.                 “Purchase Price” shall mean the sum of Fifty Million and One Dollars ($50,000,001.00), which Purchase Price shall be reasonably allocated between that part of the Property comprising the assets associated with AMLI at Castle Creek and that part of the Property comprising the assets associated with AMLI at Lake Clearwater by written agreement of the parties prior to Closing. --------------------------------------------------------------------------------                 “Real Property” shall mean those certain parcels of real estate commonly known, respectively, as AMLI at Castle Creek and AMLI at Lake Clearwater, and legally described in Exhibit A attached hereto and incorporated herein by this reference, together with all buildings, improvements and fixtures located thereon and all right, title and interest, if any, that Seller may have in and to all rights, privileges and appurtenances pertaining thereto including all of Seller’s right, title and interest, if any, in and to all rights-of-way, open or proposed streets, alleys, easements, strips or gores of land adjacent thereto; provided, however, that in the event of any condemnation that occurs after the date hereof, the term “Real Property” shall not include any of the foregoing that is taken as a result of any such condemnation proceeding.                 “Remove” with respect to any Title Objection shall mean that Seller shall release, correct or satisfy or cause the Title Company to affirmatively insure over (as applicable) such Title Objection at or prior to Closing.                 “Rent Roll” shall mean the rent roll with respect to the Real Property identifying (a) each tenant of the Real Property, (b) such tenant’s respective leased premises, (b) the termination date of such tenant’s Lease, (c) the tenant’s rent obligation, (e) the unapplied portion of such tenant’s security or other deposit, (f) the date to which rent is collected and (g) whether such tenant is in default under its Lease. The Rent Roll shall be certified as being true and correct to Seller’s knowledge.                 “Seller Parties” shall mean and include, collectively, (a) Seller, (b) its attorneys, (c) Seller’s Broker, (d) each Seller’s respective property manager, (e) any direct or indirect owner of any beneficial interest in each respective Seller, and (f) the respective officers, directors, employees, or agents of each respective Seller, each Seller’s respective property manager or any direct or indirect owner of any beneficial interest in each respective Seller.                 “Seller’s Broker” shall mean Tikijian Associates.                 “Seller’s knowledge” or words of similar import shall refer only to the current actual (as opposed to implied or constructive) knowledge of (a) Fred Shapiro, the Senior Vice President/Acquisitions, (b) Christine Eash, the Regional Vice President, (c) Matthew Jones, the Regional Manager, and (d) the respective on-site property managers of AMLI at Castle Creek and AMLI at Lake Clearwater, as to each such respective property only (the “Knowledge Parties”) and shall not be construed to refer to the knowledge of any other Seller Party or to impose or have imposed upon any Knowledge Party any duty to investigate the matters to which such knowledge, or the absence thereof, pertains. There shall be no personal liability on the part of any Knowledge Party arising out of any of the Seller’s Warranties.                 “Seller’s Warranties” shall mean Seller’s representations and warranties set forth in Section 9.2 and as remade by Seller as of the Closing Date, as such representations and warranties may be modified or waived or deemed waived by Buyer pursuant to the terms of this Agreement.                 “Survey” shall mean (a) for AMLI at Castle Creek, the ALTA/ACSM Land Title survey prepared by American Consulting, Inc., as Job No. 2005.1115, dated December 28, 2005 and certified by Edward J. Sweetland, Registered Land Surveyor #29900000, and (b) as to AMLI at Lake Clearwater, the ALTA/ACSM Land Title survey prepared by American Consulting, Inc., as Job No. 2005.1116, dated December 28, 2005, and certified by Bryan J. -------------------------------------------------------------------------------- Moll, Professional Land Surveyor #20500012, copies of which have been delivered to Buyer by Seller.                 “Title Commitment” shall mean (a) for AMLI at Castle Creek, the commitment to issue an owner’s policy of title insurance dated October 14, 2005, issued by the Title Company as Commitment No. NCS-205292-CHI 1, and (b) as to AMLI at Lake Clearwater, the commitment to issue an owner’s policy of title insurance dated October 28, 2005, issued by the Title Company as Commitment No. NCS-205301-CHI 1, copies of which have been delivered to Buyer by Seller.                 “Title Company” shall mean First American Title Insurance Company.                 “Title Documents” shall mean all documents referred to in Schedule B of the Title Commitment as exceptions to coverage.                 “Title Objections” shall mean any exceptions to coverage enumerated in Schedule B of the Title Commitment and any matters shown on the Survey to which Buyer timely objects in accordance with the terms of Section 4.2.                 “Transaction”shall mean the transaction contemplated by this Agreement. ARTICLE 2 - SALE OF PROPERTY                 Seller agrees to sell, transfer and assign, and Buyer agrees to purchase, accept and assume, subject to the terms and conditions set forth in this Agreement and the Closing Documents, all of Seller’s right, title and interest in and to the Property. ARTICLE 3 - PURCHASE PRICE                 In consideration of the sale of the Property to Buyer, Buyer shall pay to Seller the Purchase Price as follows:                 3.1     Earnest Money Deposit. Within three (3) business days after the Execution Date, and as a condition precedent to the effectiveness of this Agreement, Buyer shall deposit in escrow with the Title Company by wire transfer or other immediately available funds the sum of Three Hundred Thousand Dollars ($300,000) (the “Initial Deposit”). If Buyer has not terminated this Agreement on or before the expiration of the Due Diligence Period as permitted herein, Buyer shall, on the first business day following the expiration of the Due Diligence Period, deposit an additional Six Hundred Thousand Dollars ($600,000) (the “Additional Deposit”) in escrow with the Title Company by wire transfer or other immediately available funds. The Initial Deposit and the Additional Deposit, as and when made as required herein, shall be referred to collectively as the “Deposit.” The Deposit shall be applied against the Purchase Price on the Closing of this Transaction and shall otherwise be held and delivered by the Title Company in accordance with the provisions of Article 13. If Buyer fails timely to make the Initial Deposit as provided herein, Buyer shall be deemed to have elected to terminate this Agreement, and Seller and Buyer shall have no further liability hereunder except for obligations which by the express terms of this Agreement survive the termination of this Agreement. If Buyer fails to make the Additional Deposit as and when required herein, Seller may enforce Buyer’s obligation to make the Additional Deposit and sue to collect the same from Buyer, notwithstanding Seller’s termination of this Agreement and receipt of the Initial Deposit pursuant to the following Section 11.1. Buyer acknowledges and agrees that if it has not terminated this Agreement as of the expiration of the Due Diligence Period, Buyer’s obligation to -------------------------------------------------------------------------------- make the Additional Deposit shall expressly survive any later termination of this Agreement by Seller for Buyer’s default.                 3.2     Cash at Closing. On the Closing of this Transaction, Buyer shall (a) pay to Seller by wire transfer or other immediately available funds an amount equal to the balance of the Purchase Price plus and/or minus (as applicable) the Deposit and any other credits, reductions or prorations for which this Agreement provides, and (b) cause the Title Company to simultaneously pay the Deposit to Seller by wire transfer or other immediately available funds. ARTICLE 4 - TITLE TO REAL PROPERTY                 4.1     Title to Real Property. Seller has heretofore provided Buyer with a copy of the Survey, the Title Commitment, and copies of all Title Documents.                 4.2     Title Objections. Prior to the expiration of the Due Diligence Period, Buyer shall give Seller written notice of any Title Objections. Seller shall notify Buyer in writing within five (5) business days after receipt of Buyer’s notice of Title Objections (but, in any event, prior to the Closing Date) whether Seller elects to Remove the same. Failure of Seller to notify Buyer in writing within such five (5) business day period shall be deemed an election by Seller on the last day of such period not to Remove such Title Objections. If Seller elects not to Remove one or more Title Objections, then Buyer may either (a) terminate this Agreement by written notice to Seller given within five (5) business days after Seller’s election (but in any event prior to the Closing Date), in which event the Title Company shall (i) pay Twenty-five Thousand Dollars ($25,000.00) of the Deposit to Seller and (ii) refund the balance of the Deposit to Buyer, and thereafter Seller and Buyer shall not have any further liability hereunder except for obligations which by the express terms of this Agreement survive the termination of this Agreement, or (b) waive such Title Objections and proceed to Closing. Failure of Buyer to terminate this Agreement within such five (5) business day period shall be deemed an election by Buyer to waive such Title Objections and proceed to Closing. Any such Title Objection so waived (or deemed waived) by Buyer shall be deemed to constitute a Permitted Exception, and the Closing shall occur as herein provided without any reduction of or credit against the Purchase Price.                 Notwithstanding the foregoing, Seller shall be obligated to satisfy (or in the case of mechanics’liens, insure over at Seller’s cost) at Closing all (a) mortgages and security interests encumbering the Property, (b) mechanics’ liens or notices thereof relating to work performed at the request of any Seller Parties, and (c) liens for delinquent real estate taxes and assessments, and Buyer shall not be obligated to identify the same as a Title Objection.                 If this Agreement is not terminated by Buyer in accordance with the provisions hereof, Seller shall, at Closing, Remove or cause to be Removed any Title Objections which Seller elected in writing to Remove as provided above and any other matters which Seller is obligated to satisfy under this Section 4.2. Seller shall be entitled to a reasonable adjournment of the Closing (not to exceed ninety (90) days) for the purpose of the Removal of any Title Objections which Seller has elected in writing to Remove or other matters which Seller is obligated to satisfy under this Section 4.2.                 From and after the Letter Date, Seller shall not execute any easement, restriction, covenant, agreement or other matter affecting title to the Property other than Leases entered into by Seller in the ordinary course of business and except for the deeds contemplated by Section 15.17, unless Buyer has received a copy thereof and has approved the same in -------------------------------------------------------------------------------- writing. If Buyer fails to object in writing to any such proposed instrument within five (5) business days after receipt of the aforementioned notice, Buyer shall be deemed to have approved the proposed instrument. Buyer’s consent shall not be unreasonably withheld, conditioned or delayed with respect to any such instrument.                 4.3      Title Insurance. At Closing, Seller shall cause the Title Company to issue the Owner’s Title Policy to Buyer insuring that fee simple title to the Real Property is vested in Buyer subject only to the Permitted Exceptions, which Owner’s Title Policy shall include a 3.1 zoning endorsement at Seller’s expense. Buyer shall be entitled to request that the Title Company provide such other endorsements to the Owner’s Title Policy as Buyer may reasonably require, provided that (a) such endorsements shall be at Buyer’s cost and shall impose no additional liability on Seller, (b) Buyer’s obligations under this Agreement shall not be conditioned upon Buyer’s ability to obtain such endorsements and, if Buyer is unable to obtain such endorsements, Buyer shall nevertheless be obligated to proceed to close the Transaction without reduction of or set off against the Purchase Price, and (c) the Closing shall not be delayed as a result of Buyer’s request; provided, however, nothing herein shall be deemed to preclude Buyer from terminating this Agreement on or before the expiration of the Due Diligence Period in the event the Title Company will not agree to issue any endorsement requested or desired by Buyer. ARTICLE 5 - BUYER’S DUE DILIGENCE/AS IS SALE                 5.1     Buyer’s Due Diligence. Seller has heretofore provided Buyer with (a) a Rent Roll with respect to those Leases in effect as of the last day of the calendar month preceding the Letter Date, and (b) the Financial Data. In addition, during the Due Diligence Period (a) Seller will make or cause to be made available to Buyer for copying, at Buyer’s sole cost and expense, the Leases and Contracts and any other on-site property files of Seller and Seller’s property manager (other than Confidential Materials) and (b) will allow Buyer’s Representatives and Buyer’s consultants and contractors (collectively, the “Entering Parties”) access to the Real Property upon reasonable prior notice at reasonable times for the purpose of conducting physical tests and inspections of the Real Property, provided (i) such access does not interfere with the operation of the Real Property or the rights of tenants; (ii) Buyer shall coordinate with Seller and Seller’s property manager prior to each entry on the Real Property by any Entering Parties; (iii) the Entering Parties shall not contact any tenant; (iv) after the expiration of the Due Diligence Period, Buyer’s Representatives shall not be permitted to perform any further testing or other physical evaluation of the Real Property; and (v) Seller or its designated representative shall have the right to be present during any physical testing of the Real Property and the right to review the scope of the work for any invasive physical tests prior to the performance of such tests by Buyer or its contractors or consultants. Buyer shall address or cause its contractors or consultants to address all reasonable concerns expressed by Seller with respect to such work scope or the manner of the performance of such tests. Buyer shall deliver copies of all Buyer’s Reports to Seller promptly following receipt thereof by Buyer. Upon the completion of any tests or inspections, Buyer shall immediately return the Real Property to the condition existing prior to such tests and inspections. Prior to such time as any Entering Parties enter the Real Property, Buyer shall (i) obtain and cause each of its consultants or contractors to obtain a policy of commercial general liability insurance with limits of not less than $1,000,000 combined single limit for personal injury and property damage, which policy of insurance shall name Seller and Seller’s property managers as additional insureds and shall be issued by an insurance company reasonably acceptable to Seller, and (ii) provide Seller with a certificate of insurance evidencing such insurance policy, which certificate shall provide for ten -------------------------------------------------------------------------------- (10) days prior written notice to Seller of cancellation or material change in such insurance policy.                 All such tests and inspections of the Real Property shall be at Buyer’s sole expense and shall be in accordance with applicable Laws. Buyer shall cause each of Buyer’s Representatives to be aware of the terms of this Agreement as it relates to the conduct of Buyer’s Due Diligence and the obligations of such parties hereunder.                 Buyer, for itself and on behalf of all other Entering Parties, hereby waives and releases Seller and each of the Seller Parties from all claims resulting directly or indirectly from the entrance upon or inspection of the Real Property by any Entering Parties, including claims caused by or alleged to be caused by the negligence of any Seller Parties (other than the sole negligence or willful misconduct of any Seller Parties). This waiver and release shall survive the termination of this Agreement or the Closing (as applicable).                 5.2     As Is Sale. Buyer acknowledges and agrees as follows: (a) during the Due Diligence Period, Buyer shall conduct such Due Diligence as Buyer shall deem necessary or appropriate; (b) except for Seller’s Warranties, the Property shall be sold, and Buyer shall accept possession of the Property on the Closing Date, “AS IS, WHERE IS, WITH ALL FAULTS,” and Buyer for itself and to the extent permitted by law for its successors and assigns hereby waives, releases and discharges Seller from any Liabilities caused by, arising out of or related to the condition of the Property and covenants not to sue Seller for any Liabilities caused by, arising out of, or related to the condition of the Property; (c) except for Seller’s Warranties, none of the Seller Parties have or shall be deemed to have made any verbal or written representations, warranties, promises or guarantees (whether express, implied, statutory or otherwise) to Buyer with respect to the Property, any matter set forth, contained or addressed in the Documents (including, but not limited to, the accuracy and completeness thereof) or the results of Buyer’s Due Diligence; and (d) Buyer shall independently confirm to its satisfaction all information that it considers material to its purchase of the Property or the Transaction. The terms of this Section 5.2 shall survive the Closing.                 5.3     Termination of Agreement During Due Diligence Period. If Buyer, in its sole and absolute discretion, is not satisfied with the results of its Due Diligence during the Due Diligence Period, Buyer may terminate this Agreement by written notice to Seller given at any time prior to the expiration of the Due Diligence Period, in which event, the Title Company shall (i) pay Twenty-five Thousand Dollars ($25,000.00) of the Deposit to Seller and (ii) refund the balance of the Deposit to Buyer and thereafter Seller and Buyer shall not have any liability hereunder except for obligations which by the express terms of this Agreement survive the termination of this Agreement. In the event Buyer fails to terminate this Agreement prior to the expiration of the Due Diligence Period, Buyer shall be deemed to have waived its rights to terminate this Agreement in accordance with this Article 5. Buyer and Seller each acknowledge and agree that Buyer shall have no additional period after the expiration of the Due Diligence Period to conduct further Due Diligence. ARTICLE 6 - ADJUSTMENTS AND PRORATIONS                 The following adjustments and prorations shall be made at Closing:                 6.1     Rent. All rents payable under the Leases and collected by Seller prior to the Closing Date shall be prorated between Seller and Buyer as of the day prior to the Closing Date. Seller shall be entitled to such rents attributable to any period to but not including the -------------------------------------------------------------------------------- Closing Date. Buyer shall be entitled to such rents attributable to any period on and after the Closing Date. Rents not collected as of the Closing Date shall not be prorated at the time of Closing.                 After Closing, Buyer shall make a good faith effort to collect on Seller’s behalf any rents for any period prior to the Closing Date and not collected as of the Closing Date and to tender the same to Seller upon receipt; provided, however, that all rents collected by Buyer on or after the Closing Date shall first be applied to all amounts due Buyer under the applicable Lease at the time of collection (i.e., current rents and any rents owed to Buyer for any period prior to Buyer’s receipt of payment from the tenant) with the balance (if any) payable to Seller, but only to the extent of amounts actually due Seller. Buyer shall not have an exclusive right to collect the rents due Seller and any other amounts due Seller under the Leases, and Seller hereby retains its rights to pursue claims against any tenant under the Leases or other party for sums due with respect to any period prior to the Closing Date; provided, however, that with respect to any legal proceedings against any tenant under a Lease, Seller (a) shall be required to notify Buyer in writing of its intention to commence or pursue such legal proceedings; (b) shall only be permitted to commence or pursue any legal proceedings after the date which is sixty (60) days after Closing; and (c) shall not be permitted to commence or pursue any legal proceedings seeking eviction of such tenant or the termination of any Lease. The terms of this Section 6.1 shall survive the Closing.                 6.2     Security Deposits. Buyer shall receive a credit against the Purchase Price at Closing in an amount equal to all unapplied security or other deposits held by Seller under the Leases as of the Closing Date.                 6.3     Real Estate and Personal Property Taxes. Buyer assumes and agrees to pay so much of the real estate taxes and personal property taxes in respect of the Property assessed for and first becoming a lien during the calendar year in which Closing occurs (the “Current Year Taxes”) as shall be allocable to Buyer by proration (based upon the number of days in such calendar year on and after the Closing Date). Seller shall pay (i) all delinquent real estate taxes and personal property taxes, (ii) both installments of real estate taxes and personal property taxes payable during the calendar year in which Closing occurs and (iii) so much of the Current Year Taxes as shall be allocable to Seller by proration (based upon the number of days in such calendar year prior to the Closing Date). Any such taxes which are payable in the calendar year in which Closing occurs but are not due and payable at the time of Closing and the portion of the Current Year Taxes not assumed by Buyer hereunder shall be allowed to Buyer as a credit against the Purchase Price at Closing. If the tax rate and/or assessed value for real estate taxes or personal property taxes which are payable in the calendar year in which Closing occurs but are not yet due and payable at the time of Closing and/or the Current Year Taxes have not been set at the Closing Date, the present tax rate and assessed value shall be used for the purposes of making the adjustments at Closing under this paragraph, and Seller shall not be further liable for such taxes.                 6.4     Special Assessments. Seller shall pay all installments of special assessments due and payable prior to the Closing Date, and Buyer shall pay all installments of special assessments due and payable on and after the Closing Date; provided, however, that if Seller may elect to pay any special assessment either immediately or under a payment plan with interest, Seller may elect to pay under a payment plan, which election shall be binding on Buyer. --------------------------------------------------------------------------------                 6.5      Property Operating Expenses. Operating expenses for the Property shall be prorated as of 12:01 a.m. on the Closing Date. Seller shall pay all utility charges and other operating expenses attributable to the Property to but not including the Closing Date (except for those utility charges and operating expenses payable by tenants in accordance with the Leases), and Buyer shall pay all utility charges and other operating expenses attributable to the Property on or after the Closing Date. To the extent that the amount of actual consumption of any utility services is not determined prior to the Closing Date, a proration shall be made at Closing based on the last available reading, and post-closing adjustments between Buyer and Seller shall be made within thirty (30) days after the date that actual consumption for such pre-closing period is determined, which obligation shall survive the Closing. Seller shall not assign to Buyer any deposits which Seller has with any of the utility or service companies servicing the Property. Buyer shall arrange with such companies to have accounts opened in Buyer’s name beginning at 12:01 a.m. on the Closing Date.                 6.6     Prepaid Expenses. Buyer shall reimburse Seller at Closing for all prepaid expenses relating to the Property which were paid pursuant to Contracts to be assigned to Buyer pursuant to this Agreement to the extent attributable to the period commencing on the Closing Date or thereafter.                 6.7     Closing Costs. Seller shall pay the following costs and expenses associated with the Transaction: (a) all premiums and charges of the Title Company for the Title Commitment and the Owner’s Title Policy, including a 3.1 zoning endorsement (but excluding all other endorsements requested by Buyer), (b) the cost of endorsements obtained by Seller to Remove Title Objections which Seller has elected in writing to Remove as provided in Section 4.2 or mechanics’ liens which Seller is obligated to satisfy at Closing under Section 4.2, (c) the cost of the Survey, (d) one-half the fee of the Title Company for closing this Transaction, and (e) the commission due Seller’s Broker.                 Buyer shall pay (a) all charges of the Title Company for endorsements requested by Buyer (other than a 3.1 zoning endorsement), (b) one-half of the fee of the Title Company for closing this Transaction, (c) all costs of Buyer’s Due Diligence, (d) all costs and expenses related to any financing to be obtained by Buyer (including any cost of a mortgagee title policy) and (e) all recording and filing fees for recording/filing the deed and other documents transferring the Property to Buyer.                 The obligations of the parties under this Section 6.7 shall survive the termination of this Agreement or the Closing (as applicable).                 6.8     Delayed Adjustment; Delivery of Operating and Other Financial Statements. If at any time following the Closing Date, the amount of an item listed in this Article 6 shall prove to be incorrect (whether as a result of an error in calculation or a lack of complete and accurate information as of the Closing), the party owing money as a result of such error or adjustment shall promptly pay to the other party the sum necessary to correct such error or make such adjustment upon receipt of proof of the same, provided that such proof is received by the party from whom payment is to be made on or before ninety (90) days after Closing. Seller and Buyer shall cooperate in providing information reasonably requested by the other to determine whether any delayed adjustment is necessary. The provisions of this Section 6.8 shall survive the Closing. -------------------------------------------------------------------------------- ARTICLE 7 - CLOSING                 Buyer and Seller hereby agree that the Transaction shall be consummated as follows:                 7.1     Closing Date. Closing shall occur on the Closing Date no later than 2:00 p.m. EST at the offices of the Title Company located at 101 West Ohio, Suite 1100, Indianapolis, Indiana. Time is of the essence with respect to the Closing.                 7.2     Payment of Purchase Price. Subject to all other terms and conditions of this Agreement, Buyer agrees to pay the amount specified in Section 3.2 by delivery of the same to the Title Company no later than 2:00 p.m. EST on the Closing Date. In the event the Title Company has not received the payment specified in Section 3.2 from Buyer by 2:00 p.m. EST on the Closing Date, Seller shall have the right to extend the Closing to the next business day following such date, in which event the proration and adjustments under Article 6 shall be recomputed as of such extended Closing Date. Notwithstanding the foregoing, Seller shall have the right to terminate this Agreement at any time if the payment specified in Section 3.2 is not received by the Title Company from Buyer on the Closing Date.                 7.3     Seller’s Closing Deliveries. Provided all conditions precedent to Seller’s obligations hereunder have been satisfied and subject to all other terms and conditions of this Agreement, at Closing each Seller shall deliver or cause to be delivered the following documents with respect to the respective Property owned by it:                           (a)    Deed. A deed in the form of Exhibit D attached hereto and incorporated herein by this reference (“Deed”) executed and acknowledged by such Seller.                           (b)    Bill of Sale. A bill of sale in the form of Exhibit E attached hereto and incorporated herein by this reference (“Bill of Sale”) executed by such Seller.                           (c)    Rent Roll. A Rent Roll with respect to those Leases in effect on the date five (5) days prior to the Closing Date.                           (d)    Assignment of Tenant Leases. An assignment and assumption of the Leases, in the form of Exhibit F attached hereto and incorporated herein by this reference (“Assignment of Leases”) executed by such Seller.                           (e)    Assignment of Intangible Property. An assignment and assumption of the Intangible Property in the form of Exhibit G attached hereto and incorporated herein by this reference (“Assignment of Intangible Property”) executed by such Seller.                           (f)    Notice to Tenants. A single letter in the form of Exhibit H attached hereto and incorporated herein by this reference (“Notice to Tenants”), executed by such Seller, duplicate copies of which shall be sent by such Seller after Closing to each tenant under the Leases.                           (g)    Non-Foreign Person Affidavit. A non-foreign person affidavit in the form of Exhibit I attached hereto and incorporated herein by this reference, executed and acknowledged by such Seller. --------------------------------------------------------------------------------                           (h)    Closing Certificate. A certificate executed by such Seller remaking Seller’s representations and warranties set forth in Section 9.2 as of the Closing Date, subject, however, to the provisions of Section 9.3.                           (i)    Vendor's Affidavit. A vendor's affidavit in the form of Exhibit J attached hereto and incorporated herein by reference executed by such Seller.                           (j)    Disclosure of Sales Information. A disclosure of sales information form (State form 46021) (the “Disclosure Form”) executed by such Seller.                           (k)    Declaration. The declaration required by Ind. Code 36-2-7.5-5(a) executed by the preparer of the Deed.                           (l)    Evidence of Authority. Documentation to establish to Buyer’s reasonable satisfaction the due authorization of each Seller’s sale of the Property and the authority of the signatory to this Agreement and the documents delivered by such Seller pursuant to this Section 7.3 to execute the same on behalf of Seller.                           (m)    Closing Statement. Seller’s closing statement executed by Seller.                           (n)    Other Documents. Such other documents as may be agreed upon by Buyer and Seller to consummate this Transaction.                           (o)    Keys and Original Documents. Keys to all locks on the Real Property in Seller’s or Seller’s building manager’s possession and originals or, if originals are not available, copies of all of the Property Documents, to the extent not previously delivered to Buyer.                 7.4     Buyer's Closing Deliveries. At the Closing, Buyer shall deliver or cause to be delivered the following:                           (a)    Purchase Price. The Purchase Price, as adjusted for prorations and other adjustments to be made pursuant to Article 6, plus any other amounts required to be paid by Buyer at Closing.                           (b)    Assignment of Leases. The Assignment of Leases executed by Buyer.                           (c)    Assignment of Intangible Property. The Assignment of Intangible Property executed by Buyer.                           (d)    Notice to Tenants. The Notice to Tenants executed by Buyer.                           (e)    Disclosure Form. The Disclosure Form executed by Buyer.                           (f)    Closing Certificate. A certificate executed by Buyer remaking Buyer’s representations and warranties set forth in Section 9.1 as of the Closing Date.                           (g)    Evidence of Authority. Documentation to establish to Seller’s reasonable satisfaction the due authorization of Buyer’s acquisition of the Property and the -------------------------------------------------------------------------------- authority of the signatory to this Agreement and the Closing Documents required to be executed by Buyer to execute the same on behalf of Buyer.                           (h)    Closing Statement. Buyer’s closing statement executed by Buyer.                           (i)    Other Documents. Such other documents as may be agreed upon by Seller and Buyer to consummate the Transaction. ARTICLE 8 - SELLER’S CONDITION TO CLOSING                 Seller’s obligation to close the Transaction is conditioned upon Seller obtaining all internal approvals of the Transaction within five (5) business days after the Execution Date. In the event this condition shall not be satisfied, Seller may terminate this Agreement by written notice to Buyer given within three (3) business days after the expiration of said five (5) business day period, in which event (a) the Title Company shall refund the Deposit to Buyer and (b) thereafter Seller and Buyer shall not have any liability hereunder except obligations which by the express terms of this Agreement survive the termination of this Agreement. The Closing Date shall be extended, if necessary, to provide for the eight (8) business day period (in the aggregate) provided for in this Article 8. ARTICLE 9 - REPRESENTATIONS AND WARRANTIES                 9.1      Buyer's Warranties. As of the Execution Date, Buyer represents and warrants to Seller as follows:                           (a)    Buyer’s Authorization. Buyer (i) is duly organized, validly existing and in good standing under the Laws of its respective state of organization and, to the extent required by Law, the State of Indiana, (ii) is authorized to consummate the Transaction and fulfill all of its obligations hereunder and under the Closing Documents to be executed by Buyer, and (iii) has all necessary power to execute and deliver this Agreement and all Closing Documents to be executed by Buyer and to perform Buyer’s obligations hereunder and thereunder. This Agreement and Closing Documents to be executed by Buyer have been duly authorized by all requisite partnership, corporate, limited liability company or other required action on the part of Buyer and its general partners or managing members (as applicable) and are the valid and legally binding obligation of Buyer, enforceable in accordance with their respective terms. Neither the execution and delivery of this Agreement and the Closing Documents to be executed by Buyer, nor the performance of the obligations of Buyer hereunder or thereunder will result in the violation of any Law or any provision of the organizational documents of Buyer or its general partners or managing member (as applicable) or will conflict with any order or decree of any court or governmental instrumentality of any nature by which Buyer or its general partners or managing members (as applicable) are bound.                           (b)    Buyer’s Financial Condition. No petition has been filed by or against Buyer under the Federal Bankruptcy Code or any similar state or federal Law.                 Buyer’s representations and warranties in this Section 9.1 shall survive the Closing.                 The foregoing representations and warranties of Buyer shall be remade by Buyer as of the Closing Date. --------------------------------------------------------------------------------                 9.2     Seller’s Warranties. The representations and warranties of Seller under this Section 9.2 shall be deemed made by each Seller only as to its respective authorization or as to matters with respect to the Property owned by it. In other words, in no event shall (i) AMLI at Castle Creek L.P. be deemed to have made any representations or warranties as to the authority of AMLI Residential Properties, L.P. or as to the Property known as AMLI at Lake Clearwater or (ii) AMLI Residential Properties, L.P. be deemed to have made any representations or warranties as to the authority of AMLI at Castle Creek L.P. or the Property known as AMLI at Castle Creek. Subject to the foregoing limitations, as of the Execution Date, Seller represents and warrants to Buyer as follows:                           (a)    Seller’s Authorization. Seller (i) is duly organized, validly existing and in good standing under the Laws of its respective state of organization and, to the extent required by Law, the State of Indiana, (ii) subject to obtaining the approvals described in Article 8, is authorized to consummate the Transaction and fulfill all of its obligations hereunder and under the Closing Documents to be executed by Seller, and (iii) subject to obtaining the approvals described in Article 8, has all necessary power to execute and deliver this Agreement and the Closing Documents to be executed by Seller, and to perform Seller’s obligations hereunder and thereunder. Subject to obtaining the approvals described in Article 8, this Agreement and the Closing Documents to be executed by Seller have been duly authorized by all requisite partnership, corporate or other required action on the part of Seller and its general partner or managing member (as applicable) and is the valid and legally binding obligation of Seller, enforceable in accordance with their respective terms. Neither the execution and delivery of this Agreement and the Closing Documents to be executed by Seller, nor the performance of the obligations of Seller hereunder or thereunder will result in the violation of any Law or any provision of the organizational documents of Seller or its general partner or managing member (as applicable) and is or will conflict with any order or decree of any court or governmental instrumentality of any nature by which Seller or its general partner or managing member (as applicable) are bound.                           (b)    Seller’s Knowledge Representations. To Seller’s knowledge:                                   (i)     Except as listed in Exhibit K attached hereto, Seller has not received any written notice of any current or pending litigation against Seller which would, in the reasonable judgment of Seller, if determined adversely to Seller, materially adversely affect the Property.                                   (ii)     Seller has not entered into any contracts or agreements affecting the Property which will be binding upon Buyer after the Closing other than (i) the Contracts listed in Exhibit B attached hereto, (ii) the Leases, and (iii) liens, encumbrances, easements, restrictions, covenants, agreements and other matters of record.                                   (iii)     Except for violations cured or remedied on or before the date hereof and except as listed in Exhibit K attached hereto, Seller has not received any written notice from any governmental authority of any violation of any zoning Law applicable to the Property.                                   (iv)     Except as a result of loan instruments securing a loan that will be paid in full by Seller at or prior to Closing and except as set forth in Exhibit K attached hereto, the Personal Property to be transferred to Buyer is free and clear of liens, security interests and other encumbrances arising by, through or under Seller. --------------------------------------------------------------------------------                                   (v)     Seller has not received any notice of any current or pending assessment for public improvements with respect to the Real Property which would be due and payable, in whole or in part, after the Closing Date.                 9.3     General Provisions.                           (a)    No Representation as to Leases. Seller does not represent or warrant that any particular Lease will be in force or effect on the Closing Date or that the tenants will have performed their obligations thereunder.                           (b)    Seller's Warranties Deemed Modified. To the extent that any Buyer's Representatives obtains actual knowledge prior to the expiration of the Due Diligence Period that Seller’s representations and warranties set forth in Section 9.2 were inaccurate, untrue or incorrect in any way as of the Execution Date, (i) Buyer shall provide Seller written notice thereof within five (5) business days after Buyer’s Representatives obtain such knowledge and (ii) such representations and warranties shall be deemed modified for all purposes of this Agreement to reflect the accurate, true or correct state of facts known to Buyer’s Representatives, and Seller shall have no liability hereunder for such inaccurate, untrue or incorrect representation or warranty; provided, however, if such inaccurate, untrue or incorrect representation or warranty was made by Seller for the purpose of concealing the actual facts from Buyer, the foregoing provisions of this Section 9.3(b) shall not apply, and Buyer may pursue its remedies against Seller in accordance with Section 9.3(e).                           (c)    Breach of Seller’s Warranties Discovered After the Due Diligence Period. If after the expiration of the Due Diligence Period but prior to the Closing any Buyer’s Representatives obtains actual knowledge that any of Seller’s representations and warranties set forth in Section 9.2 were untrue, inaccurate or incorrect in any respect as of the Execution Date, Buyer shall give Seller written notice thereof within five (5) business days of obtaining such knowledge (but, in any event, prior to the Closing). Buyer, as its sole remedy, shall have the following rights:                                   (i)     If any of Seller’s representations or warranties set forth in Section 9.2 were untrue, inaccurate or incorrect in any material respect as of the Execution Date, then Buyer may elect either (A) to waive such misrepresentations and consummate the Transaction without any reduction of or credit against the Purchase Price and without any liability of Seller hereunder for such inaccurate, untrue or incorrect representation or warranty, or (B) to terminate this Agreement by written notice given to Seller on or before the Closing Date, in which event, (x) the Title Company shall refund the Deposit to Buyer and (y) thereafter Seller and Buyer shall not have any further liabilities hereunder except for obligations which by the express terms of this Agreement survive the termination of this Agreement.                                   (ii)     If any of Seller’s representations and warranties set forth in Section 9.2 were untrue, inaccurate or incorrect on the Execution Date but were not untrue, inaccurate or incorrect in any material respect, Buyer shall be deemed to waive such misrepresentation or breach of warranty, and Buyer shall be required to consummate the Transaction without any reduction of or credit against the Purchase Price and without any liability of Seller hereunder for such inaccurate, untrue or incorrect representation or warranty.                 The untruth, inaccuracy or incorrectness of Seller’s representations and warranties under Section 9.2 shall be deemed material for purposes of this Agreement only if -------------------------------------------------------------------------------- Buyer’s damages resulting from such untruth, inaccuracy or incorrectness are reasonably estimated to exceed Two Hundred Thousand Dollars ($200,000.00) in the aggregate.                 Notwithstanding the foregoing, if such inaccurate, untrue or incorrect representation or warranty was made by Seller for the purpose of concealing the actual facts from Buyer, the foregoing provisions of this Section 9.3(c) shall not apply, and Buyer may pursue its remedies against Seller in accordance with Section 9.3(e).                           (d)     Representations and Warranties Remade on Closing Date. Seller's representations and warranties under Section 9.2 shall be remade by Seller as of the Closing Date; provided, however, such representations and warranties shall be modified to reflect Buyer’s Representatives’ actual knowledge with respect to any such representation and warranty and Seller shall be entitled to modify (i) Exhibit B to reflect the Contracts as modified or terminated in accordance with Section 10.2 and any new contracts or agreements entered into in accordance with Section 10.2 and (ii) Exhibit K to reflect any matters first arising after the Execution Date.                 Notwithstanding the foregoing, if prior to Closing Seller (i) obtains actual knowledge of any matters first arising after the Execution Date that, if not resolved prior to Closing would be required to be identified on Exhibit K as of the Closing Date or (ii) receives notice of any assessment for public improvements with respect to the Real Property which would be due and payable, in whole or in part, after the Closing Date, Seller shall give Buyer written notice thereof within five (5) business days after obtaining such knowledge (but, in any event, prior to Closing). Seller shall have the right to elect to extend the Closing Date for a period not to exceed thirty (30) days by written notice of such election given to Buyer on or before the Closing Date for the purpose of endeavoring to cure or remedy any matter referenced in clause (i) of the preceding sentence of this paragraph. In the event Seller is not able to cure or remedy such matter on or before the Closing Date (as the same may be extended by Seller as provided above), and in Buyer’s reasonable judgment such matter referenced in clause (i) of the first sentence of this paragraph adversely affects the Property in any material respect, Buyer may elect to terminate this Agreement by written notice to Seller given on the Closing Date, in which event the Title Company shall refund the Deposit to Buyer and Seller and Buyer shall not have any further liability hereunder, except for obligations which by the express terms of this Agreement survive the termination of this Agreement.                           (e)    Survival. Seller’s Warranties shall survive the Closing and not be merged therein for a period of one hundred eighty (180) days, and Seller shall only be liable to Buyer hereunder for a breach of a Seller’s Warranty with respect to which a claim is made by Buyer against Seller on or before the one hundred eightieth (180th) day after the date of the Closing. Furthermore, Seller’s liability for damages for any breach of a Seller’s Warranty shall be limited to an amount equal to the amount of the Deposit made by Buyer hereunder. ARTICLE 10 - COVENANTS                 10.1     Buyer's Covenants. Buyer hereby covenants as follows:                           (a)    Confidentiality. Buyer acknowledges that any information heretofore or hereafter furnished to Buyer with respect to the Property has been and will be furnished on the condition that Buyer maintain the confidentiality thereof. Accordingly, Buyer shall not disclose, and shall prohibit the other Buyer’s Representatives and any parties identified in clause (iii) below from disclosing, to any other person without the prior written consent of -------------------------------------------------------------------------------- Seller: (i) the terms of the Agreement, and (ii) any of the information in respect of the Property delivered to or for the benefit of Buyer whether by any Buyer’s Representatives or by any of the Seller Parties, including, but not limited to, any information heretofore or hereafter obtained by any Buyer’s Representatives in connection with its Due Diligence. In the event the Closing does not occur or this Agreement is terminated, Buyer shall promptly return to Seller all documents containing any of such information without retaining any copy thereof or extract therefrom, including (but not limited to) the Documents. Notwithstanding anything to the contrary hereinabove set forth, Buyer may disclose such information (iii) on a need-to-know basis to the Title Company, to Buyer’s Representatives, to Buyer’s consultants and contractors, to its potential lenders, and to members of professional firms serving it or its potential lenders and (iv) as any governmental agency may require in order to comply with applicable Laws or a court order. In addition, this confidentiality obligation shall not apply to any information that is a matter of public record. The provisions of this Section 10.1(a) shall survive any termination of this Agreement.                           (b)    Buyer's Indemnity. Buyer hereby agrees to indemnify, defend, and hold harmless each of the Seller Parties from and against (i) any and all liabilities arising out of, or resulting from, or alleged to arise out of or result from, the breach by Buyer of the terms of Section 10.1(a) and (ii) any and all Liabilities regardless of cause, including the negligence of any Seller Parties, but expressly excluding the sole negligence or willful misconduct of any Seller Parties, arising out of or resulting from, or alleged to arise out of or result from, the entry on the Real Property and/or the conduct of any Due Diligence by any Buyer’s Representatives at any time prior to the Closing; provided, however, that Buyer’s obligations under this clause (ii) shall not apply to the mere discovery of a pre-existing environmental or physical condition at the Property or to Liabilities caused by the sole negligence or willful misconduct of any Seller Parties. The provisions of this Section 10.1(b) shall survive the termination of this Agreement or the Closing (as applicable).                           (c)    Covenants Regarding Signage. Promptly after the Closing, Buyer will “banner” or otherwise temporarily mask the portion of all signage containing the “AMLI” name to indicate the new ownership, failing which upon five (5) days prior written notice Seller may do so at the expense of Buyer. Within sixty (60) days after the Closing, Buyer will cause the portion of all signage containing the “AMLI” name to be replaced, failing which Seller may remove such portion of the signage at Buyer’s expense upon fifteen (15) days prior written notice. The provisions of this Section 10.1(c) shall survive the Closing.                 10.2     Seller's Covenants. Seller hereby covenants as follows:                           (a)    Contracts. Without Buyer’s prior consent, between the Execution Date and the Closing Date, Seller shall not extend, renew, replace or otherwise modify any Contract or enter into any new contract or agreement (other than leases) unless such Contract (as so extended, renewed, replaced or modified) or new contract or agreement can be terminated by the owner of the Property without charge or penalty on not more than thirty (30) days’ notice. Seller shall furnish Buyer with a written notice of the proposed transaction which shall contain information that Seller believes is reasonably necessary to enable Buyer to make informed decisions with respect to the advisability of the proposed transaction. If Buyer fails to object in writing to the terms set forth in Seller’s notice within three (3) business days after receipt thereof, Buyer shall be deemed to have consented to the extension, removal, replacement or modification of the existing Contract or such new contract or agreement (as applicable). Buyer’s consent shall not be unreasonably withheld, conditioned or delayed with respect to any such transaction that is proposed prior to the expiration of the Due Diligence -------------------------------------------------------------------------------- Period. Buyer, in its sole and absolute discretion, shall be entitled to grant or withhold its consent with respect to any such transaction that is proposed after the expiration of the Due Diligence Period.                 On or before the Closing, Seller shall terminate any management agreement currently in effect with respect to the Property at the sole cost and expense of Seller.                           (b)    Maintenance of Property. Except to the extent Seller is relieved of such obligations by Article 12 hereof, between the Execution Date and the Closing Date Seller shall maintain and keep the Property in a manner consistent with Seller’s past practices with respect to the Property; provided, however, that, subject to Buyer’s right to terminate this Agreement prior to the expiration of the Due Diligence Period in accordance with the terms of Article 5 hereof, Buyer hereby agrees that, except for breaches of this Section 10.2(b), Buyer, shall accept the Property subject to, and Seller shall have no obligation to cure, (a) any violations of Laws or (b) any physical conditions which would give rise to violations of Laws, whether the same now exist or arise prior to Closing. Between the Execution Date and the Closing Date, Seller will advise Buyer of any written notice Seller receives after the Execution Date from any governmental authority of the violation of any Laws regulating the condition or use of the Property.                 10.3     Mutual Covenants.                           (a)    Publicity. Seller and Buyer each hereby covenant and agree that (a) prior to the Closing neither Seller nor Buyer shall issue any press release or public statement with respect to the Transaction or this Agreement (“Release”) without the prior consent of the other, except to the extent required by applicable Law or by any securities law or regulation applicable to Buyer, and (b) after the Closing, any Release issued by either Seller or Buyer shall be subject to the review and approval of both parties (which approval shall not be unreasonably withheld, conditioned or delayed), except to the extent required by applicable Law or by any securities law or regulation applicable to Buyer. If either Seller or Buyer is required by applicable Law or by any securities law or regulation applicable to Buyer to issue a Release, such party shall, at least two (2) business days prior to the issuance of the same, deliver a copy of the proposed Release to the other party for its review. Seller waives the two (2) business day requirement as to any press release issued with Buyer’s filing of an 8K upon the execution of this Agreement.                           (b)    Brokers. Seller and Buyer expressly acknowledge that Seller’s Broker has acted as the exclusive broker with respect to the Transaction. Seller shall pay any brokerage commission due to Seller’s Broker in accordance with the separate agreement between Seller and Seller’s Broker. Seller agrees to indemnify and hold harmless Buyer from and against any and all Liabilities suffered or incurred by Buyer as a result of any claims by Seller’s Broker or any other party claiming to have represented Seller as broker in connection with the Transaction. Buyer agrees to indemnify and hold harmless Seller from and against any and all Liabilities suffered or incurred by Seller as a result of any claims by any party claiming to have represented Buyer as broker in connection with the Transaction.                           (c)    Tax Protests; Tax Refunds and Credits. After Closing, Seller shall have the right to continue and to control the progress of and to make all decisions with respect to any contest of the real estate taxes and personal property taxes for the Property due and payable during all calendar years prior to Closing. Buyer shall have the right to control the progress of and to make all decisions with respect to any tax contest of the real estate taxes -------------------------------------------------------------------------------- and personal property taxes for the Property due and payable during the calendar year in which Closing occurs and all subsequent calendar years. All real estate and personal property tax refunds and credits received after Closing with respect to any real estate and personal property taxes paid by Seller for any calendar year prior to the calendar year in which Closing occurs shall be the property of Seller. Any refunds or credits attributable to real estate and personal property taxes first due and payable during the calendar year in which Closing occurs or attributable to the Current Year Taxes shall be apportioned between Buyer and Seller in the manner provided in Section 6.3. Any refunds or credits attributable to real estate and personal property taxes assessed for any calendar year following the calendar year in which Closing occurs shall be the property of Buyer.                 The provisions of this Section 10.3 shall survive the termination of this Agreement or the Closing (as applicable). ARTICLE 11 -DEFAULT                 11.1     Default by Buyer. If (i) Buyer fails to make the Additional Deposit as and when required by the terms of this Agreement, and such failure continues for five (5) days after written notice from Seller to Buyer, or (ii) Buyer fails to close this Transaction as and when required by the terms of this Agreement, then Seller may terminate this Agreement by written notice to Buyer, in which event the Title Company shall pay the Deposit to Seller as liquidated damages and, thereafter, Seller and Buyer shall not have any further liability hereunder except for obligations which by the express terms of this Agreement survive the termination of this Agreement. If (iii) Buyer is in default of any of its other obligations hereunder or (iv) any of Buyer’s representations or warranties set forth in Section 9.1 are untrue, inaccurate or incorrect in any material respect when made, and any such circumstance described in clauses (iii) or (iv) continues for five (5) business days after written notice from Seller to Buyer, which written notice shall detail such default or untruth, as applicable, Seller may pursue all legal and equitable remedies for Buyer’s default. In such event, if the Transaction has not theretofore or thereafter closed, the Earnest Money shall continue to be held in escrow by the Title Company pending final resolution of the dispute between Buyer and Seller and upon such final resolution, applied to the satisfaction of any money judgment awarded to Seller for Buyer’s default.                 11.2     Default by Seller. If Seller is in default of any of its obligations hereunder and such default continues for five (5) business days after written notice from Buyer to Seller, which written notice shall detail such default, then Buyer shall have the right, as its sole and exclusive remedy (except as hereinafter otherwise provided), (a) to terminate this Agreement by written notice to Seller, promptly after which the Title Company shall return the Deposit to Buyer and, thereafter, Seller and Buyer shall not have any further liability hereunder except for obligations which by the express terms of this Agreement survive the termination of this Agreement, or (b) to seek specific performance of this Agreement by Seller. Notwithstanding the foregoing provisions of this Section 11.2, in the event specific performance is unavailable (for example, but not by way of limitation, because Seller has conveyed or encumbered all or part of the Property to a third party without notice) or in the event Seller’s default is a result of the willful misconduct of Seller, Buyer shall, in addition to the remedy under clause (a) of the preceding sentence, be entitled to recover its actual damages (but not consequential or punitive damages) incurred as a result of Seller’s default; provided, however, that Seller’s liability for damages incurred as a result of Seller’s default shall be limited to an amount equal to the amount of the Deposit made by Buyer hereunder. As a condition precedent to Buyer exercising any right it may have to bring an action for specific performance hereunder, Buyer must commence such an action within ninety (90) days after the occurrence of Seller’s default. Buyer -------------------------------------------------------------------------------- agrees that its failure to timely commence such an action for specific performance within such ninety (90) day period shall be deemed a waiver by it of its right to commence an action for specific performance, as well as a waiver by it of any right it may have to file or record a notice of lis pendens or notice of pendency of action or similar notice against any portion of the Property. ARTICLE 12 - CONDEMNATION/CASUALTY                 12.1      Right to Terminate. If, after the Execution Date, (a) any portion of the Property is taken by condemnation or eminent domain (or is the subject of a pending taking which has not yet been consummated), or (b) any portion of the Property is damaged or destroyed (excluding routine wear and tear), Seller shall notify Buyer in writing of such fact promptly after obtaining knowledge thereof and shall advise Buyer in such notice if such damage or destruction is an uninsured loss. If the Property is the subject of a Major Damage/Condemnation that occurs after the date hereof, Buyer shall have the right to terminate this Agreement by giving written notice to Seller not later than ten (10) business days after the giving of Seller’s notice, and the Closing Date shall be extended, if necessary, to provide sufficient time for Buyer to make such election. The failure by Buyer to so elect in writing to terminate this Agreement within such ten (10) business day period shall be deemed an election not to terminate this Agreement. If this Agreement is terminated pursuant to this Section 12.1, the Deposit shall be returned to Buyer and, thereafter, Seller and Buyer shall not have any further liability hereunder other than obligations which by the express terms of this Agreement, survive the termination of this Agreement.                 12.2     Allocation of Proceeds and Awards. If a condemnation or casualty occurs after the date hereof and this Agreement is not terminated as permitted pursuant to the terms of Section 12.1, then this Agreement shall remain in full force and effect, Buyer shall acquire the remainder of the Property upon the terms and conditions set forth herein, and at the Closing:                           (a)     if the condemnation awards or insurance proceeds on account of such condemnation or damage, as the case may be, have been paid to Seller prior to Closing, Buyer shall receive a credit at Closing equal to (i) the amount of any such award or proceeds, plus (ii) if damage has occurred and such damage is an insured casualty, an amount equal to Seller’s deductible with respect to such casualty, less (iii) an amount equal to all out-of-pocket costs and expenses (including attorneys’ fees) reasonably incurred by Seller in obtaining payment of any award or proceeds (as applicable), any portion of any award or proceeds (as applicable) for the loss of use of the Property prior to Closing and all costs reasonably incurred by Seller prior to Closing for the repair or restoration of the Property (collectively “Seller’s Costs”); and                           (b)     to the extent that such award or proceeds have not been paid to Seller prior to Closing, (i) if damage has occurred and such damage is an insured casualty, Buyer shall receive a credit at Closing equal to Seller’s deductible with respect to such casualty, less an amount equal to Seller’s Costs applicable thereto, and (ii) Seller shall assign to Buyer at the Closing (without recourse to Seller) the rights of Seller to, and Buyer shall be entitled to receive and retain, such awards or proceeds; provided, however, that within one (1) business day after receipt of such awards or proceeds, Buyer shall pay to Seller an amount equal to Seller’s Costs not previously paid to Seller or deducted from the credit for Seller’s deductible pursuant to clause (i) above; and --------------------------------------------------------------------------------                           (c)    if the damage was an uninsured casualty, and Seller elects to give Buyer a credit at Closing for the costs of restoration or repair as agreed to by Buyer and Seller within the ten (10) business day period in which Buyer may terminate this Agreement pursuant to Section 12.1, Buyer shall receive a credit at Closing equal to such agreed amount of the costs of repair or restoration.                 12.3      Insurance. Seller shall maintain the property insurance coverage currently in effect for the Property, or comparable coverage, through the Closing Date. ARTICLE 13 - ESCROW PROVISIONS                 The Deposit shall be held by the Title Company, in escrow, and disposed of only in accordance with the following provisions:                           (a)     If the Closing occurs, the Title Company shall deliver the Deposit to Seller on the Closing Date.                           (b)     If for any reason the Closing does not occur, the Title Company shall deliver the Deposit to Seller or Buyer only upon receipt of a written demand therefor from such party, subject to the following provisions of this paragraph. If for any reason the Closing does not occur and either party makes a written demand upon the Title Company for payment of the Deposit, the Title Company shall give written notice to the other party of such demand. If the Title Company does not receive a written objection from the other party to the proposed payment within ten (10) business days after the giving of such notice, the Title Company is hereby authorized to make such payment. If the Title Company does receive such written objection within such ten (10) business day period, the Title Company shall continue to hold the Deposit until otherwise directed by written instructions signed by Seller and Buyer or a final judgment of a court.                           (c)     The parties acknowledge that the Title Company is acting solely at their request and for their convenience, that the Title Company shall not be deemed to be the agent of either of the parties, and that the Title Company shall not be liable to either of the parties for any action or omission on its part taken or made in good faith and not in disregard of this Agreement. Seller and Buyer shall jointly and severally indemnify and hold the Title Company harmless from and against all Liabilities incurred in connection with the performance of the Title Company’s duties hereunder, except with respect to actions or omissions taken or made by the Title Company in bad faith, in disregard of this Agreement or involving negligence on the part of the Title Company.                           (d)     Buyer shall pay any income taxes on interest (if any) earned on the Deposit. Buyer shall provide its taxpayer identification number to the Title Company concurrently with the deposit of the Initial Deposit.                           (e)     The Title Company has executed this Agreement in the place indicated on the signature page hereof solely to confirm that the Title Company has received and shall hold the Deposit in escrow and shall disburse the Deposit pursuant to the provisions of this Article 13.                 The provisions of this Article 13 shall survive the termination of this Agreement or the Closing (as applicable). -------------------------------------------------------------------------------- ARTICLE 14 - LEASING MATTERS                 Prior to Closing, Seller shall have the right, but not the obligation, to enforce the rights and remedies of the landlord under any Lease (including, without limitation, the right to remove any tenant) and to apply all or any portion of any security deposits or other deposits then held by Seller toward any loss or damage incurred by Seller by reason of any defaults by tenants, and the exercise of any such rights or remedies shall not affect the obligations of Buyer under this Agreement in any manner or entitle Buyer to a reduction in, or credit or allowance against, the Purchase Price or give rise to any other claim on the part of Buyer. ARTICLE 15 - MISCELLANEOUS                 15.1     Buyer’s Assignment; 1031 Exchange. Buyer shall not assign this Agreement or its rights hereunder to any individual or entity without the prior written consent of Seller, which consent Seller may grant or withhold in its sole and absolute discretion, and any such assignment shall be null and void ab initio. In the event of any permitted assignment by Buyer, any assignee shall assume any and all obligations and liabilities of Buyer under this Agreement but, notwithstanding such assumption, Buyer shall continue to be liable hereunder. Notwithstanding the foregoing, if so requested by Buyer, Seller will cooperate in structuring and completing this transaction for Buyer so as to effect an acquisition of “replacement property” in connection with a like-kind exchange pursuant to Section 1031 of the Internal Revenue Code of 1986, as amended (“Code §1031”). In particular, Seller will consent to the assignment by Buyer prior to the Closing hereunder of its right to purchase the Property to a “qualified intermediary,” and Seller will accept payment of the Purchase Price from such “qualified intermediary.” The terms “replacement property” and “qualified intermediary” are used herein as defined in the Treasury Regulation Code §1031. Buyer shall bear all expenses associated with the structuring of this transaction as part of a Code §1031 like-kind exchange, including all fees of the qualified intermediary. Buyer shall reimburse Seller for, and hold Seller harmless from and against, any and all reasonable and necessary additional costs and expenses, including reasonable attorneys’ fees, and any liabilities, which Seller may incur as a result of structuring this transaction as part of a like-kind exchange. Seller shall not assume any responsibility for the tax consequences to Buyer arising out of an exchange affected pursuant to this Section 15.1.                 15.2     Survival/Merger . Except for the provisions of this Agreement which are explicitly stated to survive the Closing, (a) none of the terms of this Agreement shall survive the Closing, and (b) the delivery of the Purchase Price, the Deed and the other Closing Documents and the acceptance thereof shall effect a merger and be deemed the full performance and discharge of every obligation on the part of Buyer and Seller to be performed hereunder.                 15.3     Integration; Waiver. This Agreement, together with the Exhibits hereto, constitutes the entire understanding between the parties with respect to the Transaction, and all prior agreements, understandings, representations and statements, oral or written, are merged into this Agreement. Neither this Agreement nor any provision hereof may be modified or amended except by an instrument signed by Buyer and Seller. No waiver by either party hereto of any failure or refusal by the other party to comply with its obligations hereunder shall be deemed a waiver of any other or subsequent failure or refusal to so comply.                 15.4     Governing Law. This Agreement shall be governed by, and construed in accordance with, the law of the State of Indiana. --------------------------------------------------------------------------------                 15.5     Captions Not Binding; Exhibits. The captions in this Agreement are inserted for reference only and in no way define, describe or limit the scope or intent of this Agreement or of any of the provisions hereof. All Exhibits attached hereto shall be incorporated by reference as if set out herein in full.                 15.6     Binding Effect. Subject to the provisions of Section 15.1 above, this Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns.                 15.7    Severability. If any term or provision of this Agreement or the application thereof to any persons or circumstances shall, to any extent, be invalid or unenforceable, the remainder of this Agreement or the application of such term or provision to persons or circumstances other than those as to which it is held invalid or unenforceable shall not be affected thereby, and each term and provision of this Agreement shall be valid and enforced to the fullest extent permitted by law.                 15.8      Notices. Any notice, request, demand, consent, approval and other communications under this Agreement shall be in writing and shall be deemed duly given or made at the time and on the date when received by facsimile or by e-mail (provided that the sender of such communication shall orally confirm receipt thereof by the appropriate parties) or when personally delivered as shown on a receipt therefor (which shall include delivery by a nationally recognized overnight delivery service) or three (3) business days after being mailed by prepaid registered or certified mail, return receipt requested, to the address for each party set forth below. Any party, by written notice to the other in the manner herein provided, may designate an address different from that set forth below.                 IF TO BUYER:                 NTS Realty Holdings Limited Partnership                 ATTN: Neil A. Mitchell                 10172 Linn Station Road                 Louisville, KY 40223                 Fax: (502) 426-4994                 Email: nmitchell@ntsdevco.com                           WITH COPY TO:                 Rosann D. Tafel                 Senior Vice President and General Counsel                 NTS Realty Holdings Limited Partnership                 10172 Linn Station Road                 Louisville, KY 40223                 Fax: (502) 426-4994                 Email: rtafel@ntsdevco.com --------------------------------------------------------------------------------                 IF TO SELLER:                 c/o AMLI Residential Properties Trust                 ATTN: Fred Shapiro                 Senior Vice President/Acquisitions                 125 South Wacker Drive                 Suite 3100                 Chicago, IL 60606                 Fax: (312) 443-0909                 Email: fshapiro@amli.com                           WITH COPY TO:                 Mary K. Lisher                 Baker & Daniels LLP                 300 North Meridian, Suite 2700                Indianapolis, IN 46204                 Fax: (317) 237-1000                 Email: Mary.Lisher@bakerd.com                 15.9       Counterparts. This Agreement may be executed in counterparts (including execution of counterpart signature pages), each of which shall be an original and all of which counterparts taken together shall constitute one and the same agreement.                 15.10      No Recordation. Seller and Buyer each agrees that neither this Agreement nor any memorandum or notice hereof shall be recorded.                 15.11      Construction . The parties acknowledge that each party and its counsel have reviewed and revised this Agreement and that the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement, any amendment or modification hereof or any of the Closing Documents.                 15.12     Time of Essence. Time is of the essence with respect to this Agreement.                 15.13      Waiver of Jury Trial. EACH PARTY HEREBY WAIVES TRIAL BY JURY IN ANY PROCEEDINGS BROUGHT BY THE OTHER PARTY IN CONNECTION WITH ANY MATTER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THE TRANSACTION, THIS AGREEMENT, THE PROPERTY OR THE RELATIONSHIP OF BUYER AND SELLER HEREUNDER. THE PROVISIONS OF THIS SECTION SHALL SURVIVE TERMINATION OF THIS AGREEMENT OR THE CLOSING.                 15.14     Attorneys’ Fees. In addition to any other remedy provided for herein, the non-prevailing party shall pay all costs and expenses, including reasonable attorneys’ fees and court costs, incurred by the prevailing party in successfully enforcing any provision of this Agreement against such non-prevailing party. --------------------------------------------------------------------------------                 15.15     Facsimile Signatures. Signatures to this Agreement transmitted by telecopy shall be valid and effective to bind the party so signing. Each party agrees to promptly deliver an execution original of this Agreement with its actual signature to the other party, but a failure to do so shall not affect the enforceability of this Agreement.                 15.16     Property Personnel. From and after the Execution Date until Closing or the earlier termination of this Agreement, Buyer shall have the right to interview Property staff in anticipation of retaining such staff following Closing.                 15.17     Assignment of Seller’s Interest. Seller hereby advises Buyer that on or about February 7, 2006, AMLI Residential Properties Trust (the sole general partner of AMLI Residential Properties, L.P., one of the Seller’s hereunder and the general partner of AMLI at Castle Creek, L.P.) will merge into PPF AMLI Acquisition, LLC and, on or about February 8, 2006, (i) AMLI at Castle Creek, L.P. will transfer ownership of the real property known as AMLI at Castle Creek to PPF AMLI at Castle Creek LLC, and (ii) AMLI Residential Properties, L.P. will transfer ownership of the real property known as AMLI at Lake Clearwater to PPF AMLI at Lake Clearwater LLC, each of which is and will remain a wholly owned subsidiary of AMLI Residential Properties, L.P. Buyer hereby acknowledges and consents, if and to the extent Buyer’s consent is required by applicable Law, to AMLI at Castle Creek, L.P.‘s and AMLI Residential Properties, L.P.‘s transfer of the Property (on or about February 8, 2006) to new subsidiary entitled, PPF AMLI at Castle Creek, LLC and PPF AMLI at Lake Clearwater, LLC (collectively, the “Subsidiaries”) of the post-merger parent entity, PPF AMLI Acquisition, LLC The Subsidiaries shall assume all obligations of Seller under this Agreement.                 15.18      Post-Closing Audit. Notwithstanding anything contained herein to the contrary, Buyer, upon reasonable prior notice to Seller, shall have the right at any time after the execution of this Agreement (but not more than one such audit), at Buyer’s expense, to obtain an audited financial statement for the Property for the calendar year ended December 31, 2005, and to audit all books and records relating to the Property, including, but not limited to, revenue and expense supporting documents, deposits, bank statements, invoices and other similar documentation. Seller acknowledges and agrees that its books and records are the subject of the audit, and Seller agrees to execute standard forms of engagement and representation letters with an auditor designated by Buyer in connection with the audit; provided that such letters expressly provide that all costs and fees of Buyer’s auditor shall be paid by Buyer. Seller agrees to cooperate with Buyer in granting Buyer, its agents, representatives and employees access to such books, records and documentation so that it and its auditors may timely and fully complete such audit. Buyer shall reimburse Seller for its reasonable and necessary costs and expenses incurred in connection with such audit and shall indemnify and hold harmless Seller from all costs and fees of Buyer’s auditor in connection with such audit. The terms of this Section 15.18 shall survive the Closing and the delivery of the Deed. [Remainder of Page Intentionally left blank] --------------------------------------------------------------------------------                 IN WITNESS WHEREOF, each party hereto has caused this Agreement to be duly executed to be effective as of the day and year first above written. SELLER: AMLI AT CASTLE CREEK, L.P.      By: AMLI Residential Properties, L.P.,            its sole general partner            By: AMLI Residential Properties Trust,                  its sole general partner            By: /s/ Fred Shapiro            ——————————————            Fred Shapiro            Senior Vice President AMLI RESIDENTIAL PROPERTIES, L.P.      By: AMLI Residential Properties Trust,            its sole general partner            By: /s/ Fred Shapiro            ——————————————            Fred Shapiro            Senior Vice President BUYER: NTS REALTY HOLDINGS LIMITED PARTNERSHIP      By: NTS Realty Capital, Inc., its managing            general partner            By: /s/ Neil A. Mitchell            ——————————————            Neil A. Mitchell            Senior Vice President -------------------------------------------------------------------------------- AGREEMENT OF TITLE COMPANY                 The undersigned has executed this Agreement solely to confirm its agreement to hold the Deposit in escrow in accordance with the provisions hereof and comply with the provisions of Article 13.                 IN WITNESS WHEREOF, the undersigned has executed this Agreement as of February 7, 2006. FIRST AMERICAN TITLE INSURANCE COMPANY By: /s/ John Beckstedt —————————————— John Beckstedt Account Representative -------------------------------------------------------------------------------- AMENDMENT TO PURCHASE AND SALE AGREEMENT                 This Amendment to Purchase and Sale Agreement (“Amendment”) is entered into this 27th day of February, 2006, by PPF AMLI at Castle Creek LLC, a Delaware limited liability company, and PPF AMLI at Lake Clearwater LLC, a Delaware limited liability company (together, “Seller”) and NTS Realty Holdings Limited Partnership, a Delaware limited partnership (“Buyer”).                 WHEREAS, Seller’s predecessor in interest and Buyer entered into that certain Purchase and Sale Agreement dated February 7, 2006 (the “Agreement”) relating to the properties commonly known as AMLI at Castle Creek and AMLI at Lake Clearwater;                 WHEREAS, Seller and Buyer desire to amend the Agreement in certain respects; and                 WHEREAS, all terms used herein with initial capital letters and not otherwise defined herein shall have the same meaning as in the Agreement.                 NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Seller and Buyer amend the Agreement as follows:                 1.    Exhibit B to the Agreement is deleted in its entirety and replaced with Exhibit B-1 attached hereto and made a part hereof. All references to Exhibit B in the Agreement shall be deemed to refer to the attached Exhibit B-1. Buyer has requested that Seller cancel and terminate the following contracts identified in Exhibit B-1 for each property as of the Closing Date:                         Copyfax — Copier Maintenance Agreement                         Apartment for Rent — Apartment Advertising                         White Fence (Q Corps.) — AMLI Connect                         Velocity — Water Meter Reading Seller has agreed to cancel said contracts and agrees that the same shall not be included in the Contracts assigned to Buyer at Closing.                 2.    Exhibit C to the Agreement is amended to include 276 dryers in the community equipment inventory list for AMLI at Castle Creek.                 3.    Seller shall establish at Closing a repair escrow with two escrow funds as follows: (i) a fund in the amount of Thirty Thousand Dollars ($30,000.00) to reimburse Buyer for the cost of repairs to flashings at both AMLI at Castle Creek and AMLI at Lake Clearwater (the “Flashing Repair Fund”) and (ii) a fund in the amount of Twenty-five Thousand Dollars ($25,000.00) to reimburse Buyer for the cost of connecting the carwash drain at AMLI at Castle Creek to the drainage system (the “Carwash Repair Fund,” and together with the Flashing Repair Fund, the “Escrow Funds”). The Flashing Repair Fund and the Carwash Repair Fund shall be used to reimburse Buyer for the cost of the repairs for which each such Fund was established. -------------------------------------------------------------------------------- The Escrow Funds shall be held by the Title Company in an interest bearing account and interest earned on the Escrow Funds shall be the property of Seller. The Escrow Funds shall be disbursed to Buyer upon Buyer’s submission to the Title Company of a request for disbursement from the Flashing Repair Fund or Carwash Repair Fund (as applicable), accompanied by a contractor’s invoice or contractor’s application for payment substantiating the costs for which disbursement is requested and evidence of the payment thereof. Only one request for disbursement from each such Fund shall be made. The Title Company shall provide Seller with a copy of the disbursement request received from Buyer promptly upon receipt thereof. Payment of the amount requested shall be made by the Title Company to Buyer within ten (10) days after the Title Company’s receipt of the disbursement request, unless within such 10-day period, Seller objects to the disbursement of the Escrow Funds as not being for repair costs actually incurred for the purpose for which the respective Fund was established. The escrow shall terminate on the first anniversary of the Closing Date, and any Escrow Funds remaining undisbursed at such time, together with any interest earned thereon, shall be paid to Seller.                 The parties shall enter into an escrow agreement at Closing setting forth the foregoing terms and such other terms regarding the escrow not inconsistent with the foregoing terms as Seller, Buyer and the Title Company shall reasonably require, including terms related to the resolution of Seller’s objection to the requested disbursement. Any escrow fee charged by the Title Company shall be paid by Seller.                 4.     This Amendment shall be binding on and shall inure to the benefit of Seller and Buyer and their respective successors and assigns. Except as expressly amended by this Amendment, all terms and provisions of the Agreement shall remain in full force and effect.                 IN WITNESS WHEREOF, the parties have caused this Amendment to be executed as of the date set forth above. [SIGNATURES ON FOLLOWING PAGES] -------------------------------------------------------------------------------- SELLER: PPF AMLI AT CASTLE CREEK LLP a Delaware limited liability company By:     PPF AMLI TRS LLC, a Delaware limited liability company, its            sole member      By:     AMLI Residential Properties, L.P., a Delaware limited                 partnership, its sole member           By:     PPF AMLI Partners LLC, a Delaware limited liability                      company, its sole general partner                By:     PPF Multifamily, LLC, a Delaware limited                           liability company, its Manager                     By:     PPF OP, LP, a Delaware limited                                partnership, its sole member                          By:     PPF OPGP, LLC, a Delaware limited liability                                     company, its sole general partner                               By:     Prime Property Fund, LLC, a Delaware                                          limited liability company, its sole member                                    By:     Morgan Stanley Real Estate                                               Advisor, Inc., a Delaware                                               corporation, its Manager                                    By: /s/ John C. Shoser                                    ——————————————                                    John C. Shoser                                    Executive Director -------------------------------------------------------------------------------- PPF AMLI AT CLEARWATER LLP a Delaware limited liability company By:     PPF AMLI TRS LLC, a Delaware limited liability company, its            sole member      By:     AMLI Residential Properties, L.P., a Delaware limited                 partnership, its sole member           By:     PPF AMLI Partners LLC, a Delaware limited liability                      company, its sole general partner                By:     PPF Multifamily, LLC, a Delaware limited                           liability company, its Manager                     By:     PPF OP, LP, a Delaware limited                                partnership, its sole member                          By:     PPF OPGP, LLC, a Delaware limited liability                                     company, its sole general partner                               By:     Prime Property Fund, LLC, a Delaware                                          limited liability company, its sole member                                    By:     Morgan Stanley Real Estate                                               Advisor, Inc., a Delaware                                               corporation, its Manager                                    By: /s/ John C. Shoser                                    ——————————————                                    John C. Shoser                                    Executive Director -------------------------------------------------------------------------------- BUYER: NTS REALTY HOLDINGS LIMITED PARTNERSHIP By:     NTS Realty Capital, Inc., its managing           general partner            By: /s/ Rosann D. Tafel            ——————————————            Rosann D. Tafel            Senior Vice President -------------------------------------------------------------------------------- EXHIBIT B-1 Maintenance Service Contracts AMLI at Castle Creek - February 2006 Contracts Vendor Name Collected Landscaping     Brickman     Yes           Cable / Internet   Comcast of Indy   Yes   Must   Telephone   SBC Ameritech   Yes   MTM   Vending   Vendco   Yes       Copier (Maintenance Agreement)   Copyfax   Yes       Waste Removal   Ray's   Yes       Apartment Advertising                 - Apartment Guide   HPC   Yes         - Apartment For Rent   Apt For Rent   Yes         - E-Mail Agreement   Rent.com   Yes       Pool Phones   Kings III   Yes       Snow Removal   Brickman   Yes       AMLI Connect   White Fence (Q-Corps)   Yes       Water Meter Reading   Velocity   Yes       Alarms - Fire   Honeywell   Yes       Alarms - Security   Honeywell   Yes       Alarms - Clubhouse   Honeywell   Yes       Maintenance Service Contracts AMLI at Lake Clearwater - February 2006 Contracts Vendor Name Collected Landscaping     Mainscape     Yes           Cable & Internet   Comcast of Indy   Yes   Must   Telephone   SBC Ameritech Services   Yes   MTM   Vending   Vendco   Yes       Copier (Maintenance Agreement)   Copyfax   Yes       Waste Removal   Ray's   Yes       Apartment Advertising                 - Apartment Guide   HPC   Yes         - Apartment For Rent   Apt For Rent   Yes         - E-Mail Agreement   Rent.com   Yes       Pool Phones   Kings III   Yes       Snow Removal   Mainscape   Yes       AMLI Connect   WhiteFence (Q-Corp)   Yes       Water Meter Reading   Velocity Master Services   Yes       Alarms - Fire   Honeywell   Yes       Alarms - Security   Honeywell   Yes       Alarms - Clubhouse   Honeywell   Yes      

EXHIBIT 10.1 AMENDMENT TO EMPLOYMENT AGREEMENT THIS AMENDMENT TO EMPLOYMENT AGREEMENT (the “Amendment”) is made as of this 4th day of December, 2006 by and between BUCA, Inc., a Minnesota corporation (the “Company”), and Modesto Alcala (the “Executive”). WHEREAS, the Company and the Executive previously entered into an Employment Agreement dated as of February 10, 2005 (the “Employment Agreement”); and WHEREAS, the Company and Executive have determined that Executive’s employment with the Company shall terminate effective January 2, 2007; and WHEREAS, in consideration for the contributions Executive has made to the business of the Company, the Company has agreed to provide to Executive additional benefits specified below. NOW THEREFORE, IN CONSIDERATION of the premises and the terms and conditions hereinafter set forth, the parties hereto amend the Employment Agreement as follows: 1. Capitalized terms not otherwise defined herein shall have the meanings given to them in the Employment Agreement. 2. The Company agrees that so long as Executive remains an employee of the Company through December 31, 2006: a. the termination of Executive’s employment on January 2, 2007 shall be deemed to be a termination of Executive’s employment by the Company without Cause, and Executive shall then be entitled to the termination payment specified in the Employment Agreement as well as the benefits provided in this Section 2 of this Amendment; b. Executive shall remain eligible to receive a bonus under the terms of the Employment Agreement for fiscal 2006 to the extent the Company achieves the targets previously determined by the Compensation Committee of the Board of Directors of the Company; c. the Company shall waive, effective January 2, 2007, the covenants of Executive contained in Section 12(a) of the Employment Agreement; d. Executive shall be eligible to receive his first six months of COBRA insurance coverage at employee rates; -------------------------------------------------------------------------------- e. Executive shall receive $12,000 as payment for out-placement services; and f. Executive’s outstanding restricted stock award shall vest on January 2, 2007 in an amount equal to 21,167 shares and the remaining 20,833 shares shall be forfeited to the Company. 3. All other provisions of the Employment Agreement shall remain in full force and effect. 4. The Employment Agreement, as amended by this Amendment, constitutes the entire understanding and agreement between the Company and Executive with regard to the matters stated herein. There are no other agreements, conditions or representations, oral or written, express or implied, with regard to the employment of Executive by the Company. [Signature page follows] -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the parties have executed this Amendment the date and year first above written.   BUCA, INC. By:   /s/ Wallace B. Doolin Its:     Chairman and     Chief Executive Officer EXECUTIVE /s/ Modesto Alcala Modesto Alcala  

EXHIBIT 10.49 Salix Pharmaceuticals 2006 Board of Directors Compensation Structure        John Chappell    Thomas D’Alonzo    Richard Franco    William Keane    William Harral, III Annual Fees:                Annual Retainer    $ 75,000    $ 20,000    $ 20,000    $ 20,000    $ 20,000 Audit Committee Chair      —        —        —        6,000      —   Audit Committee Member      —        6,000      6,000      6,000      6,000 Compensation Committee Chair      —        6,000      —        —        —   Nominating/Governance Committee Chair      —        —        6,000      —        —                                      Total Annual Fees    $ 75,000    $ 32,000    $ 32,000    $ 32,000    $ 26,000                                    Amount due Quarterly    $ 18,750    $ 8,000    $ 8,000      8,000    $ 6,500                                    Daily Board of Director’s Meeting Fees: Face-to-face meeting—$2,000 per day Telephonic meeting—$1,000 per call Audit committee meeting—$500 per meeting

EXHIBIT 10.1 AMENDMENT NO. 1 TO LEASE 3200 Yeon This Amendment No. 1 to Lease is made as of the 1st day of February, 2004 and between SCHNITZER INVESTMENT CORP., an Oregon corporation (“Landlord”), and SCHNITZER STEEL INDUSTRIES, INC., an Oregon corporation (“Tenant”). RECITALS A.           Landlord and Tenant are parties to that a certain Lease dated August 7, 2003 with respect to the leasing of approximately 7,905 rentable square feet on the lower level and approximately 11,266 rentable square feel on the first floor of the building commonly known as 3200 NW Yeon Avenue, Portland, Oregon (the “Lease). The premises leased by Tenant under the Lease (the “Premises”) is more particularly described on the Lease. B.            Landlord and Tenant desire to expand the Premises in accordance with the terms and conditions set forth in this Amendment No. 1 to Lease (this “Amendment”). Capitalized terms used in this Amendment shall have the meanings given to them in the Lease, except as provided in this Amendment. AGREEMENT In consideration of the mutual covenants and conditions contained herein and for other good and valuable consideration, Landlord and Tenant agree as follows: 1. Expansion of Premises. A.           Expansion of Premises. Effective as of February 1, 2004, the Premises is expanded to include approximately 1,288 rentable square feet on the second floor level of the Building comprised of approximately 1,031 rentable square feet in the area shown on the attached Exhibit A as the “Permanent Expansion Premises” and approximately 257 rentable square feet in the area shown on the attached Exhibit A as the “Temporary Expansion Premises”. As of March 31, 2004, Tenant surrendered possession of the Temporary Expansion Premises to Landlord. Thus, as of April 1, 2004, Section 1.1(i) is revised to reflect an additional approximately 1,031 rentable square feet on the second floor level of the Building. Tenant shall have the right to terminate Tenant’s right to use the entire Permanent Expansion Premises at any time upon ninety (90) days prior written notice to Landlord. B.            Rent During February and March 2004. For the months of February 2004 and March 2004, the monthly Base Rent is increased by $1,824.67 per month to $26,348.59; Tenant’s Share of Building (Section 1.1(o)) is 66.48%; and Tenant’s Share of Project (Section 1.1(p)) is 7.59%. C.            Rent Commencing on April 1, 2004. From and after the month of April 2004, Section 1.1(o) of the Lease is revised to reflect that Tenant’s Share of Building is 65.64%; Section 1.1(p) of the Lease is revised to reflect that Tenant’s Share of the Project is 7.49%; and the monthly Base Rent payable with respect to the Premises is as follows (which replaces the table in Section 1.1(k) of the Lease): Months Rent PRSF (Annual) Monthly Installments   Lower Level First and Second Floor   4 (April 2004) – 12 $13.00 $17.00 $25,984.50 13-24 $13.33 $17.43 $26,642.53 25-36 $13.66 $17.87 $27,310.81 37-48 $14.00 $18.32 $27,995.92 49-60 $14.35 $18.78 $28,697.87 61-72 $14.71 $19.25 $29.416.65 73-84 $15.08 $19.73 $30,152.27 85-96 $15.45 $20.22 $30,898.13 97-108 $15.84 $20.73 $31,667.67 109-120 $16.24 $21.25 $32,474.04   D.           Real Estate Brokers. Tenant and Landlord each represent and warrant to the other that there is no real estate broker or agent who is or may be entitled to any commission or finder’s --------------------------------------------------------------------------------   fee in connection with this Amendment and each shall indemnify and hold the other harmless from and against any and all claims, demands, losses, liabilities, lawsuits, judgments, costs and expenses (including without limitation, attorneys’ fees and costs) with respect to any leasing commission or equivalent compensation alleged to be owing on account of such party’s discussions, negotiations and/or dealings with any real estate broker or agent.   2. Tenant Representations. Tenant represents and warrants that: A.           Due Authorization. Tenant has full power and authority to enter into this Amendment without the consent of any other person or entity; B.   No Assignment. Tenant has not assigned the Lease, or sublet the premises; C.            No Default. Tenant is not in default of the Lease and Tenant acknowledges that Landlord is not in default of the Lease; and D.           Binding Effect. The Lease is binding on Tenant and is in full force and effect, and Tenant has no defenses to the enforcement of the Lease.   3. General Provisions A.           Attorneys' Fees. If a suit or an action is instituted in connection with any dispute arising out of this Amendment or the Lease or to enforce any rights hereunder or thereunder, the prevailing party shall be entitled to recover such amount as the court may adjudge reasonable as attorneys' and paralegals' fees incurred in connection with the preparation for and the participation in any legal proceedings (including, without limitation, any arbitration proceedings or court proceedings, whether at trial or on any appeal or review), in addition to all other costs or damages allowed. B.            Execution in Counterparts. This Amendment may be executed in counterparts and when each party has signed and delivered at least one such executed counterpart to the other party at the party's address set forth above, then each such counterpart shall be deemed an original, and, when taken together with the other signed counterpart, shall constitute one agreement which shall be binding upon and effective as to all signatory parties. C.            Effect of Amendment. The Lease is unmodified except as expressly set forth in this Amendment. Except for the modifications to the Lease set forth in this Amendment, the Lease remains in full force and effect. To the extent any provision of the Lease conflicts with or is in any way inconsistent with this Amendment, the Lease is deemed to conform to the terms and provisions of this Amendment. D.           Binding Effect. The provisions of this Amendment shall be binding upon and inure to the benefit of the parties and their respective successors and assigns and no amendment to this Amendment shall be binding upon the parties unless in the form of a writing executed by each party hereto. E.            Integration. This Amendment contains the entire agreement and understanding of the parties with respect to the matters described herein, and supersedes all prior and contemporaneous agreements between them with respect to such matters. IN WITNESS WHEREOF, Landlord and Tenant have executed this Amendment as of the date first above written. Landlord: Tenant: SCHNITZER INVESTMENT CORP., an Oregon corporation SCHNITZER STEEL INDUSTRIES, INC., an Oregon corporation By:                                                                            Its:                                                                            Date:                                                                        By:                                                                            Its:                                                                            Date:                                                                          --------------------------------------------------------------------------------   Exhibit A   3200 NW Yeon Building Second Floor   Floor Plan          

Exhibit 10.1 THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE APPLICABLE SECURITIES LAWS OF ANY STATE. SECURED PROMISSORY NOTE   $200,000.00   July 12, 2006   Clearwater, Florida For value received, Digital Lightwave, Inc., a Delaware corporation (the “Company”), promises to pay to Optel Capital, LLC, a Delaware limited liability company (the “Holder”), or its registered assigns, the principal sum of Two Hundred Thousand Dollars ($200,000.00). Interest shall accrue from the date of this Note on the unpaid principal amount at a rate equal to 10.0% per annum, compounded annually. The interest rate shall be computed on the basis of the actual number of days elapsed and a year of 360 days. This Note is subject to the following terms and conditions. 1. Maturity. (a) Principal and any accrued but unpaid interest under this Note shall be due and payable upon demand by the Holder at any time after August 31, 2006. (b) Notwithstanding the foregoing, the entire unpaid principal sum of this Note, together with accrued and unpaid interest thereon, shall become immediately due and payable upon demand by the Holder at any time on or following the occurrence of any of the following events: (i) the sale of all or substantially all of the Company’s assets, or any merger or consolidation of the Company with or into another corporation; other than a merger or consolidation in which the holders of more than 50% of the shares of capital stock of the Company outstanding immediately prior to such transaction continue to hold (either by the voting securities remaining outstanding or by their being converted into voting securities of the surviving entity) more than 50% of the total voting power represented by the voting securities of the Company, or such surviving entity, outstanding immediately after such transaction; (ii) the inability of the Company to pay its debts as they become due; -------------------------------------------------------------------------------- (iii) the dissolution, termination of existence, or appointment of a receiver, trustee or custodian, for all or any material part of the property of, assignment for the benefit of creditors by, or the commencement of any proceeding by the Company under any reorganization, bankruptcy, arrangement, dissolution or liquidation law or statute of any jurisdiction, now or in the future in effect; (iv) the execution by the Company of a general assignment for the benefit of creditors; (v) the commencement of any proceeding against the Company under any reorganization, bankruptcy, arrangement, dissolution or liquidation law or statute of any jurisdiction, now or in the future in effect, which is not cured by the dismissal thereof within ninety (90) days after the date commenced; or (vi) the appointment of a receiver or trustee to take possession of the property or assets of the Company. 2. Payment; Prepayment. All payments shall be made in lawful money of the United States of America at such place as the Holder hereof may from time to time designate in writing to the Company. Payment shall be credited first to the accrued interest then due and payable and the remainder applied to principal. Prepayment of this Note may be made at any time without penalty. 3. Transfer; Successors and Assigns. The terms and conditions of this Note shall inure to the benefit of and be binding upon the respective successors and assigns of the parties. This Note may be transferred only upon surrender of the original Note for registration of transfer, duly endorsed, or accompanied by a duly executed written instrument of transfer in form satisfactory to the Company. Thereupon, a new note for the same principal amount and accrued interest will be issued to, and registered in the name of, the transferee. Interest and principal are payable only to the registered holder of this Note. 4. Governing Law. This Note and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto shall be governed, construed and interpreted in accordance with the laws of the State of Florida, without giving effect to principles of conflicts of law. 5. Notices. Any notice required or permitted by this Agreement shall be in writing and shall be deemed sufficient upon receipt, when delivered personally or by courier, overnight delivery service or confirmed facsimile, or 48 hours after being deposited in the U.S. mail as certified or registered mail with postage prepaid, if such notice is addressed to the party to be notified at such party’s address or facsimile number as set forth below or as subsequently modified by written notice. 6. Amendments and Waivers. Any term of this Note may be amended only with the written consent of the Company and the Holder. Any amendment or waiver effected in accordance with this Section 6 shall be binding upon the Company, each Holder and each transferee of this Note.   -2- -------------------------------------------------------------------------------- 7. Officers and Directors Not Liable. In no event shall any officer or director of the Company be liable for any amounts due or payable pursuant to this Note. 8. Security Interest. This Note is secured by all of the assets of the Company in accordance with the Twenty Second Amended and Restated Security Agreement by and between the Company and the Holder dated as of September 16, 2004 (the “Security Agreement”). In case of an Event of Default (as defined in the Security Agreement), the Holder shall have the rights set forth in the Security Agreement. 9. Counterparts. This Note may be executed in any number of counterparts, each of which will be deemed to be an original and all of which together will constitute a single agreement. 10. Action to Collect on Note. If action is instituted to collect on this Note, the Company promises to pay all costs and expenses, including reasonable attorney’s fees, incurred in connection with such action. 11. Loss of Note. Upon receipt by the Company of evidence satisfactory to it of the loss, theft, destruction or mutilation of this Note or any Note exchanged for it, and indemnity satisfactory to the Company (in case of loss, theft or destruction) or surrender and cancellation of such Note (in the case of mutilation), the Company will make and deliver in lieu of such Note a new Note of like tenor. [Remainder of this page intentionally left blank.]   -3- -------------------------------------------------------------------------------- This Note was entered into as of the date set forth above.   COMPANY: DIGITAL LIGHTWAVE, INC. By:   /s/ Kenneth T. Myers   Kenneth T. Myers   President and Chief Executive Officer   AGREED TO AND ACCEPTED: OPTEL CAPITAL, LLC By:   /s/ Paul Ragaini Name:   Paul Ragaini         (print) Title:   Chief Financial Officer

  Exhibit 10.9 CENTEX CORPORATION EXECUTIVE DEFERRED COMPENSATION PLAN Effective as of April 1, 2003, and Amended and Restatement Effective as of April 1, 2006   --------------------------------------------------------------------------------   CENTEX CORPORATION EXECUTIVE DEFERRED COMPENSATION PLAN Effective as of April 1, 2003 Table of Contents                               Page   ARTICLE I. NATURE OF PLAN     1                     ARTICLE II. DEFINITIONS AND CONSTRUCTION     2     2.1     Definitions     2     2.2     Word Usage     5                     ARTICLE III. ELIGIBILITY TO PARTICIPATE     6     3.1     Date of Participation     6     3.2     Change in Employment Status     6                     ARTICLE IV. DEFERRED CASH COMPENSATION AWARDS     7     4.1     Award from Company     7     4.2     Agreement     7     4.3     Crediting of Amounts     7     4.4     Interest     7     4.5     Vesting     7     4.6     Distribution     7     4.7     Forfeiture     7     4.8     Death, Disability or Vested Retirement     7     4.9     Change in Control     8     4.10     Employee Directors     8                     ARTICLE V. PARTICIPANT ACCOUNTS     9     5.1     Participant Accounts     9     5.2     Accounting for Distributions     9                     ARTICLE VI. DISTRIBUTION OF BENEFITS     10     6.1     Election for Form of Distribution of Benefits     10     6.2     Time of Distribution     11     6.3     Distributions In the Event of the Participant’s Death     12     6.4     Withdrawals in the Event of an Unforeseeable Financial Emergency     13     6.5     Notice to Trustee     13     6.6     Elections Under Q&A-21 of notice 2005-1     13                     ARTICLE VII. AMENDMENTS AND TERMINATION     15     --------------------------------------------------------------------------------                                 Page     7.1     Amendment by Company     15     7.2     Plan Termination     15                     ARTICLE VIII. TRUST     16     8.1     Establishment of Trust     16     8.2     Funding     16                     ARTICLE IX. PLAN ADMINISTRATION     17     9.1     Powers and Responsibilities of the Committee     17     9.2     Claims and Review Procedures     17                     ARTICLE X. MISCELLANEOUS     19     10.1     Communication to Participants     19     10.2     Limitation of Rights     19     10.3     Spendthrift Provision     19     10.4     Spousal Claims     19     10.5     Withholding     19     10.6     Facility of Payment     19     10.7     Overpayment and Underpayment of Benefits     19     10.8     Governing Law     20     --------------------------------------------------------------------------------   CENTEX CORPORATION EXECUTIVE DEFERRED COMPENSATION PLAN Effective as of April 1, 2003 ARTICLE I. NATURE OF PLAN      Centex Corporation (the “Company”) established the Centex Corporation Executive Deferred Compensation Plan (the “Plan”), effective as of April 1, 2003, for the benefit of certain of its Eligible Employees. The purpose of the Plan is to provide non-qualified Deferred Cash Compensation Awards to Eligible Employees.      The Plan is intended to be an unfunded deferred compensation plan maintained for the benefit of a select group of management or highly compensated employees under sections 201(2), 301(a)(3) and 401(a)(1) of ERISA.      NOW, THEREFORE, Centex Corporation hereby authorizes the establishment of the Plan, effective as of April 1, 2003, as amended and restated effective April 1, 2006, to read as follows: 1 --------------------------------------------------------------------------------   ARTICLE II. DEFINITIONS AND CONSTRUCTION      2.1 Definitions. Wherever used herein, the following terms have the meanings set forth below, unless a different meaning is clearly required by the context:           “Account” means an account established on the books of the Employer for the purpose of recording amounts credited on behalf of a Participant and any income, expenses, gains or losses included thereon as described in Article V.           “Beneficiary” means the person or persons entitled under Section 6.3 to receive benefits under the Plan upon the death of a Participant.           “Board” means the Board of Directors of the Company.           “Change in Control” means, unless otherwise defined by the independent Compensation Committee of the Board, a change in control of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended (the “Act”), whether or not the Company is then subject to such reporting requirement; provided, that, without limitation, such a change in control shall be deemed to have occurred if:      (1) a third person, including a “Group” as defined in Section 13(d)(3) of the Act, becomes the beneficial owner of Company common stock, par value $0.25 per share, having 50% or more of total number of votes that may be cast for the election of Directors; or      (2) as a result of, or in connection with, a contested election for Director, persons who were Directors immediately before such election shall cease to constitute a majority of the Board.           “Code” means the Internal Revenue Code of 1986, as amended from time to time.           “Committee” means the Compensation Committee of the Board.           “Company” means Centex Corporation, a Nevada corporation, or any successor thereto which shall adopt this Plan.           “Deferral Election Form” means an election, in the form and subject to the conditions prescribed by the Committee, pursuant to which a Participant elects the time and form of distribution of his Account under the Plan. 2 --------------------------------------------------------------------------------             “Deferred Cash Compensation” means deferred cash compensation granted to an Eligible Employee as a bonus following the conclusion of a fiscal year pursuant to Article IV.           “Deferred Cash Compensation Award” means an award of Deferred Cash Compensation.           “Deferred Compensation Agreement” means an agreement between the Company and an Eligible Employee, in the form and subject to the conditions prescribed by the Committee, pursuant to which an Eligible Employee is granted a Deferred Cash Compensation Award from the Company, and which specifies:      (1) that the Eligible Employee agrees to participate in this Plan in accordance with its provisions; and      (2) that this Plan is incorporated by reference and the Deferred Compensation Agreement shall be subject to this Plan in all respects.           “Director” means an individual who is a member of the Board.           “Disability” means a disability which entitles a Participant to benefits under the Employer’s long-term disability plan or which would entitle the Participant to benefits under such plan were the Participant an employee at the time of such disability.           “Eligible Employee” means (1) prior to January 1, 2004, an Employee of the Employer who is a member of the Senior Management Team, and (2) after December 31, 2003, an Employee who is an officer or key Employee of the Employer.           “Employee” means any employee of the Employer.           “Employee Director” means an individual (1) who is both a member of the Board and an Employee of the Company at the time of the grant of the Deferred Cash Compensation Award or (2) who was an Employee whose date of Retirement is before the Deferred Cash Compensation Award is granted, but who qualifies for such award in accordance with an incentive compensation plan of the Company.           “Employer” means the Company and any Related Employer.           “ERISA” means the Employee Retirement Income Security Act of 1974, as from time to time amended.           “Form of Distribution” means one of the distribution options set forth in Section 6.1(b).           “Full Time Employee” means a person actively and regularly engaged in work at least 40 hours a week. 3 --------------------------------------------------------------------------------             “Maximum Deferral Date” means December 31st of the 7th year after the year in which a Deferred Cash Compensation Award is granted to a Participant.           “Participant” means any Eligible Employee who participates in the Plan in accordance with Article III and Article IV.           “Plan” means the Centex Corporation Executive Deferred Compensation Plan, as set forth herein and as may be amended from time to time.           “Plan Year” means the 12-consecutive month period beginning January 1 and ending December 31.           “Related Employer” means any employer other than the Company named herein, if the Company and such other employer are members of a controlled group of corporations (as defined in Section 414(b) of the Code) or an affiliated service group (as defined in Section 414(m)), or are trades or businesses (whether or not incorporated) which are under common control (as defined in Section 414(c)), or such other employer is required to be aggregated with the Company pursuant to regulations issued under Code Section 414(o). Related Employer shall also include any joint venture in which the Company or a subsidiary of the Company is a partner, if the Company or a subsidiary of the Company manages such joint venture, and any Affiliated Business Arrangement. For purposes of this definition of Related Employer, an “Affiliated Business Arrangement” means any entity in which either CTX Mortgage Ventures, LLC, a Delaware limited liability company, or a subsidiary of the Company owns an interest and in which a non-Company owned entity also owns an interest, and may take the form of a limited partnership, a limited liability limited partnership, a limited liability company or such other ownership and management structure as CTX Mortgage Ventures, LLC or a subsidiary of the Company, as applicable, may deem appropriate. In addition, predecessors to the Company and its subsidiaries are Related Employers.           “Retirement” means the Participant’s voluntary termination of employment from the Employer and, where the context indicates, will include Vested Retirement with respect to Deferred Cash Compensation Awards granted prior to April 1, 2006.           “Senior Management Team” means Messrs. Leldon E. Echols, Timothy R. Eller, Laurence E. Hirsch, Raymond G. Smerge, and Robert S. Stewart.           “Trust” means a trust fund established, if any, pursuant to the Article VIII hereof.           “Trustee” means the corporation or individuals named in the agreement establishing a Trust and such successor and/or additional trustees as may be named in accordance with a trust agreement, if one is established.           “Unforeseeable Financial Emergency” means an unanticipated emergency that is caused by an event beyond the control of the Participant that would result in severe financial 4 --------------------------------------------------------------------------------   hardship to the Participant resulting from (i) sudden and unexpected illness or accident of the Participant, the Participant’s spouse, or a dependent of the Participant, (ii) a loss of the Participant’s property due to casualty, or (iii) such other extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant, all as determined in the sole discretion of the Committee.           “Vested Retirement” means the voluntary termination by a Participant who is a Full Time Employee of all employment from the Employer at any time after the Participant is age 55 or older, has at least 10 Years of Service and the sum of age and Years of Service equals at least 70. Calculation of eligibility for Vested Retirement shall be based on whole years of age and Years of Service on the date as of which the calculation is being made. Any partial years shall be disregarded. In no event will the Plan’s Vested Retirement provisions apply to Deferred Cash Compensation Awards granted on or after April 1, 2006.           “Weighted Average Cost of Funds” means the Company’s weighted average borrowing cost as determined quarterly by the Company’s Treasurer.           “Years of Service” means the Participant’s years of employment with an Employer. A Participant shall be credited with a Year of Service on each anniversary of the date on which he was first employed with an Employer, provided that the Participant continues to be employed by an Employer on such anniversary date.      2.2 Word Usage. Words used in the masculine shall apply to the feminine where applicable, and wherever the context of the Plan dictates, the plural shall be read as the singular and the singular as the plural. The words “herein,” “hereof,” “hereinafter” and other conjunctive uses of the word “here” shall be construed as reference to another portion of this Plan document. The terms “Section” or “Article” when used as a cross-reference shall refer to other Sections or Articles contained in the Plan and not to another instrument, document or publication unless specifically stated otherwise. 5 --------------------------------------------------------------------------------   ARTICLE III. ELIGIBILITY TO PARTICIPATE      3.1 Date of Participation. An Eligible Employee shall become a Participant in the Plan as of the date he is granted a Deferred Cash Compensation Award, pursuant to Section 4.1, subject to his timely execution of a Deferred Compensation Agreement.      3.2 Change in Employment Status. If any Participant continues in the employ of the Employer or Related Employer but ceases to be an Eligible Employee, the individual shall continue to be a Participant while he remains employed and the Deferred Cash Compensation Award will continue to vest and be paid in accordance with its terms; provided, however, the individual shall not be eligible for new grants of Deferred Cash Compensation Awards on and after the date he is no longer an Eligible Employee. 6 --------------------------------------------------------------------------------   ARTICLE IV. DEFERRED CASH COMPENSATION AWARDS      4.1 Award from Company. From time to time while the Plan is in effect, the Committee may in its absolute discretion select from among Eligible Employees such one or more of them as in the opinion of the Committee should receive a Deferred Cash Compensation Award from the Company. The Committee will also, in its absolute discretion, determine the amount of the Deferred Cash Compensation Award for each Eligible Employee so selected.      4.2 Agreement. Each Deferred Cash Compensation Award under the Plan shall be evidenced by, and subject to, a timely executed Deferred Compensation Agreement setting forth the terms and conditions of the award.      4.3 Crediting of Amounts. An Employer shall credit a Participant’s Account with the amount of Deferred Cash Compensation that has been awarded to the Participant in accordance with Section 4.1. Such amount shall be credited to a Participant’s Account on the date specified under the applicable Deferred Compensation Agreement.      4.4 Interest. A Participant’s Account shall accrue interest (compounded on a daily basis) until paid to the Participant, and shall be credited with interest each day at a per annum interest rate equal to the Company’s Weighted Average Cost of Funds for the calendar quarter ended immediately prior to such day or as otherwise provided in the applicable Deferred Compensation Agreement.      4.5 Vesting. A Participant’s Deferred Cash Compensation Award shall vest in accordance with a schedule established by the Committee, in its sole and absolute discretion, and as described in the applicable Deferred Compensation Agreement. The schedules established by the Committee for each Deferred Cash Compensation Award may differ among Participants.      4.6 Distribution. The distribution of any vested portion of a Deferred Cash Compensation Award shall be as provided in the applicable Deferred Compensation Agreement, subject to the provisions of Article VI below.      4.7 Forfeiture. Subject to Sections 4.8, 4.9 and 4.10 below and except as otherwise provided in a Deferred Compensation Agreement or as otherwise determined by the Committee, any unvested portion of an Account attributable to a Deferred Cash Compensation Award shall be immediately forfeited automatically upon termination of employment of the Participant for any reason other than death or Disability, or, with respect to Deferred Cash Compensation Awards granted prior to April 1, 2006, Vested Retirement.      4.8 Death, Disability or Vested Retirement. Notwithstanding Section 4.5 to the contrary, unless (i) otherwise expressly provided in the applicable Deferred Compensation Agreement or (ii) previously forfeited under Section 4.7, in the event of the Participant’s death or Disability or, with respect to Deferred Cash Compensation Awards granted prior to April 1, 7 --------------------------------------------------------------------------------   2006, Vested Retirement, each Deferred Cash Compensation Award granted to such Participant shall become immediately vested in its entirety.      4.9 Change in Control. In the event of a Change in Control during a Participant’s employment with the Employer, each Deferred Cash Compensation Award granted under this Plan to the Participant shall become immediately vested and payable and shall be paid in a lump sum in cash (regardless of the otherwise applicable distribution and vesting provided for under the Deferred Compensation Agreement or the terms of the Deferred Cash Compensation Award) unless otherwise expressly provided in such Deferred Compensation Agreement or Deferred Cash Compensation Award.      4.10 Employee Directors. An Employee Director’s entire Deferred Cash Compensation Award will vest in full on the date the Employee Director ceases to be both a Director and an Employee. 8 --------------------------------------------------------------------------------   ARTICLE V. PARTICIPANT ACCOUNTS      5.1 Participant Accounts. The Company will establish and maintain an Account for each Participant to which shall be credited all Employer contributions and any earnings attributable to the Participant’s Account. The Committee will establish and maintain such other accounts and records as it decides in its discretion to be reasonably required or appropriate in order to discharge its duties under the Plan. Participants will be furnished statements of their Account values at least once each Plan Year.      5.2 Accounting for Distributions. As of any date of a distribution to a Participant or a Beneficiary hereunder, the distribution to the Participant or to the Participant’s Beneficiary(ies) shall be charged to the Participant’s Account. 9 --------------------------------------------------------------------------------   ARTICLE VI. DISTRIBUTION OF BENEFITS      6.1 Election for Form of Distribution of Benefits.      (a) A Participant shall elect the Form of Distribution to be made from the Participant’s Account when such Participant first enters into a Deferred Compensation Agreement and at such other designated times as provided in Section 6.2(b).      (b) Participants may elect to receive distribution of their Account with respect to the amounts scheduled to vest in the following year from among the following Forms of Distribution, subject to Section 6.2 of the Plan:      (1) For a distribution following death, Disability, or Retirement prior to the Maximum Deferral Date:      (A) a lump sum in cash; or      (B) a series of substantially equal quarterly, semi-annual or annual installments in cash over a period certain which does not exceed the Maximum Deferral Date; or      (C) two installments in cash in amounts (stated as percentages of the Account that total 100%) payable as of the dates elected by the Participant which do not exceed the Maximum Deferral Date.      (2) For a distribution during employment prior to the Maximum Deferral Date:      (A) a lump sum in cash of all or a portion of the Participant’s Account payable as of the date(s) elected by the Participant which do not exceed the Maximum Deferral Date; or      (B) two installments in cash in amounts (stated as percentages of the Account that total 100%) payable as of the dates elected by the Participant which do not exceed the Maximum Deferral Date.      (c) Notwithstanding anything herein to the contrary, if a Participant has not elected a Form of Distribution at the time the Participant terminates employment or, if earlier, the Maximum Deferral Date(s), then his vested Account shall be distributed in a lump sum in cash on or about the earlier of his termination date or, if applicable, the Maximum Deferral Date(s). 10 --------------------------------------------------------------------------------        6.2 Time of Distribution.      (a) A Participant may elect to receive a distribution as follows:      (1) If the Participant elects a lump sum distribution, he can elect that the distribution be made:      (A) within 30 days following his death, Disability, or Retirement; or      (B) in January of the year following death, Disability or Retirement; provided, however, that if the Maximum Deferral Date for the amount to be distributed occurs prior to the Participant’s death, Disability or Retirement, then such lump sum distribution shall be made on (or as soon as administratively practicable after) the Maximum Deferral Date.      (2) If the Participant elects a distribution in quarterly, semi-annual or annual installments, the distribution will commence in January of the year following death, Disability, or Retirement; provided, however, that if the Maximum Deferral Date for the amount to be distributed occurs prior to the Participant’s death, Disability or Retirement, then such amount shall be distributed in lump sum on (or as soon as administratively practicable after) the Maximum Deferral Date.      (3) If the Participant elects a lump sum distribution during employment, he can elect that the distribution be made after a set number of years not to exceed the Maximum Deferral Date for the amount to be distributed, provided, however, that if the Participant terminates employment prior to such date, then the Plan’s provisions with respect to distribution following death, Disability, or Retirement, or the general provisions of this Section, shall control the distribution of his Account. An election pursuant to this Section shall be made by the Participant when the Participant first enters into a Deferred Compensation Agreement pursuant to a Deferral Election Form and at other such times as permitted by the Committee on subsequent Deferral Election Forms.      (b) An election of timing of distribution for a prior Plan Year award may be revoked and a new election substituted therefor during any subsequent Plan Year; provided, however, that such new election (i) shall only be effective with respect to distributions during a Plan Year subsequent to the Plan Year during which the new election is made and (ii) the new distribution date shall not exceed the applicable Maximum Deferral Date with respect to the amounts to be distributed. 11 --------------------------------------------------------------------------------        (c) Notwithstanding a Participant’s election regarding timing of a distribution, in the event that a Participant terminates employment other than due to death, Disability, or Retirement and such termination date is prior to the Maximum Deferral Date for the amounts to be distributed, then the Participant’s vested Account shall be distributed in a lump sum as soon as administratively practicable after such date; provided, however, that the Committee may, in its sole and absolute discretion, choose to continue the deferral until the Participant’s Account would otherwise be payable for a period not to exceed the earlier of (i) the end of the following Plan Year or (B) the applicable Maximum Deferral Date for the amounts to be distributed, subject to the right of the Committee to revoke the deferral at any time and cause a distribution to occur.      (d) Notwithstanding the foregoing or any other provision of the Plan to the contrary, in no event will distribution of a Participant’s vested Account balance be deferred later than the date specified by the Participant in his election to defer his Deferred Cash Compensation Award or, if earlier, the applicable Maximum Deferral Date with respect to each Deferred Cash Compensation Award, subject to Section 6.2(c).      6.3 Distributions In the Event of the Participant’s Death. If a Participant dies before the distribution of his Account has commenced, or before such distribution has been completed, his designated Beneficiary or Beneficiaries will be entitled to receive, to the extent vested, the balance or remaining balance of his Account, plus any amounts thereafter credited to his Account, in a lump sum as soon as administratively practicable after the Participant’s date of death and satisfaction of this Section 6.3.           If a Participant is married, his Beneficiary is his spouse at the time of his death. A Participant may designate a Beneficiary or Beneficiaries other than his spouse, provided that the Participant’s spouse either consents to such designation or the Participant establishes to the satisfaction of the Committee that the spouse’s consent cannot be obtained because the spouse cannot be located. Spousal consent must be in writing, must acknowledge the effect of the designation, and must be witnessed by a Plan representative or a notary public. Any consent by a spouse (or the establishment that a spouse cannot be located) shall be valid only with respect to that spouse. The designation of a nonspousal Beneficiary or a change in any prior designation of Beneficiary or Beneficiaries shall be made by giving notice to the Committee on a form designated by the Committee.           If a Participant is not married, he may designate a Beneficiary or Beneficiaries or change any prior designation of Beneficiary or Beneficiaries by giving notice to the Committee on a form designated by the Committee.           If more than one person is designated as the Beneficiary, their respective interests shall be as indicated on the designation form. Distributions shall be made in lump sum payments in cash as soon as administratively practicable following the Committee’s receipt of notice of the Participant’s death. 12 --------------------------------------------------------------------------------             A copy of the death notice or other sufficient documentation must be filed with and approved by the Committee. If upon the death of the Participant there is, in the opinion of the Committee, no designated Beneficiary for part or all of the Participant’s vested Account, such amount will be paid to his surviving spouse or, if none, to his estate (such spouse or estate shall be deemed to be the Beneficiary for purposes of the Plan). If a Beneficiary dies after benefits to such Beneficiary have commenced, but before they have been completed, and, in the opinion of the Committee, no person has been designated to receive such remaining benefits, then such benefits shall be paid to the deceased Beneficiary’s estate.      6.4 Withdrawals in the Event of an Unforeseeable Financial Emergency. If the Participant experiences an Unforeseeable Financial Emergency, the Participant may petition the Committee, in the manner and form specified by the Committee, to receive a partial or full distribution of his vested Account. A payout under this section shall not exceed the lesser of the vested balance in the Participant’s Account or the amount reasonably needed to satisfy the Unforeseeable Financial Emergency. Approval of such a request shall be made by the Committee in its sole discretion.      6.5 Notice to Trustee. The Committee will notify the Trustee, if applicable, in writing whenever any Participant or Beneficiary is entitled to receive benefits under the Plan. The Committee’s notice shall indicate the form, amount and frequency of benefits that such Participant or Beneficiary shall receive.      6.6 Elections Under Q&A-21 of notice 2005-1.      (a) Pursuant to Q&A-21 of IRS Notice 2005-1, on or before March 15, 2005, Participants may elect, pursuant to a Deferral Election Form, the form and time of distribution, as set forth in subsection (b) below, of the following amounts of Deferred Cash Compensation awarded to such Participants:      (1) Deferred Cash Compensation awarded in May 2003 that vests after December 31, 2004, along with earnings thereon (“Unvested May 2003 Award Amounts”);      (2) Deferred Cash Compensation awarded in May 2004 that vests after December 31, 2004, along with earnings thereon (“Unvested May 2004 Award Amounts”); and      (3) Deferred Cash Compensation awarded in May 2005, along with earnings thereon (“May 2005 Award Amounts”).      (b) A Participant may elect a distribution separately for each of his Unvested May 2003 Award Amounts, Unvested May 2004 Award Amounts and May 2005 Award Amounts, as applicable, from among the following:      (1) total amount in a lump sum in cash on or as soon as 13 --------------------------------------------------------------------------------   administratively practicable after a date, selected by the Participant, that:      (A) is not earlier than March 31, 2006 and not later than the Maximum Deferral Date (as defined below), for Unvested May 2003 Award Amounts;      (B) is not earlier than March 31, 2007 and not later than the Maximum Deferral Date, for Unvested May 2004 Award Amounts; and      (C) is not earlier than March 31, 2008 and not later than the Maximum Deferral Date, for May 2005 Award Amounts;      (2) in lump sums in cash on or as soon as administratively practicable after January 15th of the year following the applicable calendar year during which the amounts awarded vest; or      (3) total amount in a lump sum in cash on or as soon as administratively practicable after the first to occur of:      (A) termination of the Participant’s employment for any reason (or, if the Participant is a “specified employee” within the meaning of Code Section 409A(a)(B)(i) and the regulations thereunder, as determined by the Committee, and the Participant’s termination is not due to his death, then the date that is six months after the date of the Participant’s termination of employment); or      (B) the Maximum Deferral Date For purposes of this Section 6.6, the “Maximum Deferral Date”: is (i) December 31, 2010, for Unvested May 2003 Award Amounts; (ii) December 31, 2011, for Unvested May 2004 Award Amounts; and (iii) December 31, 2012, for May 2005 Award Amounts. 14 --------------------------------------------------------------------------------   ARTICLE VII. AMENDMENTS AND TERMINATION      7.1 Amendment by Company. The Company, by action of the Committee, reserves the authority to amend the Plan at any time and in any manner, except that no amendment shall apply retroactively to alter the rights of Participants (or, following the Particpants’ death, their Beneficiaries) with respect to past deferrals, nor shall any such amendment divest any Participant (or, following the Participant’s death, his Beneficiaries) of any deferral made prior to the amendment. Amendments may be made as necessary or appropriate to enable the Plan to satisfy the applicable requirements of the Code or ERISA or to conform the Plan to any change in federal law or to any regulations or ruling thereunder.      7.2 Plan Termination. The Company has adopted the Plan with the intention and expectation that the Plan will be continued indefinitely. However, the Company has no obligation or liability whatsoever to maintain the Plan for any length of time and may discontinue contributions under the Plan or, by action of the Committee, terminate the Plan at any time. In the event of such discontinuance, Accounts of Participants maintained under the Plan at the time of termination shall continue to be governed by the terms of the Plan until paid out in accordance with the terms of the Plan; provided, however, that the Company reserves the right to distribute to each Participant the total amount deferred, including accrued interest, of the Participant’s Account at any time or times. 15 --------------------------------------------------------------------------------   ARTICLE VIII. TRUST      8.1 Establishment of Trust. Benefits hereunder shall constitute an unfunded, general obligation of the Company. The Company may, but shall not be required to, establish a Trust between the Company and the Trustee, in accordance with the terms and conditions as set forth in a separate agreement, under which assets are held, administered and managed, subject to the claims of the Company’s creditors in the event of the Company’s insolvency, until paid to Participants and their Beneficiaries as specified in the Plan. Any such Trust shall be treated as a grantor trust under the Code, and the establishment of any such Trust is not intended to cause Participants to realize current income on amounts contributed thereto. If a Trust is established under this Section 8.1, then benefits may be paid by the Company or from the Trust.      8.2 Funding. Notwithstanding the ability or obligation, as applicable, of the Company to establish a Trust under this Article VIII, or to take other action to create reserves or funds, benefits under this Plan shall constitute an unfunded and unsecured promise to pay benefits. A Participant and his Beneficiary(ies) shall be general creditors of the Company with respect to the payment of any benefit under this Plan. 16 --------------------------------------------------------------------------------   ARTICLE IX. PLAN ADMINISTRATION      9.1 Powers and Responsibilities of the Committee. The Committee has the full power and discretion and the full responsibility to interpret the Plan and to administer the Plan in all of its details, subject, however, to the applicable requirements of ERISA. The Committee’s powers and responsibilities include, but are not limited to, the following:      (a) To make and enforce such rules and regulations as it deems necessary or proper for the efficient administration of the Plan;      (b) To interpret the Plan, its interpretation thereof in good faith and discretion to be final and conclusive on all persons claiming benefits under the Plan;      (c) To decide all questions concerning the Plan and the eligibility of any person to participate in the Plan;      (d) To administer the claims and review procedures specified in Section 9.2;      (e) To compute the amount of benefits which will be payable to any Participant, former Participant or Beneficiary in accordance with the provisions of the Plan;      (f) To determine the person or persons to whom such benefits will be paid;      (g) To authorize the payment of benefits;      (h) To comply with the reporting and disclosure requirements of Part 1 of Subtitle B of Title I of ERISA;      (i) To designate such persons (which may include Employees of the Company), counsel, accountants, and consultants as may be required to assist in administering the Plan; and      (j) To allocate and delegate its responsibilities, including the formation of any other committees as appropriate to the administration of the Plan.      9.2 Claims and Review Procedures.      (a) If any person believes he is entitled to any rights or benefits under the Plan, such person may file a claim in writing with the Committee, which shall be in appropriate detail to convey a clear understanding of such claim. If any such claim is wholly or partially denied, the Committee will notify such person of its decision in writing. Such notification will contain (i) specific reasons for the denial, (ii) specific reference to pertinent Plan provisions, (iii) a description of any additional material or information necessary for such person to perfect such claim and an explanation of why such material or 17 --------------------------------------------------------------------------------   information is necessary, and (iv) information as to the steps to be taken if the person wishes to submit a request for review, the time limits applicable to such procedures, and a statement of the person’s rights following an adverse benefit determination on review, including a statement of his right to file a lawsuit under ERISA if the claim is denied on appeal. Such notification will be given within 90 days after the claim is received by the Committee (or within 180 days, if special circumstances require an extension of time for processing the claim, and if written notice of such extension and circumstances is given to such person within the initial 90-day period). If such notification is not given within such period, the claim will be considered denied as of the last day of such period and such person may request a review of his claim.      (b) Within 60 days after the date on which a person receives a notice of denial (or within 60 days after the date on which such denial is considered to have occurred), such person (or his duly authorized representative) may (i) file a written request with the Committee for a review of his denied claim; (ii) review pertinent documents; and (iii) submit issues and comments in writing. The decision on review will be made within 60 days after the request for review is received by the Committee (or within 120 days, if special circumstances require an extension of time for processing the request, such as an election by the Committee to hold a hearing, and if written notice of such extension and circumstances is given to such person within the initial 60-day period). The decision on review shall be in written or electronic form, and include notice of the final determination. If the claim is denied in whole or part, such notice, which shall be in a manner calculated to be understood by the person receiving such notice, shall include (i) the specific reasons for the decision, (ii) the specific references to the pertinent plan provisions on which the decision is based, (iii) a statement that the person is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the claim for benefits, (iv) a description of any voluntary appeal procedures offered by the Plan and the person’s right to obtain further information about any such procedures, and (v) a statement of the person’s right to file a lawsuit under ERISA. If the decision on review is not made within such period, the claim will be considered denied.           Benefits under this Plan will only be paid if the Committee decides, in its discretion, that a person is entitled to them. Moreover, no action at law or in equity shall be brought to recover benefits under this Plan prior to the date the claimant has exhausted the administrative process of appeal available under the Plan. 18 --------------------------------------------------------------------------------   ARTICLE X. MISCELLANEOUS      10.1 Communication to Participants. The Committee shall communicate the terms of the Plan as soon as practicable after an Eligible Employee is designated as a Participant.      10.2 Limitation of Rights. Neither the establishment of the Plan and, if applicable, the Trust, nor any amendment thereof, nor the creation of any fund or account, nor the payment of any benefits, will be construed as giving to any Participant or other person any legal or equitable right against the Company, an Employer, the Committee (or its delegates) or Trustee, except as provided herein. The Plan is not an employment contract, and in no event will the terms of employment or service of any Participant be modified or in any way affected hereby.      10.3 Spendthrift Provision. Except as otherwise provided in Section 10.4, the benefits provided hereunder will not be subject to alienation, assignment, garnishment, attachment, execution or levy of any kind, either voluntarily or involuntarily, and any attempt to cause such benefits to be so subjected will not be recognized, except to such extent as may be required by law.      10.4 Spousal Claims. Any claim against benefits under this Plan for child support, spousal maintenance, alimony, property division or other matrimonial or dependent obligations shall be paid in a single lump sum payment in cash as soon as administratively practicable after the Committee (or its delegate) approves such payment. Except as provided herein, such a claim under this Plan shall be subject to the Plan’s claims procedures, provisions and restrictions.      10.5 Withholding. Any taxes required to be withheld from distributions hereunder shall be deducted and withheld by the Employer, benefit provider or funding agent.      10.6 Facility of Payment. In the event the Committee determines, on the basis of medical reports or other evidence satisfactory to the Committee, that the recipient of any benefit payments under the Plan is incapable of handling his affairs by reason of minority, illness, infirmity or other incapacity, the Committee may, but is not obligated to, provide for disbursement of such payments to such person’s spouse or to any person or institution designated by a court which has jurisdiction over such recipient or a person or institution otherwise having the legal authority under applicable state law for the care and control of such recipient. The receipt by any such person or institution of any such payments therefor, and any such payment to the extent thereof, shall discharge the liability of the Plan for the payment of benefits hereunder to such recipient.      10.7 Overpayment and Underpayment of Benefits. The Committee may adopt, in its sole discretion, whatever rules, procedures and accounting practices are appropriate in providing for the collection of any overpayment of benefits. If an overpayment is made to a Participant, spouse, other Beneficiary or alternate payee, for whatever reason, the Committee may, in its sole discretion, withhold payment of any further benefits under the Plan until the 19 --------------------------------------------------------------------------------   overpayment has been collected or may require repayment of benefits paid under this Plan, without regard to further benefits to which the person may be entitled and, to the extent deemed necessary by the Committee, in its sole discretion, the Committee may seek repayment of such overpaid amounts through any and all available legal actions, including, but not limited to, filing suit in a court with appropriate jurisdiction. If a Participant, spouse, alternate payee, or other Beneficiary receives an underpayment of benefits, the Committee shall direct that immediate payment be made to make up for the underpayment.      10.8 Governing Law. The Plan will be construed, administered and enforced according to ERISA, and to the extent not preempted thereby, the laws of the State of Texas. 20 --------------------------------------------------------------------------------   IN WITNESS WHEREOF, Centex Corporation has executed these presents as evidenced by the signature of its officer affixed hereto, in a number of copies, all of which shall constitute but one and the same instrument, which may be sufficiently evidenced by any executed copy hereof, this ___ day of ___, ___.                   CENTEX CORPORATION                       By:                                         Its:                       21

Exhibit 10.107     PROMISSORY NOTE   $5,000,000.00 As of January 27, 2006   FOR VALUE RECEIVED, Smith & Wollensky Restaurant Group, Inc., a Delaware corporation, having an office at 1114 First Avenue, New York, New York 10021 (the “Borrower”), hereby unconditionally promises to pay to the order of MORGAN STANLEY DEAN WITTER COMMERCIAL FINANCIAL SERVICES, INC., a Delaware corporation, as lender, having an address at 2000 Westchester Avenue, Purchase, New York 10577 (the “Lender”), or at such other place as the holder hereof may from time to time designate in writing, the principal sum of FIVE MILLION AND NO/100 DOLLARS ($5,000,000.00), or, if less than such principal amount, the aggregate unpaid principal amount of all Advances (as defined in the Line of Credit Agreement of even date herewith by and among the Borrower, Dallas S&W, L.P. and the Lender (as the same may be amended, supplemented or otherwise modified, the “Loan Agreement”), in lawful money of the United States of America with interest thereon to be computed from the date of this Promissory Note (this "Note") at the rate determined in accordance with the Basic Loan Terms portion of the Loan Agreement (as such rate may increase pursuant to the terms of the Loan Agreement), and to be paid in accordance with the terms of this Note and the Loan Agreement. All capitalized terms not defined herein shall have the respective meanings set forth in the Loan Agreement. ARTICLE 1 - PAYMENT TERMS This Note is the Note referred to in the Loan Agreement and is subject to the terms and provisions of the Loan Agreement including, without limitation, the said Basic Loan Terms and Article II. Any outstanding balance of the principal sum of this Note and all accrued and unpaid interest thereon shall be due and payable on the Termination Date. All Advances made by the Lender to the Borrower under the Loan Agreement shall be recorded by the Lender and endorsed on the grid schedule attached hereto (or a similar record maintained by the Lender).   ARTICLE 2 - DEFAULT AND ACCELERATION The Advances shall without notice become due and payable at the option of the Lender (or immediately upon the occurrence of an Event of Default under Section 6.01(e) of the Loan Agreement) in accordance with the provisions of Section 6.01 of the Loan Agreement. The Borrower agrees to pay default interest and late charges, as provided for in the said Basic Loan Terms. ARTICLE 3 - OTHER DOCUMENTS This Note is secured by the Deed of Trust and the other Collateral Documents. All of the terms, covenants and conditions contained in the Loan Agreement are hereby made part of this Note to the same extent and with the same force as if they were fully set forth herein. In the event of a conflict or inconsistency between the terms of this Note and the Loan Agreement, the terms and provisions of the Loan Agreement shall govern. ARTICLE 4 - SAVINGS CLAUSE Anything herein to the contrary notwithstanding, if at any time the interest rate under this Note, together with all fees and charges that are treated as interest under applicable law (collectively, the “Charges”), as provided for in the Loan Agreement or herein or in any other Loan Document, or otherwise contracted for, charged, received, taken or reserved by the Lender, shall exceed the maximum     --------------------------------------------------------------------------------   lawful rate (the “Maximum Rate”) that may be contracted for, charged, taken, received or reserved by the Lender in accordance with applicable law, the rate of interest payable on this Note, together with all Charges payable to the Lender, shall be limited to the Maximum Rate. The Borrower shall never be liable for unearned interest thereon or shall ever be required to pay interest thereon in excess of the maximum amount that may be lawfully charged under applicable law from time to time in effect. If (a) the maturity of the obligations of the Borrower under this Note is accelerated for any reason, (b) any of such obligations are prepaid and as a result any amounts held to constitute interest are determined to be in excess of the legal maximum or (c) the Lender or any other holder of any or all of the obligations of the Borrower under this Note or the Loan Agreement shall otherwise collect moneys that are determined to constitute interest that would otherwise increase the interest on any or all of such obligations to an amount in excess of that permitted to be charged by applicable law then in effect, then all such sums determined to constitute interest in excess of such legal limit shall, without penalty, be promptly applied to reduce the then outstanding principal of such obligations or, at the Lender’s or such holder’s option, promptly returned to the Borrower or the other payor thereof upon such determination.   ARTICLE 5- NO ORAL CHANGE No amendment or waiver of any provision of this Note nor consent to any departure by the Borrower therefrom, shall in any event be effective unless the same shall be in writing and signed by the Lender and the Borrower, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. ARTICLE 6 - WAIVERS The Borrower and all others who may become liable for the payment of all or any part of the Advances do hereby severally waive presentment and demand for payment, notice of dishonor, notice of intention to accelerate, notice of acceleration, protest and notice of protest and non-payment and all other notices of any kind except as expressly provided in the Loan Agreement. No release of any security for the Advances or extension of time for payment of this Note or any installment hereof, and no alteration, amendment or waiver of any provision of this Note, the Loan Agreement or any of the other Loan Documents made by agreement between the Lender or any other Person shall release, modify, amend, waive, extend, change, discharge, terminate or affect the liability of the Borrower, and any other Person who may become liable for the payment of all or any part of the Advances, under this Note, the Loan Agreement or the other Loan Documents (except as otherwise specifically provided in writing by any such alterations, amendments or waivers of this Note, the Loan Agreement or the other Loan Documents). No notice to or demand on the Borrower shall be deemed to be a waiver of the obligation of the Borrower or of the right of the Lender to take further action without further notice or demand as provided for in this Note, the Loan Agreement or the other Loan Documents. ARTICLE 7- GOVERNING LAW This Note shall be governed, construed, applied and enforced in accordance with the laws of the State of New York and applicable laws of the United States of America without regard to conflicts of laws principles of New York State law other than § 5-1401 of the New York General Obligations Law. ARTICLE 8 - NOTICES All notices or other written communications hereunder shall be delivered in accordance with Section 7.02 (and the said Basic Loan Terms) of the Loan Agreement.     -2-     --------------------------------------------------------------------------------   IN WITNESS WHEREOF, Borrower has duly executed this Note as of the day and year first above written. BORROWER: THE SMITH & WOLLENSKY RESTAURANT GROUP, INC., a Delaware corporation   By:/s/ Samuel Goldfinger   Name: Samuel Goldfinger   Title: Secretary       STATE OF NEW YORK )     ss.: COUNTY OF NEW YORK )     On the 20th day of January in the year 2006 before me, the undersigned, a Notary Public in and for said State, personally appeared Samuel Goldfinger, personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his capacity, and that by his signature on the instrument, the individual, or the person upon behalf of which the individual acted, executed the instrument.     Maria Chang   Notary Public, State of NY NO.  01CH6093157       -3-     --------------------------------------------------------------------------------   NOTE   Grid Schedule of Advances/Payments       Unpaid Name of     Interest Principal Person     Date Advances Rate Payments Balance Making Notation       ______ _________ ________ ________ _______ ______________   ______ _________ ________ ________ _______ ______________   ______ _________ ________ ________ _______ ______________   ______ _________ ________ ________ _______ ______________   ______ _________ ________ ________ _______ ______________   ______ _________ ________ ________ _______ ______________   ______ _________ ________ ________ _______ ______________   ______ _________ ________ ________ _______ ______________   ______ _________ ________ ________ _______ ______________   ______ _________ ________ ________ _______ ______________   ______ _________ ________ ________ _______ ______________   ______ _________ ________ ________ _______ ______________   ______ _________ ________ ________ _______ ______________   ______ _________ ________ ________ _______ ______________   ______ _________ ________ ________ _______ ______________   ______ _________ ________ ________ _______ ______________   ______ _________ ________ ________ _______ ______________   ______ _________ ________ ________ _______ ______________   ______ _________ ________ ________ _______ ______________   ______ _________ ________ ________ _______ ______________   ______ _________ ________ ________ _______ ______________   ______ _________ ________ ________ _______ ______________   -4-

Exhibit 10.3   November 21, 2005   Mr. John Hertig 85 Harbourside Road North Quincy, MA  02171   Dear John,   I am pleased to offer you the full-time position of Chief Executive Officer of Enpath Medical, Inc. starting January 16, 2006. In addition, subject to Board approval and your acceptance of this offer, you will be elected to the Company’s Board of Directors.   This offer includes the following:   •                  A salary at an annual rate of $250,000, payable in accordance with our regular payroll practices   •                  A one-time sign-on bonus of $25,000 payable on January 20, 2006 (to be refunded to the Company should you voluntarily leave the Company within six months of employment)   •                  A bonus opportunity of 30% of annual compensation at target (excluding the sign-on bonus) based on the achievements of goals and objectives set by the Board of Directors   •                  Three weeks of annual vacation   •                  Inclusion in our benefits package, subject to meeting the applicable eligibility conditions   •                  A 100,000 share stock option grant with the following features, and subject to the terms of our standard option grant:   •                  Grant date of January 16, 2006   •                  Six year term (with earlier termination upon stated events, such as termination or change in control)   •                  Vesting 20% per year on the first 5 anniversaries of date of grant   •                  Exercise prices as follows:   •                  Segment 1-  25,000 at market price of $7.70/share (the closing price on the date of this letter) or its equivalent value   •                  Segment 2-  25,000 at price set in Segment 1 plus $1.30   •                  Segment 3-  25,000 at price set in Segment 1 plus $3.30   •                  Segment 4-  25,000 at price set in Segment 1 plus $5.30   •                  Options will, to the greatest extent possible, be issued as incentive stock options under Code Section 422 (the first $100,000 in value vesting in each year) with the remainder as non-qualified stock options.   --------------------------------------------------------------------------------   I will forward to you within the next several days a new hire and benefits packet including specific coverage information and enrollment forms for our benefit plan. We will also be forwarding to you our Confidentiality and Non-competition Agreement and “Procedures and Guidelines Governing Insider Trading and Tipping”. This offer is contingent upon execution of a written employment agreement as mutually agreed to by you and the Company.   Once again, I am very pleased to be extending this offer of employment. I am confident you will find Enpath Medical a challenging and rewarding opportunity and I am excited about the impact your leadership can have on the future success of this business.     Sincerely,     /s/ James D. Hartman     Enpath Medical, Inc. James D. Hartman Chief Executive Officer   --------------------------------------------------------------------------------

Reference Number: FXNSC8749-BXNS196993 - Amended Novation Confirmation Deutsche Bank Trust Company Americas, not in its individual capacity, but solely as Supplemental Interest Trust Trustee for the benefit of RALI Series 2006-QA8 Supplemental Interest Trust, Mortgage Asset-Backed Pass-Through Certificates, Series 2006-QA8 September 28, 2006 [OBJECT OMITTED]] BEAR STEARNS FINANCIAL PRODUCTS INC. 383 MADISON AVENUE NEW YORK, NEW YORK 10179 212-272-4009 DATE: September 28, 2006 TO: Deutsche Bank Trust Company Americas, not in its individual capacity, but solely as Supplemental Interest Trust Trustee for the benefit of RALI Series 2006-QA8 Supplemental Interest Trust, Mortgage Asset-Backed Pass-Through Certificates, Series 2006-QA8 ATTENTION: Trust Administration, RALI Series 2006-QA8 TELEPHONE: 714-247-6000 FACSIMILE: 714-247-6285 TO: Residential Funding Corporation ATTENTION: Ms. Josie Knorr TELEPHONE: 1-952-857-6560 FACSIMILE: 1-952-352-0503 FROM: Derivatives Documentation TELEPHONE: 212-272-2711 FACSIMILE: 212-272-9857 RE: AMENDED NOVATION CONFIRMATION REFERENCE NUMBER(S): FXNSC8749-BXNS196993 This Novation Confirmation is amended and supersedes all previous Novation Confirmations regarding this Novation Transaction. The purpose of this letter is to confirm the terms and conditions of the Novation Transaction entered into between the parties and effective from the Novation Date specified below. This Novation Confirmation constitutes a "Confirmation" as referred to in the New Agreement specified below. 1. The definitions and provisions contained in the 2004 ISDA Novation Definitions (the "Definitions") and the terms and provisions of the 2000 ISDA Definitions, as published by the International Swaps and Derivatives Association, Inc. and amended from time to time, are incorporated in this Novation Confirmation. In the event of any inconsistency between (i) the Definitions, (ii) the 2000 ISDA Definitions, and/or (iii) the Novation Agreement and this Novation Confirmation, this Novation Confirmation will govern. 2. The terms of the Novation Transaction to which this Novation Confirmation relates are as follows: Novation Trade Date: September 28, 2006 Novation Date: September 28, 2006 Novated Amount: USD 784,000,000 Transferor 1: Residential Funding Corporation Transferor 2: Bear Stearns Bank plc Transferee 1: Deutsche Bank Trust Company Americas, not in its individual capacity, but solely as Supplemental Interest Trust Trustee for the benefit of RALI Series 2006-QA8 Supplemental Interest Trust, Mortgage Asset-Backed Pass-Through Certificates, Series 2006-QA8 Transferee 2: Bear Stearns Financial Products Inc. New Agreement (between Transferee 1 The Master Agreement as defined in the and Transferee 2): New Confirmation 3. The terms of the Old Transaction to which this Novation Confirmation relates, for identification purposes, are as specified in each Old Confirmation attached hereto as Exhibit A. 4. The terms of the New Transaction to which this Novation Confirmation relates shall be as specified in the New Confirmation attached hereto as Exhibit B. Full First Calculation Period: Applicable 5. Offices: Transferor 1: Not Applicable Transferor 2: Not Applicable Transferee 1: Not Applicable Transferee 2: Not Applicable 6. Supplemental Interest Trust Trustee Liability Limitations. It is expressly understood and agreed by the parties hereto that (a) this Novation Confirmation is executed and delivered by Deutsche Bank Trust Company Americas ("Deutsche Bank"), not individually or personally but solely as Supplemental Interest Trust Trustee of the RALI Series 2006-QA8 Supplemental Interest Trust (the "Trust"), in the exercise of the powers and authority conferred and vested in it under the Pooling and Servicing Agreement, (b) each of the representations, undertakings and agreements herein made on the part of the Trust are made and intended not as personal representations, undertakings and agreements by Deutsche Bank but is made and intended for the purpose of binding only the Counterparty, (c) nothing herein contained shall be construed as creating any liability on Deutsche Bank, individually or personally, to perform any covenant either expressed or implied contained herein, all such liability, if any, being expressly waived by the parties hereto and by any Person claiming by, through or under the parties hereto; provided that nothing in this paragraph shall relieve Deutsche Bank from performing its duties and obligations under the Pooling and Servicing Agreement in accordance with the standard of care set forth therein, and (d) under no circumstances shall Deutsche Bank be personally liable for the payment of any indebtedness or expenses of the Counterparty or be liable for the breach or failure of any obligation, representation, warranty or covenant made or undertaken by the Counterparty under this Novation Confirmation or any other related documents. -------------------------------------------------------------------------------- The parties confirm their acceptance to be bound by this Novation Confirmation as of the Novation Date by executing a copy of this Novation Confirmation and returning a facsimile of the fully-executed Novation Confirmation to 212-272-9857. Transferor 1 and Transferor 2, by their respective execution of a copy of this Novation Confirmation, each agrees to the terms of the Novation Confirmation as it relates to the Old Transaction. Transferee 1 and Transferee 2, by their respective execution of a copy of this Novation Confirmation, each agrees to the terms of the Novation Confirmation as it relates to the New Transaction. For inquiries regarding U.S. Transactions, please contact DERIVATIVES DOCUMENTATION by telephone at 212-272-2711. For all other inquiries please contact DERIVATIVES DOCUMENTATION by telephone at 353-1-402-6223. BEAR STEARNS FINANCIAL PRODUCTS INC. DEUTSCHE BANK TRUST COMPANY AMERICAS, NOT IN ITS INDIVIDUAL CAPACITY, BUT SOLELY AS SUPPLEMENTAL INTEREST TRUST TRUSTEE FOR By: _/s/_Ann Manevitz_________________ THE BENEFIT OF RALI SERIES 2006-QA8 Name: Annie Manevitz SUPPLEMENTAL INTEREST TRUST, MORTGAGE Title: Authorized Signatory ASSET-BACKED PASS-THROUGH CERTIFICATES, Date: SERIES 2006-QA8 By: /s/ Amy Stoddard Name: Amy Stoddard Title: Authorized Signer Date: BEAR STEARNS BANK PLC RESIDENTIAL FUNDING CORPORATION By: /s/ Susan Donlon By: /s/ Heather Anderson Name: Susan Donlon Name: Heather Anderson Title: Authorized Signatory Title: Associate Date: Date: -------------------------------------------------------------------------------- Reference Number: BXNS196993 Residential Funding Corporation September 28, 2006 Bear Stearns Bank plc is regulated by the Financial Regulator Registered in Dublin, Ireland No. 241404 Directors: Pascal J Lambert, FR, Jeffrey C Bernstein, USA, Wendy de Monchaux, USA, Liam J. MacNamara, Patrick J. Mahon, Michael J. Meagher, Michael Minikes, USA, Samuel L Molinaro, USA, Padraic O'Connor, Michel Peretie, FR, A. Graham Sadler, UK, Niamh G. Walsh BEAR STEARNS BANK PLC BLOCK 8, HARCOURT CENTRE CHARLOTTE WAY DUBLIN 2, IRELAND Tel (353-1) 402 6200 Fax (353-1) 402-6223 EXHIBIT A DATE: September 28, 2006 TO: Residential Funding Corporation ATTENTION: Ms. Josie Knorr TELEPHONE: 1-952-857-6560 FACSIMILE: 1-952-352-0503 FROM: Derivatives Documentation TELEPHONE: 353-1-402-6233 FACSIMILE: 353-1-402-6223 SUBJECT: Fixed Income Derivatives Confirmation REFERENCE NUMBER(S): BXNS196993 The purpose of this letter agreement is to confirm the terms and conditions of the Transaction entered into on the Trade Date specified below (the "Transaction") between Bear Stearns Bank plc ( "Bear Stearns ") and Residential Funding Corporation ( "Counterparty "). This letter agreement constitutes the sole and complete "Confirmation," as referred to in the Master Agreement specified below, with respect to this Transaction. 1. This Confirmation is subject to and incorporates the 2000 ISDA Definitions (the "Definitions"), as published by the International Swaps and Derivatives Association, Inc. ("ISDA"). This Confirmation supplements, forms a part of and is subject to the ISDA Master Agreement dated as of November 16, 1999 between Bear Stearns and Counterparty (the agreement, as amended and supplemented from time to time, being referred to herein as the "Master Agreement"). All provisions contained in, or incorporated by reference to, the Master Agreement shall govern the Transaction referenced in this Confirmation except as expressly modified herein. In the event of any inconsistency between this Confirmation and the Definitions or Master Agreement, this Confirmation shall prevail. 2. The terms of the particular Transaction to which this Confirmation relates are as follows: Notional Amount: With respect to any Calculation Period, the amount set forth for such period in Schedule I attached hereto. Trade Date: August 28, 2006 Effective Date: September 28, 2006 Termination Date: September 28, 2011 FIXED AMOUNTS: Fixed Rate Payer: Counterparty Fixed Rate Payer Period End Dates: The 25th calendar day of each month during the Term of this Transaction, commencing October 25, 2006 and ending on the Termination Date, with No Adjustment Fixed Rate Payer Payment Dates: Early Payment shall be applicable. The Fixed Rate Payer Payment Dates shall be one Business Days preceding each Fixed Rate Payer Period End Date. Fixed Rate: 5.30000% Fixed Rate Day Count Fraction: 30/360 FLOATING AMOUNTS: Floating Rate Payer: Bear Stearns Floating Rate Payer Period End Dates: The 25th calendar day of each month during the Term of this Transaction, commencing October 25, 2006 and ending on the Termination Date, with No Adjustment. Floating Rate Payer Payment Dates: Early Payment shall be applicable. The Floating Rate Payer Payment Dates shall be one Business Days preceding each Floating Rate Payer Period End Date. Floating Rate for initial Calculation Period: To be determined. Floating Rate Option: USD-LIBOR-BBA Designated Maturity: 1 month Spread: None Floating Rate Day Count Fraction: Actual/360 Reset Dates: The first day of each Calculation Period. Compounding: Inapplicable Business Days: New York Business Day Convention: Following Additional Amount: In connection with entering into this Transaction USD 1,006,000.00 is payable by Bear Stearns to Counterparty on September 28, 2006. Calculation Agent: In accordance with the Master Agreement. 3. Account Details and Settlement Information: Payments to Bear Stearns: USD PAYMENT INSTRUCTIONS: BANK: CITIBANK NA ABA/BIC: 021000089 ACCT NAME: BEAR STEARNS SECURITIES CORP ACCT #: 09253186 FURTHER CR: BEAR STEARNS BANK PLC SUBACCT: 1014484024 Payments to Counterparty: USD PAYMENT INSTRUCTIONS: BANK: JPMORGAN CHASE BANK, NA ABA/BIC: 071000013 ACCT NAME: RFC OPERATING ACCOUNT ACCT #: 5315476 -------------------------------------------------------------------------------- ADDITIONAL PROVISIONS: Agency. Counterparty acknowledges that Bear, Stearns & Co. Inc. ("BS&C") has acted as agent for Counterparty solely for the purposes of arranging this Transaction with its Affiliate, Bear Stearns. This Confirmation is being provided by BS&C in such capacity. Upon your written request, BS&C will furnish you with the time at which this Transaction was entered into. Bear Stearns is not a member of the Securities Investor Protection Corporation. Non-Reliance. Each party represents to the other party that (a) it has not received and is not relying upon any legal, tax, regulatory, accounting or other advice (whether written or oral) of the other party regarding this Transaction, other than representations expressly made by that other party in this Confirmation and in the Master Agreement and (b) in respect of this Transaction, (i) it has the capacity to evaluate (internally or through independent professional advice) this Transaction and has made its own decision to enter into this Transaction and (ii) it understands the terms, conditions and risks of this Transaction and is willing to assume (financially and otherwise) those risks. Counterparty acknowledges that Bear Stearns has advised Counterparty to consult its own tax, accounting and legal advisors in connection with this Transaction evidenced by this Confirmation and that the Counterparty has done so. -------------------------------------------------------------------------------- SCHEDULE I (all such dates subject to adjustment in accordance with the Business Day Convention) NOTIONAL AMOUNT FROM AND INCLUDING TO BUT EXCLUDING (USD) Effective Date 25-Oct-2006 784,000,000.00 25-Oct-2006 25-Nov-2006 760,964,429.26 25-Nov-2006 25-Dec-2006 738,605,245.63 25-Dec-2006 25-Jan-2007 716,902,598.97 25-Jan-2007 25-Feb-2007 695,837,221.50 25-Feb-2007 25-Mar-2007 675,390,410.59 25-Mar-2007 25-Apr-2007 655,544,012.33 25-Apr-2007 25-May-2007 636,280,405.33 25-May-2007 25-Jun-2007 617,582,485.15 25-Jun-2007 25-Jul-2007 599,433,649.16 25-Jul-2007 25-Aug-2007 581,817,781.75 25-Aug-2007 25-Sep-2007 564,719,240.14 25-Sep-2007 25-Oct-2007 548,122,840.44 25-Oct-2007 25-Nov-2007 532,013,844.24 25-Nov-2007 25-Dec-2007 516,377,945.49 25-Dec-2007 25-Jan-2008 501,201,257.91 25-Jan-2008 25-Feb-2008 486,470,302.58 25-Feb-2008 25-Mar-2008 472,171,996.06 25-Mar-2008 25-Apr-2008 458,293,638.74 25-Apr-2008 25-May-2008 444,822,903.66 25-May-2008 25-Jun-2008 431,747,825.48 25-Jun-2008 25-Jul-2008 419,056,789.97 25-Jul-2008 25-Aug-2008 406,738,523.64 25-Aug-2008 25-Sep-2008 394,782,083.80 25-Sep-2008 25-Oct-2008 383,176,848.79 25-Oct-2008 25-Nov-2008 371,912,508.65 25-Nov-2008 25-Dec-2008 360,979,055.91 25-Dec-2008 25-Jan-2009 350,366,776.76 25-Jan-2009 25-Feb-2009 340,066,242.39 25-Feb-2009 25-Mar-2009 330,068,300.68 25-Mar-2009 25-Apr-2009 320,364,068.07 25-Apr-2009 25-May-2009 310,944,921.66 25-May-2009 25-Jun-2009 301,802,491.59 25-Jun-2009 25-Jul-2009 292,928,653.59 25-Jul-2009 25-Aug-2009 284,315,530.41 25-Aug-2009 25-Sep-2009 275,952,643.19 25-Sep-2009 25-Oct-2009 267,835,396.40 25-Oct-2009 25-Nov-2009 259,956,706.64 25-Nov-2009 25-Dec-2009 252,309,567.97 25-Dec-2009 25-Jan-2010 244,887,180.12 25-Jan-2010 25-Feb-2010 237,682,942.38 25-Feb-2010 25-Mar-2010 230,690,447.80 25-Mar-2010 25-Apr-2010 223,903,477.50 25-Apr-2010 25-May-2010 217,315,995.12 25-May-2010 25-Jun-2010 210,922,141.53 25-Jun-2010 25-Jul-2010 204,716,229.52 25-Jul-2010 25-Aug-2010 198,692,738.89 25-Aug-2010 25-Sep-2010 192,846,311.44 25-Sep-2010 25-Oct-2010 187,171,746.26 25-Oct-2010 25-Nov-2010 181,663,995.16 25-Nov-2010 25-Dec-2010 176,318,158.08 25-Dec-2010 25-Jan-2011 171,129,478.86 25-Jan-2011 25-Feb-2011 166,093,340.93 25-Feb-2011 25-Mar-2011 161,205,263.27 25-Mar-2011 25-Apr-2011 156,460,896.40 25-Apr-2011 25-May-2011 151,856,018.54 25-May-2011 25-Jun-2011 147,386,531.85 25-Jun-2011 25-Jul-2011 143,048,458.80 25-Jul-2011 25-Aug-2011 138,837,938.64 25-Aug-2011 Termination Date 134,740,995.45 -------------------------------------------------------------------------------- BEAR STEARNS [OBJECT OMITTED]] BEAR STEARNS FINANCIAL PRODUCTS INC. 383 MADISON AVENUE NEW YORK, NEW YORK 10179 212-272-4009 EXHIBIT B DATE: September 28, 2006 TO: Deutsche Bank Trust Company Americas, not in its individual capacity, but solely as Supplemental Interest Trust Trustee for the benefit of RALI Series 2006-QA8 Supplemental Interest Trust, Mortgage Asset-Backed Pass-Through Certificates, Series 2006-QA8 ATTENTION: Trust Administration, RALI Series 2006-QA8 TELEPHONE: 714-247-6000 FACSIMILE: 714-247-6285 FROM: Derivatives Documentation TELEPHONE: 212-272-2711 FACSIMILE: 212-272-9857 SUBJECT: Fixed Income Derivatives Confirmation and Agreement REFERENCE NUMBER(S): FXNSC8749 - Amended The purpose of this letter agreement ("Agreement") is to confirm the terms and conditions of the Transaction entered into on the Trade Date specified below (the "Transaction") between Bear Stearns Financial Products Inc. ("BSFP") and Deutsche Bank Trust Company Americas, not in its individual capacity, but solely as Supplemental Interest Trust Trustee for the benefit of RALI Series 2006-QA8 Supplemental Interest Trust, Mortgage Asset-Backed Pass-Through Certificates, Series 2006-QA8 (the "Counterparty"). This letter agreement, which evidences a complete and binding agreement between you and us to enter into the Transaction on the terms set forth below, constitutes a "Confirmation" as referred to in the ISDA Form Master Agreement (as defined below). 1. This Agreement is subject to and incorporates the (the "2000 Definitions"), as published by the International Swaps and Derivatives Association, Inc. ("ISDA"). You and we have agreed to enter into this Agreement in lieu of negotiating a Schedule to the 1992 ISDA Master Agreement (Multicurrency--Cross Border) form (the "ISDA Form Master Agreement") but, rather, an ISDA Form Master Agreement shall be deemed to have been executed by you and us on the date we entered into the Transaction. In the event of any inconsistency between the provisions of this Agreement and the Definitions or the ISDA Form Master Agreement, this Agreement shall prevail for purposes of the Transaction. Terms capitalized but not defined herein shall have the meaning attributed to them in the Series Supplement dated as of September 1, 2006 (the "Series Supplement"), to the Standard Terms of Pooling and Servicing Agreement dated as of March 1, 2006 (the "Standard Terms", and together with the Series Supplement, the "Pooling and Servicing Agreement"), among Residential Accredit Loans, Inc., as Depositor, Residential Funding Corporation, as Master Servicer and Deutsche Bank Trust Company Americas as Trustee. 2. The terms of the particular Transaction to which this Confirmation relates are as follows: Notional Amount: With respect to any Calculation Period, the amount set forth for such period in Schedule I attached hereto. Trade Date: September 28, 2006 Effective Date: September 28, 2006 Termination Date: September 28, 2011 FIXED AMOUNT: Fixed Rate Payer: Counterparty Fixed Rate Payer Period End Dates: The 25th calendar day of each month during the Term of this Transaction, commencing October 25, 2006 through and including August 25, 2011, and ending on the Termination Date, with No Adjustment. Fixed Rate Payer Payment Dates: Early Payment shall be applicable. The Fixed Rate Payer Payment Date shall be one Business Day prior to each Fixed Rate Payer Period End Date. Fixed Rate: 5.30000% Fixed Rate Day Count Fraction: 30/360 FLOATING AMOUNTS: Floating Rate Payer: BSFP Floating Rate Payer Period End Dates: The 25th calendar day of each month during the Term of this Transaction, commencing October 25, 2006 through and including August 25, 2011, and ending on the Termination Date, with No Adjustment. Floating Rate Payer Payment Dates: Early Payment shall be applicable. The Floating Rate Payer Payment Date shall be one Business Day prior to each Floating Rate Payer Period End Date. Floating Rate for initial Calculation Period: To be determined. Floating Rate Option: USD-LIBOR-BBA Designated Maturity: One month Spread: None Floating Rate Day Count Fraction: Actual/360 Reset Dates: The first day of each Calculation Period. Compounding: Inapplicable Business Days: New York Business Day Convention: Following 3. Additional Provisions: Each party hereto is hereby advised and acknowledges that the other party has engaged in (or refrained from engaging in) substantial financial transactions and has taken (or refrained from taking) other material actions in reliance upon the entry by the parties into the Transaction being entered into on the terms and conditions set forth herein. 4. Provisions Deemed Incorporated in a Schedule to the ISDA Form Master Agreement: 1) [Intentionally omitted] 2) The parties agree that subparagraph (ii) of Section 2(c) of the ISDA Form Master Agreement will apply to any Transaction. 3) Termination Provisions. For purposes of the ISDA Form Master Agreement: (a) "Specified Entity" is not applicable to BSFP or Counterparty for any purpose. (b) "Specified Transaction" is not applicable to BSFP or Counterparty for any purpose, and, accordingly, Section 5(a)(v) shall not apply to BSFP or Counterparty. (c) The "Cross Default" provisions of Section 5(a)(vi) shall not apply to BSFP or Counterparty. (d) The "Credit Event Upon Merger" provisions of Section 5(b)(iv) will not apply to BSFP or Counterparty. (e) The "Bankruptcy" provisions of Section 5(a)(vii)(2) will not apply to Counterparty. (f) The "Automatic Early Termination" provision of Section 6(a) will not apply to BSFP or to Counterparty. (g) Payments on Early Termination. For the purpose of Section 6(e): (i) Market Quotation will apply. (ii)The Second Method will apply. (h) "Termination Currency" means United States Dollars. (i) Tax Event. The provisions of Section 2(d)(i)(4) and 2(d)(ii) of the printed ISDA Form Master Agreement shall not apply to BSFP or Counterparty and neither BSFP nor the Counterparty shall be required to pay any additional amounts referred to therein. (j) The provisions of Section 5(a)(ii), 5(a)(iii) and 5(a)(iv) shall not apply to BSFP or Counterparty. 4) Tax Representations. (a) Payer Representations. For the purpose of Section 3(e) of the ISDA Form Master Agreement, each of BSFP and the Counterparty will make the following representations: It is not required by any applicable law, as modified by the practice of any relevant governmental revenue authority, of any Relevant Jurisdiction to make any deduction or withholding for or on account of any Tax from any payment (other than interest under Section 2(e), 6(d)(ii) or 6(e) of the ISDA Form Master Agreement) to be made by it to the other party under this Agreement. In making this representation, it may rely on: (i) the accuracy of any representations made by the other party pursuant to Section 3(f) of the ISDA Form Master Agreement; (ii)the satisfaction of the agreement contained in Section 4(a)(iii) of the ISDA Form Master Agreement and the accuracy and effectiveness of any document provided by the other party pursuant to Section 4(a)(iii) of the ISDA Form Master Agreement; and (iii) the satisfaction of the agreement of the other party contained in Section 4(d) of the ISDA Form Master Agreement, provided that it shall not be a breach of this representation where reliance is placed on clause (ii) and the other party does not deliver a form or document under Section 4(a)(iii) of the ISDA Form Master Agreement by reason of material prejudice to its legal or commercial position. (b) Payee Representations. For the purpose of Section 3(f) of the ISDA Form Master Agreement, each of BSFP and the Counterparty make the following representations. The following representation will apply to BSFP: BSFP is a corporation organized under the laws of the United States and its U.S. taxpayer identification number is 13-3866307. The following representation will apply to the Counterparty: Deutsche Bank Trust Company Americas is the Trustee for the benefit of RALI Series 2006-QA8 Trust, a common law trust organized under the laws of the State of New York. 5) [Reserved] 6) Documents to be Delivered. For the purpose of Section 4(a)(i) and 4(a) (iii) of the ISDA Form Master Agreement: (1) Tax forms, documents, or certificates to be delivered are: PARTY REQUIRED TO DELIVER DOCUMENT FORM/DOCUMENT/ DATE BY WHICH TO CERTIFICATE BE DELIVERED BSFP and Any document required or Promptly after the earlier of (i) The Counterparty reasonably requested to reasonable demand by either party allow the other party to or (ii) learning that such form or make payments under this document is required Agreement without any deduction or withholding for or on the account of any Tax or with such deduction or withholding at a reduced rate (2) Other documents to be delivered are: PARTY REQUIRED TO FORM/DOCUMENT/ DATE BY WHICH TO COVERED BY SECTION DELIVER DOCUMENT CERTIFICATE BE DELIVERED 3(D) REPRESENTATION BSFP and Any documents required by the Upon the execution and Yes The Counterparty receiving party to evidence delivery of this Agreement the authority of the and such Confirmation delivering party or its Credit Support Provider, if any, for it to execute and deliver this Agreement, any Confirmation, and any Credit Support Documents to which it is a party, and to evidence the authority of the delivering party or its Credit Support Provider to perform its obligations under this Agreement, such Confirmation and/or Credit Support Document, as the case may be BSFP and the A certificate of an Upon the execution and Yes Counterparty authorized officer of the delivery of this Agreement party, as to the incumbency and such Confirmation and authority of the respective officers of the party signing this Agreement. BSFP Legal opinion(s) with respect Upon the execution and No to such party and its Credit delivery of this Agreement Support Provider, if any, for and any Confirmation it reasonably satisfactory in form and substance to the other party relating to the enforceability of the party's obligations under this Agreement. BSFP A copy of the most recent Promptly after request by Yes annual report of such the other party party (only if available) and its Credit Support Provider, if any, containing in all cases audited consolidated financial statements for each fiscal year certified by independent certified public accountants and prepared in accordance with generally accepted accounting principles in the United States or in the country in which such party is organized The Counterparty Copies of closing documents Promptly upon request by Yes delivered in connection with BSFP the issuance of the Certificates Reference Security (as defined above) The Counterparty Each other report or other Promptly upon request by Yes document required to be BSFP, or with respect to delivered by or to the any particular type of Counterparty under the terms report or other document as of the Pooling and Servicing to which BSFP has Agreement, other than those previously made request to required to be delivered receive all reports or directly by the Supplemental documents of that type, Interest Trust Trustee or promptly upon delivery or Trustee to BSFP thereunder receipt of such report or document by the Counterparty The Counterparty Evidence, in form and Upon execution and delivery Yes substance reasonably of this Agreement satisfactory to the other party, that the party's Process Agent acknowledges its agreement to serve such function Counterparty An executed copy of the Within 30 days after the No Pooling and Servicing date of this Agreement. Agreement 7) Miscellaneous. (a) Address for Notices: For the purposes of Section 12(a) of the ISDA Form Master Agreement: Address for notices or communications to BSFP: Address: 383 Madison Avenue, New York, New York 10179 Attention: DPC Manager Facsimile: (212) 272-5823 with a copy to: Address: One Metrotech Center North, Brooklyn, New York 11201 Attention: Derivative Operations - 7th Floor Facsimile: (212) 272-1634 (For all purposes) Address for notices or communications to the Counterparty: Address: Deutsche Bank Trust Company Americas 1761 East St. Andrew Place Santa Ana, CA 92705 Attention: Trust Administration, RALI Series 2006-QA8 Facsimile: (714) 247-6285 Phone: (714) 247-6000 (For all purposes) (b) Process Agent. For the purpose of Section 13(c) of the ISDA Form Master Agreement: BSFP appoints as its Process Agent: Not Applicable The Counterparty appoints as its Process Agent: Not Applicable (c) Offices. The provisions of Section 10(a) of the ISDA Form Master Agreement will not apply to this Agreement; neither BSFP nor the Counterparty have any Offices other than as set forth in the Notices Section and BSFP agrees that, for purposes of Section 6(b) of the ISDA Form Master Agreement, it shall not in future have any Office other than one in the United States. (d) Multibranch Party. For the purpose of Section 10(c) of the ISDA Form Master Agreement: BSFP is not a Multibranch Party. The Counterparty is not a Multibranch Party. (e) Calculation Agent. The Calculation Agent is BSFP. (f) Credit Support Document. Not applicable for either BSFP or the Counterparty. (g) Credit Support Provider. BSFP: Not Applicable The Counterparty: Not Applicable (h) Governing Law. The parties to this ISDA Agreement hereby agree that this Agreement will be governed by and construed in accordance with the laws of the State of New York without reference to choice of law doctrine except Section 5-1401 and Section 5-1402 of the New York General Obligation Law. (i) Non-Petition. BSFP hereby irrevocably and unconditionally agrees that it will not institute against, or join any other person in instituting against or cause any other person to institute against the Counterparty, any bankruptcy, reorganization, arrangement, insolvency, or similar proceeding under the laws of the United States, or any other jurisdiction for the non-payment of any amount due hereunder or any other reason until the payment in full of the Certificates (as defined in the Pooling and Servicing Agreement) and the expiration of a period of one year plus ten days (or, if longer, the applicable preference period) following such payment. (j) Non-Recourse Provisions. Notwithstanding anything to the contrary contained herein, none of the Counterparty or any of its officers, directors, or shareholders (the "Non-recourse Parties") shall be personally liable for the payment by or on behalf of the Issuer hereunder, and BSFP shall be limited to a proceeding against the Collateral or against any other third party other than the Non-recourse Parties, and BSFP shall not have the right to proceed directly against the Issuer for the satisfaction of any monetary claim against the Non-recourse Parties or for any deficiency judgment remaining after foreclosure of any property included in such Collateral and following the realization of the Collateral, any claims of BSFP shall be extinguished. (k) Severability. If any term, provision, covenant, or condition of this Agreement, or the application thereof to any party or circumstance, shall be held to be invalid or unenforceable (in whole or in part) for any reason, the remaining terms, provisions, covenants, and conditions hereof shall continue in full force and effect and shall remain applicable to all other parties circumstances as if this Agreement had been executed with the invalid or unenforceable portion eliminated, so long as this Agreement as so modified continues to express, without material change, the original intentions of the parties as to the subject matter of this Agreement and the deletion of such portion of this Agreement will not substantially impair the respective benefits or expectations of the parties. The parties shall endeavor to engage in good faith negotiations to replace any invalid or unenforceable term, provision, covenant or condition with a valid or enforceable term, provision, covenant or condition, the economic effect of which comes as close as possible to that of the invalid or unenforceable term, provision, covenant or condition. (l) Consent to Recording. Each party hereto consents to the monitoring or recording, at any time and from time to time, by the other party of any and all communications between officers or employees of the parties, waives any further notice of such monitoring or recording, and agrees to notify its officers and employees of such monitoring or recording. (m) Waiver of Jury Trial. Each party to this Agreement respectively waives any right it may have to a trial by jury in respect of any Proceedings relating to this Agreement, any Credit Support Document or any of the transactions contemplated hereby. (n) Limited Set-Off. Notwithstanding any provision of this Agreement or any other existing or future agreement, each party irrevocably waives any and all rights it may have to set off, net, recoup or otherwise withhold or suspend or condition payment or performance of any obligation between it and the other party hereunder against any obligation between it and the other party under any other agreements. The provisions for Set-off set forth in Section 6(e) of the ISDA Form Master Agreement shall not apply for purposes of this Transaction. (o) This Agreement may be executed in several counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. (p) Supplemental Interest Trust Trustee Liability Limitations. It is expressly understood and agreed by the parties hereto that (a) this Agreement is executed and delivered by Deutsche Bank Trust Company Americas ("Deutsche Bank"), not individually or personally but solely as Supplemental Interest Trust Trustee of the RALI Series 2006-QA8 Supplemental Interest Trust (the "Trust"), in the exercise of the powers and authority conferred and vested in it under the Pooling and Servicing Agreement, (b) each of the representations, undertakings and agreements herein made on the part of the Trust are made and intended not as personal representations, undertakings and agreements by Deutsche Bank but is made and intended for the purpose of binding only the Counterparty, (c) nothing herein contained shall be construed as creating any liability on Deutsche Bank, individually or personally, to perform any covenant either expressed or implied contained herein, all such liability, if any, being expressly waived by the parties hereto and by any Person claiming by, through or under the parties hereto; provided that nothing in this paragraph shall relieve Deutsche Bank from performing its duties and obligations under the Pooling and Servicing Agreement in accordance with the standard of care set forth therein, and (d) under no circumstances shall Deutsche Bank be personally liable for the payment of any indebtedness or expenses of the Counterparty or be liable for the breach or failure of any obligation, representation, warranty or covenant made or undertaken by the Counterparty under this Agreement or any other related documents. 8) "Affiliate" will have the meaning specified in Section 14 of the ISDA Form Master Agreement, provided that BSFP shall not be deemed to have any Affiliates for purposes of this Agreement, including for purposes of Section 6(b)(ii) of the ISDA Form Master Agreement. 9) Section 3 of the ISDA Form Master Agreement is hereby amended by adding at the end thereof the following subsection (g): "(g) Relationship Between Parties. Each party represents to the other party on each date when it enters into a Transaction that:-- (1) Nonreliance. (i) It is not relying on any statement or representation of the other party regarding the Transaction (whether written or oral), other than the representations expressly made in this Agreement or the Confirmation in respect of that Transaction and (ii) it has consulted with its own legal, regulatory, tax, business, investment, financial and accounting advisors to the extent it has deemed necessary, and it has made its own investment, hedging and trading decisions based upon its own judgement and upon any advice from such advisors as it has deemed necessary and not upon any view expressed by the other party. (2) Evaluation and Understanding. (i) It has the capacity to evaluate (internally or through independent professional advice) the Transaction and has made its own decision to enter into the Transaction; and (ii) It understands the terms, conditions and risks of the Transaction and is willing and able to accept those terms and conditions and to assume those risks, financially and otherwise. (3) Purpose. It is entering into the Transaction for the purposes of managing its borrowings or investments, hedging its underlying assets or liabilities or in connection with a line of business. (4) Principal. BSFP is entering into the Transaction as principal, and not as agent or in any other capacity, fiduciary or otherwise and Deutsche Bank Trust Company Americas is acting as supplemental interest trust trustee of the supplemental interest trust created under the Pooling and Servicing Agreement and not for its own account. (5) Eligible Contract Participant. It is an "eligible swap participant" as such term is defined in Section 35.1(b)(2) of the regulations (17 C.F.R 35) promulgated under, an and "eligible contract participant" as defined in Section 1(a)(12) of, the Commodity Exchange Act, as amended, and it is entering into the Transaction for the purposes of managing its borrowings or investments, hedging its underlying assets or liabilities or in connection with a line of business." 10) Additional Termination Events. The following Additional Termination Events will apply: (a) If a Rating Agency Downgrade has occurred and BSFP has not complied with Section 11 below, then an Additional Termination Event shall have occurred with respect to BSFP and BSFP shall be the sole Affected Party with respect to such an Additional Termination Event. (b) If the Trust is unable to pay the Class A Certificates or fails or admits in writing its inability to pay its Class A Certificates as they become due, then an Additional Termination Event shall have occurred with respect to Counterparty and Counterparty shall be the sole Affected Party with respect to such Additional Termination Event. (c) If at any time, the Master Servicer provides notice that it will purchase the Mortgage Loans pursuant to Section 9.01 of the Pooling and Servicing Agreement, then an Additional Termination Event shall have occurred with respect to Counterparty and Counterparty shall be the sole Affected Party with respect to such Additional Termination Event; provided that notwithstanding anything in the first sentence of Section 6(d)(ii) of the ISDA Form Master Agreement to the contrary, the amount calculated as being due in respect of such Additional Termination Event shall be payable on the Distribution Date upon which the final distribution is made to the Certificateholders. (d) Without the prior written consent of BSFP, where such consent is required under the Pooling and Servicing Agreement and which shall not be unreasonably withheld, Counterparty shall not consent to any amendment or supplemental agreement to the Pooling and Servicing Agreement if such amendment or supplemental agreement could reasonably be expected to have an adverse effect on the interests of BSFP. Counterparty will furnish to BSFP a copy of each proposed and each executed amendment or supplemental agreement and copies of any related Rating Agency confirmation therewith, if any. The failure by Counterparty to comply with the above shall constitute an Additional Termination Event hereunder, upon which Counterparty shall be the sole Affected Party and all Transactions hereunder shall be Affected Transactions. (e) Swap Disclosure Event. If, upon the occurrence of a Swap Disclosure Event (as defined in Section 12(ii) below), BSFP has not, within 10 days after such Swap Disclosure Event complied with any of the provisions set forth in Section 12(iii) below, then an Additional Termination Event shall have occurred with respect to BSFP and BSFP shall be the sole Affected Party with respect to such Additional Termination Event. 11) Rating Agency Downgrade. In the event that BSFP's long-term unsecured and unsubordinated debt rating is reduced below "AA-" by S&P or its long-term unsecured and unsubordinated debt rating is withdrawn or reduced below "Aa3" by Moody's (and together with S&P, the "Swap Rating Agency", and such rating thresholds, "Approved Rating Thresholds"), then within 30 days after such rating withdrawal or downgrade (unless, within 30 days after such withdrawal or downgrade, each such Swap Rating Agency, as applicable, has reconfirmed the rating of the Certificates, which was in effect immediately prior to such withdrawal or downgrade), BSFP shall, at its own expense, subject to the Rating Agency Condition, (i) transfer this Agreement to another entity that meets or exceeds the Approved Rating Thresholds on terms substantially similar to this Agreement (ii) obtain a guaranty of, or other agreement of another person with the Approved Rating Thresholds, to honor, BSFP's obligations under this Agreement (iii) post collateral which will be sufficient to restore the immediate prior ratings of the Certificates or (iv) take any other action that satisfies the Rating Agency Condition. In the event that BSFP's long-term unsecured and unsubordinated debt rating is withdrawn or reduced below "BBB-" by S&P, then within 10 Business Days after such rating withdrawal or downgrade, BSFP shall, subject to the Rating Agency Condition and at its own expense, (i) secure another entity to replace BSFP as party to this Agreement that meets or exceeds the Approved Rating Thresholds on terms substantially similar to this Agreement (ii) obtain a guaranty of, or other agreement of another person with the Approved Rating Thresholds, to honor, BSFP's obligations under this Agreement or (iii) take any other action that satisfies the Rating Agency Condition. For purposes of this provision, "Rating Agency Condition" means, with respect to any particular proposed act or omission to act hereunder that the party acting or failing to act must consult with each of the Swap Rating Agencies then providing a rating of the Certificates and receive from each of the Swap Rating Agencies a prior written confirmation that the proposed action or inaction would not cause a downgrade, qualification or withdrawal of the then-current rating of the Certificates. 12) Compliance with Regulation AB. (i) BSFP agrees and acknowledges that Residential Funding Corporation or its affiliates (the "Sponsor") is required under Regulation AB under the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended (the "Exchange Act") ("Regulation AB"), to disclose certain financial information regarding BSFP or its group of affiliated entities, if applicable, depending on the aggregate "significance percentage" of this Agreement and any other derivative contracts between BSFP or its group of affiliated entities, if applicable, and Counterparty, as calculated from time to time in accordance with Item 1115 of Regulation AB. (ii) It shall be a swap disclosure event ("Swap Disclosure Event") if, on any Business Day after the date hereof, Sponsor requests from BSFP the applicable financial information described in Item 1115 of Regulation AB (such request to be based on a reasonable determination by Sponsor, in good faith, that such information is required under Regulation AB) (the "Swap Financial Disclosure"). (iii) Upon the occurrence of a Swap Disclosure Event, BSFP, at its own expense, shall (a) provide to Sponsor the Swap Financial Disclosure, (b) secure another entity to replace BSFP as party to this Agreement on terms substantially similar to this Agreement and subject to prior notification to the Swap Rating Agencies, which entity (or a guarantor therefor) satisfies the Rating Agency Condition and which entity is able to comply with the requirements of Item 1115 of Regulation AB or (c) obtain a guaranty of BSFP's obligations under this Agreement from an affiliate of the BSFP that is able to comply with the financial information disclosure requirements of Item 1115 of Regulation AB, such that disclosure provided in respect of the affiliate will satisfy any disclosure requirements applicable to BSFP, and cause such affiliate to provide Swap Financial Disclosure. If permitted by Regulation AB, any required Swap Financial Disclosure may be provided by incorporation by reference from reports filed pursuant to the Exchange Act. (iv) BSFP agrees that, in the event that BSFP provides Swap Financial Disclosure to Sponsor in accordance with Section 11(iii)(a) or causes its affiliate to provide Swap Financial Disclosure to Sponsor in accordance with Section 11(iii)(c), it will indemnify and hold harmless Sponsor, its respective directors or officers and any person controlling Sponsor, from and against any and all losses, claims, damages and liabilities caused by any untrue statement or alleged untrue statement of a material fact contained in such Swap Financial Disclosure or caused by any omission or alleged omission to state in such Swap Financial Disclosure a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. 13) Third Party Beneficiary. Sponsor shall be a third party beneficiary of this Agreement. 14) Transfer, Amendment and Assignment. No transfer, amendment, waiver, supplement, assignment or other modification of this Transaction shall be permitted by either party (other than a change of Counterparty in connection with a change of Trustee or Supplemental Interest Trust Trustee in accordance with the Pooling and Servicing Agreement) unless (i) each Moody's Investors Service, Inc. ("Moody's") and Standard and Poor's, a Division of the McGraw Hill Companies ("S&P"), has been provided notice of the same, and confirms in writing (including by facsimile transmission) that it will not downgrade, qualify, withdraw or otherwise modify its then-current rating of the Residential Accredit Loans, Inc., Mortgage Asset-Backed Pass-Through Certificates, Series 2006-QA8 (the "Certificates"). NEITHER THE BEAR STEARNS COMPANIES INC. NOR ANY SUBSIDIARY OR AFFILIATE OF THE BEAR STEARNS COMPANIES INC. OTHER THAN BSFP IS AN OBLIGOR OR A CREDIT SUPPORT PROVIDER ON THIS AGREEMENT OR ANY TRANSACTION COVERED HEREBY. 5. Account Details and Settlement Information: PAYMENTS TO BSFP: Citibank, N.A., New York ABA Number: 021-0000-89, for the account of Bear, Stearns Securities Corp. Account Number: 0925-3186, for further credit to Bear Stearns Financial Products Inc. Sub-account Number: 102-04654-1-3 Attention: Derivatives Department PAYMENTS TO COUNTERPARTY: Deutsche Bank Trust Company Americas ABA Number: 021001033 Account Number: 01419663 Account Name: NYLTD Funds Control - Stars West Ref: RALI 2006-QA8 lm/am -------------------------------------------------------------------------------- SCHEDULE I (all such dates subject to adjustment in accordance with the Business Day Convention) NOTIONAL AMOUNT FROM AND INCLUDING TO BUT EXCLUDING (USD) Effective Date 25-Oct-2006 784,000,000.00 25-Oct-2006 25-Nov-2006 760,964,429.26 25-Nov-2006 25-Dec-2006 738,605,245.63 25-Dec-2006 25-Jan-2007 716,902,598.97 25-Jan-2007 25-Feb-2007 695,837,221.50 25-Feb-2007 25-Mar-2007 675,390,410.59 25-Mar-2007 25-Apr-2007 655,544,012.33 25-Apr-2007 25-May-2007 636,280,405.33 25-May-2007 25-Jun-2007 617,582,485.15 25-Jun-2007 25-Jul-2007 599,433,649.16 25-Jul-2007 25-Aug-2007 581,817,781.75 25-Aug-2007 25-Sep-2007 564,719,240.14 25-Sep-2007 25-Oct-2007 548,122,840.44 25-Oct-2007 25-Nov-2007 532,013,844.24 25-Nov-2007 25-Dec-2007 516,377,945.49 25-Dec-2007 25-Jan-2008 501,201,257.91 25-Jan-2008 25-Feb-2008 486,470,302.58 25-Feb-2008 25-Mar-2008 472,171,996.06 25-Mar-2008 25-Apr-2008 458,293,638.74 25-Apr-2008 25-May-2008 444,822,903.66 25-May-2008 25-Jun-2008 431,747,825.48 25-Jun-2008 25-Jul-2008 419,056,789.97 25-Jul-2008 25-Aug-2008 406,738,523.64 25-Aug-2008 25-Sep-2008 394,782,083.80 25-Sep-2008 25-Oct-2008 383,176,848.79 25-Oct-2008 25-Nov-2008 371,912,508.65 25-Nov-2008 25-Dec-2008 360,979,055.91 25-Dec-2008 25-Jan-2009 350,366,776.76 25-Jan-2009 25-Feb-2009 340,066,242.39 25-Feb-2009 25-Mar-2009 330,068,300.68 25-Mar-2009 25-Apr-2009 320,364,068.07 25-Apr-2009 25-May-2009 310,944,921.66 25-May-2009 25-Jun-2009 301,802,491.59 25-Jun-2009 25-Jul-2009 292,928,653.59 25-Jul-2009 25-Aug-2009 284,315,530.41 25-Aug-2009 25-Sep-2009 275,952,643.19 25-Sep-2009 25-Oct-2009 267,835,396.40 25-Oct-2009 25-Nov-2009 259,956,706.64 25-Nov-2009 25-Dec-2009 252,309,567.97 25-Dec-2009 25-Jan-2010 244,887,180.12 25-Jan-2010 25-Feb-2010 237,682,942.38 25-Feb-2010 25-Mar-2010 230,690,447.80 25-Mar-2010 25-Apr-2010 223,903,477.50 25-Apr-2010 25-May-2010 217,315,995.12 25-May-2010 25-Jun-2010 210,922,141.53 25-Jun-2010 25-Jul-2010 204,716,229.52 25-Jul-2010 25-Aug-2010 198,692,738.89 25-Aug-2010 25-Sep-2010 192,846,311.44 25-Sep-2010 25-Oct-2010 187,171,746.26 25-Oct-2010 25-Nov-2010 181,663,995.16 25-Nov-2010 25-Dec-2010 176,318,158.08 25-Dec-2010 25-Jan-2011 171,129,478.86 25-Jan-2011 25-Feb-2011 166,093,340.93 25-Feb-2011 25-Mar-2011 161,205,263.27 25-Mar-2011 25-Apr-2011 156,460,896.40 25-Apr-2011 25-May-2011 151,856,018.54 25-May-2011 25-Jun-2011 147,386,531.85 25-Jun-2011 25-Jul-2011 143,048,458.80 25-Jul-2011 25-Aug-2011 138,837,938.64 25-Aug-2011 Termination Date 134,740,995.45

  EXHIBIT 10.1 INDEMNIFICATION AGREEMENT      This INDEMNIFICATION AGREEMENT (the “Agreement”) made and entered into as of June 30, 2006, by and among Z-Axis Corporation, a Colorado corporation (the “Company”), Z-Axis, LLC, a Colorado limited liability company, and ___[Name of Officer or Director] (“Indemnitee”), and is acknowledged and consented to by TKH, LLC, a Colorado limited liability company (the “Purchaser LLC”), of which Messrs. Alan Treibitz and Raymond Hauschel, and Ms. Stephanie S. Kelso (collectively, the “Z-Axis Investor Group”) are the sole record and beneficial owners of Purchaser LLC.      WHEREAS, highly competent persons are reluctant to serve corporations as directors or in other capacities unless they are provided with adequate protection through insurance or adequate indemnification against inordinate risks of claims and actions against them arising out of their service to and activities on behalf of the corporation; and      WHEREAS, it is reasonable, prudent and necessary for the Company contractually to obligate itself to indemnify such persons to the fullest extent permitted by applicable law so that they will serve or continue to serve the Company free from undue concern that they will not be so indemnified; and      WHEREAS, Indemnitee is willing to serve or continue to serve for or on behalf of the Company on the condition that Indemnitee be so indemnified; and      WHEREAS, the parties hereto intend that upon consummation of the Exchange (as defined in Article X), the Company will no longer have any obligations pursuant to, this Agreement and at that time the Company will solely be obligated to indemnify the Indemnitee pursuant to the provisions of Section 12.5 of the Stock Exchange Agreement (as defined in Article X of this Agreement); and      NOW, THEREFORE, in consideration of the promises, conditions, representations and warranties set forth herein, including Indemnitee’s continued service to the Company, the Company and Indemnitee hereby covenant and agree as follows: ARTICLE I DEFINITIONS      For purposes of this Agreement, the following terms shall have the meaning given here:      1.01 “Board” shall mean the Board of Directors of the Company.      1.02 “Corporate Status” describes the status of a person who is or was a director, officer, employee, agent or fiduciary of the Company or of any other corporation, partnership, joint venture, trust, employee benefit or other enterprise which such person is or was serving at the express written request of the Company.      1.03 “Covered Act” means any breach of duty, neglect, error, misstatement, misleading statement, omission or other act done or wrongfully attempted by Indemnitee or against any of the foregoing alleged by any claimant or any claim against Indemnitee by reason of being a director or officer of the Company.      1.04 “D&O Insurance” means the directors’ and officers’ liability insurance in favor of the Company and as reflected by the policy or policies issued by the insurer(s), and having the policy number(s), amount(s) and deductible(s) now existing and included in the Company’s files or replacement, substitute or tail policies issued by one or more reputable insurers providing in all respects coverage at least comparable to and in the same amount as that provided under the policy or policies covering the Company and its directors and officers that is now or hereafter placed into effect.      1.05 “Determination” means a determination, based on the facts known at the time, made by:      (a) A majority vote of a quorum of disinterested directors; or 1 --------------------------------------------------------------------------------        (b) Independent Counsel in a written opinion prepared at the request of a majority of a quorum of Disinterested Directors; or      (c) A majority of the disinterested stockholders of the Company; or      (d) A final adjudication by a court of competent jurisdiction.      “Determined” shall have a correlative meaning.      1.06 “Disinterested Director” means a director of the Company who is not and was not a party to the Proceeding in respect of which indemnification is sought by Indemnitee.      1.07 “Effective Date” means the date of this Agreement.      1.08 “Excluded Claim” means any payment for Losses or Expenses in connection with any claim:      (a) Based upon or attributable to Indemnitee gaining in fact any personal profit or advantage to which Indemnitee is not entitled; or      (b) For the return by Indemnitee of any remuneration paid to Indemnitee without the previous approval of the stockholders of the Company which is illegal; or      (c) For an accounting of profits in fact made from the purchase or sale by Indemnitee of securities of the Company within the meaning of Section 16 of the Securities Exchange Act of 1934, as amended, or similar provisions of any state law; or      (d) Resulting from Indemnitee’s knowingly fraudulent, dishonest or willful misconduct; or      (e) The payment of which by the Company under this Agreement is not permitted by applicable law.      1.09 “Expenses” shall include all reasonable attorneys fees, retainers, court costs, transcript costs, fees of experts, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, all costs of e-discovery, and all other disbursements or expenses of the types customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, or being or preparing to be a witness in a Proceeding, but shall not include Fines.      1.10 “Fines” mean any fine, penalty or, with respect to an employee benefit plan, any excise tax or penalty assessed with respect thereto.      1.11 “Good Faith” shall mean Indemnitee having acted in good faith and in a manner Indemnitee reasonably believed to be in or not opposed to the best interests of the Company and, with respect to any criminal Proceeding, having had no reasonable cause to believe Indemnitee’s conduct was unlawful.      1.12 “Independent Counsel” means a law firm, or a member of a law firm, that is experienced in matters of corporation law and neither presently is, nor in the past three years has been, retained to represent (i) the Company or Indemnitee in any matter material to either such party or (ii) any other party to the Proceeding giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing the term “Independent Counsel” shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee’s rights under this Agreement.      1.13 “Loss” means any amount which Indemnitee is legally obligated to pay as a result of a claim or claims made against him or her for Covered Acts including, without limitation, damages and judgments and sums paid in settlement of a claim or claims, but shall not include Fines.      1.14 “Proceeding” includes any action, suit, arbitration, alternate dispute resolution mechanism, investigation, administrative hearing or any other actual threatened or completed proceeding whether civil, criminal, administrative or investigative, other than one initiated by Indemnitee. For purposes of the foregoing sentence, a “Proceeding” shall not be deemed to have been initiated by Indemnitee where 2 --------------------------------------------------------------------------------   Indemnitee seeks pursuant to Article IX of this Agreement to enforce Indemnitee’s rights under this Agreement relating thereto. ARTICLE II SERVICES BY, AND CAPACITIES, OF INDEMNITEE      Indemnitee is at the date hereof a director [and officer] of the Company. The positions under which Indemnitee will render services to the Company shall be all those which are reflected in the meeting minutes of the Company’s stockholders or directors or both, as the case may be, and will include any and all services rendered in those capacities. Indemnitee may at any time and for any reason resign from his or her position as a director or officer, as the case may be, of the Company, subject to any other contractual obligation or any obligation imposed by operation of law. ARTICLE III MAINTENANCE OF D&O INSURANCE      3.01 Description of D&O Insurance. The Company will maintain a policy or policies of directors’ and officers’ liability insurance that will be in effect not later than the Effective Date, all of which has or have been disclosed to the Indemnitee and as to which Indemnitee acknowledges having the right to receive a copy or copies of all such policies prior to execution hereof or upon reasonable request at any time hereafter.      3.02 Named Insured. In any policies of D&O Insurance which will be maintained by the Company, Indemnitee shall be named as an insured in such a manner as to provide Indemnitee the same rights and benefits, subject to the same limitations, as are accorded to the Company’s directors and officers most favorably insured by such policy.      3.03 No Obligation. Nothing herein shall impose upon the Company the obligation to maintain D&O Insurance if the Company determines in good faith that such insurance is not reasonably available, the premium costs for such insurance are disproportionate to the amount of coverage provided, or the coverage provided by such insurance is limited by exclusions so as to provide an insufficient benefit. Any discontinuance of prior coverage or non-renewal of D&O Insurance coverage will be communicated by the Company to the Indemnitee. ARTICLE IV INDEMNIFICATION      4.01 Indemnification in General. The Company shall indemnify and hold Indemnitee harmless for any Losses, Expenses, judgments, penalties, Fines and amounts paid in settlement actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection with such Proceeding or any claim, issue or matter therein, if Indemnitee acted in Good Faith. Such indemnification and hold harmless will relate back to the date upon which the Indemnitee first became a director or officer of the Company.      4.02 Excluded Coverage. The Company shall have no obligation to indemnify and hold Indemnitee harmless from any Losses or Expense which has been Determined to constitute an Excluded Claim. Notwithstanding the provisions of Section 4.01, no such indemnification shall be made in respect of any claim, issue or matter in such Proceeding as to which Indemnitee shall have been adjudged to be liable to the Company if applicable law prohibits such indemnification; provided, however, that, if applicable law so permits, indemnification shall nevertheless be made by the Company in such event if and only to the extent that a court of competent jurisdiction in the State of Colorado, or the court in which such Proceeding shall have been brought or pending, shall Determine.      4.03 Indemnification of a Party Who Is Wholly or Partly Successful. Notwithstanding any other provision of this Agreement, to the extent that Indemnitee is, by reason of Indemnitee’s Corporate Status, a party to and is successful, on the merits or otherwise, in any Proceeding, Indemnitee shall be indemnified to the maximum extent permitted by law, against all Losses, Expenses, judgments, penalties, Fines and amounts paid in settlement, actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection therewith. If Indemnitee is not wholly successful in such Proceeding but is successful, on the 3 --------------------------------------------------------------------------------   merits or otherwise, as to one or more but less than all claims, issues or matters in such Proceeding, the Company shall indemnify Indemnitee to the maximum extent permitted by law, against all Losses, Expenses, judgments, penalties, Fines and amounts paid in settlement, actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection with each successfully resolved claim, issue or matter. For purposes of this Section 4.03 and without limitation, the termination of any claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter, so long as there has been no finding (either adjudicated or pursuant to Article VI) that Indemnitee did not act in Good Faith.      4.04 Indemnification For Expenses of a Witness. Notwithstanding any other provision of this Agreement to the extent that Indemnitee is, by reason of Indemnitee’s Corporate Status, a witness in a Proceeding, Indemnitee shall be indemnified against all Losses and Expenses actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection therewith. ARTICLE V ADVANCEMENT OF EXPENSES      Notwithstanding any provision to the contrary in Article VI, the Company shall advance all reasonable Expenses which, by reason of Indemnitee’s Corporate Status, are incurred by or on behalf of Indemnitee in connection with any Proceeding, within twenty (20) days after the receipt by the Company of a statement or statements from Indemnitee requesting such advance or advances, whether prior to or after final disposition of such Proceeding. Such statement or statements shall reasonably evidence the Expenses incurred by Indemnitee and shall include or be preceded or accompanied by an undertaking by or on behalf of Indemnitee to repay any Expenses if it shall ultimately be determined that Indemnitee is not entitled to be indemnified against such Expenses. Such statements may be redacted to the extent necessary to preserve attorney-client confidentiality, work product or other applicable privileges, if any. Any advance and undertakings to repay pursuant to this Article V shall be unsecured and interest free. ARTICLE VI PROCEDURES FOR DETERMINATION OF ENTITLEMENT      6.01 Initial Notice. Promptly after receipt by Indemnitee of notice of the commencement of or the threat of commencement of any Proceeding, Indemnitee shall, if indemnification with respect thereto may be sought from the Company under this Agreement, notify the Company of the commencement thereof. Indemnitee shall include therein or therewith such documentation and information as is reasonably available to Indemnitee and is reasonably necessary to determine whether and to what extent Indemnitee is entitled to indemnification. The Secretary of the Company shall promptly advise the Board in writing that Indemnitee has requested indemnification.      6.02 D&O Insurance. If, at the time of the receipt of such notice, the Company has D&O Insurance in effect, the Company shall give prompt notice of the commencement of such Proceeding to the insurers in accordance with the procedures set forth in the respective policies in favor of Indemnitee. The Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of Indemnitee, all Losses and Expenses payable as a result of such Proceeding in accordance with the terms of such policies.      6.03 Employment of Counsel. To the extent the Company does not, at the time of the commencement of or the threat of commencement of a Proceeding, have applicable D&O Insurance, or if a Determination is made that any Expenses arising out of such Proceeding will not be payable under the D&O Insurance then in effect, the Company shall be obligated to pay the Expenses of any such Proceeding in advance of the final disposition thereof as provided in Article V and the Company, if appropriate, shall be entitled to assume the defense of such Proceeding, with counsel satisfactory to Indemnitee, upon the delivery to Indemnitee of written notice of its election so to do. After delivery of such notice, the Company will not be liable to Indemnitee under this Agreement for any legal or other Expenses subsequently incurred by Indemnitee in connection with such defense other than reasonable Expenses of investigation provided that Indemnitee shall have the right to employ its own counsel in any such Proceeding but the fees and expenses of such counsel incurred after delivery of notice from the Company of its assumption of such defense shall be at Indemnitee’s expense and provided further that if (i) the employment of counsel by Indemnitee has 4 --------------------------------------------------------------------------------   been previously authorized by the Company, (ii) Indemnitee and counsel shall have reasonably concluded that there may be a conflict of interest between the Company and Indemnitee in the conduct of any such defense or (iii) the Company shall not, in fact, have employed counsel to assume the defense of such Proceeding, the fees and expenses of counsel shall be at the expense of the Company.      6.04 Payment. All payments on account of the Company’s indemnification obligations under this Agreement shall be made within sixty (60) days of Indemnitee’s written request therefor unless a Determination is made that the claims giving rise to Indemnitee’s request are Excluded Claims or otherwise not payable under this Agreement or applicable law.      6.05 Reimbursement by Indemnitee. Indemnitee agrees that he or she will reimburse the Company for all Losses and Expenses paid by the Company in connection with any Proceeding against Indemnitee in the event and only to the extent that a Determination shall have been made by a court in a final adjudication from which there is no further right of appeal that Indemnitee is not entitled to be indemnified by the Company for such Expenses because the claim is an Excluded Claim or because Indemnitee is otherwise not entitled to payment under this Agreement.      6.06 Cooperation. Indemnitee shall cooperate with the person, persons or entity making the Determination with respect to Indemnitee’s entitlement to indemnification under this Agreement, including providing to such person, persons or entity upon reasonable advance request any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to Indemnitee and reasonably necessary to such Determination. Any costs or Expenses (including attorneys’ fees and disbursements) incurred by Indemnitee in so cooperating with the person, persons or entity making such Determination shall be borne by the Company (irrespective of the determination as to Indemnitee’s entitlement to indemnification) and the Company hereby indemnifies and agrees to hold Indemnitee harmless therefrom. ARTICLE VII SETTLEMENT      The Company shall have no obligation to indemnify Indemnitee under this Agreement for any amounts paid in settlement of any Proceeding effected without the Company’s prior written consent. The Company shall not settle any claim in any manner which would impose any Fine or other obligation on Indemnitee without Indemnitee’s written consent. Neither the Company nor Indemnitee shall unreasonably withhold their consent to any proposed settlement. ARTICLE VIII RIGHTS NOT EXCLUSIVE      The rights provided hereunder shall not be deemed exclusive of any other rights to which Indemnitee may be entitled under any bylaw, agreement, vote of stockholders or of Disinterested Directors or otherwise, both as to action in his or her official capacity and as to action in any other capacity by holding such office, and shall continue after Indemnitee ceases to serve the Corporation as a director or officer or both, as the case may be. ARTICLE IX ENFORCEMENT      9.01 Burden of Proof. Indemnitee’s right to indemnification shall been enforceable by Indemnitee in the state courts of the State of Colorado and shall be enforceable notwithstanding any adverse Determination. In any such action, if a prior adverse Determination has been made, the burden of proving that indemnification is required under this Agreement shall be on Indemnitee. The Company shall have the burden of proving that indemnification is not required under this Agreement if no prior adverse Determination shall have been made.      9.02 Costs And Expenses. In the event that any action is instituted by Indemnitee under this Agreement, or to enforce or interpret any of the terms of this Agreement, Indemnitee shall be entitled to be paid all court costs and expenses, including reasonable counsel fees, incurred by Indemnitee with respect to 5 --------------------------------------------------------------------------------   such action, unless the court determines that each of the material assertions made by Indemnitee as a basis for such action were not made in Good Faith or were frivolous. ARTICLE X APPLICABILITY OF AGREEMENT FOR SILICON MOUNTAIN HOLDINGS      10.01 The Exchange, LLC Sale and Related Transactions. The Company is a party to that that certain Stock Exchange Agreement (herein so called) dated as of May 7, 2006, as amended on June 30, 2006, by and among the Company, Silicon Mountain Memory, Incorporated, a Colorado corporation (“SMM”), Rudolph (Tre’) A. Cates III and Roger Haston, as the SMM principal stockholders, and Alan Treibitz and Stephanie Kelso, as the Z-Axis principal stockholders pursuant to which the Company will acquire, subject to the conditions set forth therein, all the issued and outstanding securities of SMM through an exchange (the “Exchange”), upon the terms set forth therein. Following the Closing (as defined in the Stock Exchange Agreement), the entity formerly known as the Company shall be known as Silicon Mountain Holdings. Pursuant to the terms of the Stock Exchange Agreement, the Company intends to transfer all of its assets and Liabilities (as defined in the Stock Exchange Agreement), including this Agreement and all the Company’s rights and obligations pursuant to this Agreement, to Z-Axis, LLC, a Colorado limited liability company (“Z-Axis LLC”), which will be a wholly owned subsidiary of the Company. Pursuant to the terms of the Stock Exchange Agreement, and in accordance with the terms of the Limited Liability Company Interests Purchase Agreement by and among the Company, Purchaser LLC and the Investor Group dated June 30, 2006, Purchaser LLC intends to purchase all of the outstanding membership interests of Z-Axis LLC from the Company (the “LLC Sale”). The transfer of all the assets and Liabilities of the Company to the Z-Axis LLC will include all the Liabilities of Z-Axis as of the transfer, including (but not limited to) Liabilities for events that occur prior to the Closing, this Agreement and the D&O Insurance (the “Z-Axis Transfer”). Notwithstanding any other provision of this Agreement, upon the Z-Axis Transfer, this Agreement and the D&O Insurance and all rights and obligations of the Company pursuant to this Agreement will be transferred to and assumed by the Z-Axis LLC, and thereafter, neither the Company nor Silicon Mountain Holdings will have any obligations to any Indemnitee or to any other person or entity pursuant to the terms of this Agreement.      10.02 Transfer of the Agreement and D&O Policy. Notwithstanding anything to the contrary, the parties hereby acknowledge, consent and agree to the assignment of this Agreement and all of Company’s rights and obligations hereunder by the Company to Z-Axis LLC as part of the Z-Axis Transfer as referenced above and to the LLC Sale, and the assumption of the indemnification obligations by Z-Axis LLC as further described herein..      10.03 Obligations of Z-Axis and Silicon Mountain Holdings Following the Exchange. Notwithstanding anything to the contrary, this Agreement is not intended to expand, change, modify, affect or otherwise relate to, in any manner whatsoever, the rights or obligations of Silicon Mountain Holdings under Section 12.5 of the Stock Exchange Agreement. The parties acknowledge and agree that Silicon Mountain Holdings’ sole responsibilities and obligations pursuant to Section 12.5 of the Stock Exchange Agreement are solely defined by the terms of Section 12.5 of the Stock Exchange Agreement, and none of the terms or provisions of this Agreement is applicable to any indemnification or other matter provided by, or otherwise occurring pursuant to, Section 12.5 of the Stock Exchange Agreement. Other than its obligations under Section 12.5 to the Stock Exchange Agreement (as described above), the Company and Indemnitee hereby release Silicon Mountain Holdings from any and all liabilities or obligations under this Agreement, and effective upon the closing of the Exchange and only if the Exchange is consummated, the Indemnitee releases the Company from any and all liabilities under this Agreement. At the effective time of this release, and subsequent thereto, the Indemnitee will be indemnified by Silicon Mountain Holdings pursuant to the provisions of Section 12.5 of the Stock Exchange Agreement. and in the event of a conflict between this Agreement and Section 12.5 of the Stock Exchange Agreement, the provisions of Section 12.5 of the Stock Exchange Agreement shall control. 6 --------------------------------------------------------------------------------   ARTICLE XI GENERAL PROVISIONS      11.01 Successors And Assigns. This Agreement shall be binding upon and inure to the benefit of the Company and its successors and assigns, and shall be binding upon and shall inure to the benefit of Indemnitee and Indemnitee’s heirs, executors, personal representatives and administrators.      11.02 No Duplicate Indemnity or Recovery. Notwithstanding any provisions to the contrary herein, this Agreement shall not be interpreted or construed in such a manner as to provide Indemnitee duplicate indemnities or recoveries to the extent Indemnitee is entitled under applicable law, D&O policies or other contracts or agreements, to indemnity or reimbursement of Losses, Expenses, judgments, penalties, Fines and amounts paid in settlement actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection with a Proceeding or any claim, issue or matter therein.      11.02 Severability. If any provision or provisions of this Agreement is determined by a court to be invalid, illegal or unenforceable for any reason whatsoever, such provision shall be limited or modified in its application to the minimum extent necessary to avoid a violation of law, and, as so limited or modified, such provision and the balance of this Agreement shall be enforceable in accordance with its terms.      11.03 Identical Counterparts. This Agreement may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original but all of which together shall constitute one and the same Agreement. Only one such counterpart signed by the party against whom enforceability is sought needs to be produced to evidence the existence of this Agreement.      11.04 Headings. The headings of the paragraphs of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction thereof.      11.05 Modification and Waiver. No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar) nor shall such waiver constitute a continuing waiver. This Agreement shall remain in effect for a period of ten years from the date of its execution, notwithstanding any change in control of the Company that shall occur during the term of this Agreement and notwithstanding that during the term hereof the Indemnitee shall cease serving as an officer or director of the Company, as the case may be.      11.06 Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if (i) delivered by hand and receipted for by the party to whom said notice or other communication shall have been directed, or (ii) mailed by certified or registered mail with postage prepaid, on the third business day after the date on which it is so mailed.       If to Indemnitee to:   As shown with Indemnitee’s signature below       If to the Company to:   Z-Axis Corporation     5445 DTC Parkway, Suite 450     Greenwood Village, Colorado 80111       With a copy to:   Robert W. Walter, Esq. or to such other address as may have been furnished to Indemnitee by the Company or to the Company by Indemnitee, as the case may be.      11.07 Governing Law. The parties agree that this Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of Colorado without application of the conflict of laws principles thereof.      11.08 Consent to Jurisdiction. The Company and Indemnitee each hereby irrevocably consent to the jurisdiction of the courts of the State of Colorado for all purposes in connection with any Proceeding which 7 --------------------------------------------------------------------------------   arises out of or relates to this Agreement, and agree that any action instituted under this Agreement shall be brought only in the state courts of the State of Colorado.      11.09 Entire Agreement. This Agreement constitutes the entire agreement and understanding between the parties hereto in reference to all the matters herein agreed upon. This Agreement replaces in full all prior indemnification agreements or understandings of the parties hereto, and any and all such prior agreements or understandings are hereby rescinded by mutual agreement. [Remainder of Page Intentionally Left Blank] 8 --------------------------------------------------------------------------------        IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.             INDEMNITEE:       Signed:           Print Name: Print Title(s): Address:                 Z-AXIS CORPORATION A Colorado corporation:       By:         Name:         Title:                     Z-AXIS, LLC A Colorado limited liability company       By:         Name:         Title:       [acknowledgment and consent signatures on next page] 9 --------------------------------------------------------------------------------   ACKNOWLEDGED AND CONSENTED TO:             TKH LLC A Colorado limited liability company       By:         Name:   Alan Treibitz     Title:   Authorized Manager                 Z-AXIS INVESTOR GROUP             Alan Treibitz           Stephanie S. Kelso           Raymond Hauschel 10

Exhibit 10.2 SUBLEASE AGREEMENT         THIS SUBLEASE AGREEMENT (“Sublease”) is made as of this 30th day of December, 2005 by and between SILICON GENESIS CORPORATION, a California corporation (“Sublandlord”) and TEGAL CORPORATION., a Delaware corporation (“Subtenant”). WITNESSETH: 1.     Recitals. This Sublease is made with reference to the following facts:   1.1 BRE/PCCP Orchard LLC, a Delaware limited liability company(“Master Landlord”), as landlord, and Sublandlord, as tenant, entered into a written lease dated December 22, 2000, a copy of which is attached hereto as Exhibit A(“Master Lease”) covering the premises commonly known as 51 East Daggett Drive, San Jose, California (being 12,717 rentable square feet and referred to herein as the “Premises”) and 61 East Daggett Drive, San Jose, California (being 13,300 rentable square feet).   1.2 The Master Lease was amended on October 1, 2001, December 12, 2001, May 20, 2002 and March 15, 2005. Such amendments are included in the reference to Master Lease.   1.3 Subtenant desires to sublease the Premises from Sublandlord on the terms and conditions contained in this Sublease. 2.     Basic Sublease Provisions.   2.1 Premises Address: 51 East Daggett Drive, San Jose, California.   2.2 Rentable Area of Premises: Approximately 12,717 square feet of a larger building known as 41-61 East Daggett Drive, San Jose, CA (see exhibit D)   2.3 Subtenant’s Percentage Share: 32.35%.   2.4 Commencement Date: February 1, 2006.   2.5 Expiration Date: January 31, 2008.   2.6 Base Monthly Rent: Eleven Thousand Four Hundred Forty-Five Dollars and Thirty Cents ($11,445.30) per month. Base Monthly Rent shall be paid without demand, deduction, set-off or counter claim, in advance of the first day of each calendar month during the term of this Sublease, and in the event of a partial rental month, rent shall be prorated on the basis of a thirty (30) day month.   2.7 Prepaid Rent: Immediately upon execution of this Sublease, Subtenant shall prepay to Sublandlord the first month’s Basic Monthly Rent in the amount of Eleven Thousand Four Hundred Forty-Five Dollars and Thirty Cents ($11,445.30) per month.   2.8 Rental Adjustment(s) during the sublease term: Adjustment Date Adjusted Rent February 1, 2007 $11,788.66   2.9 Permitted Use: Research and development, storage and distribution, offices, marketing, and other related uses as per the Master Lease.   2.10 Acceptance of Premises: Sublandlord shall deliver the Premises with the roof, HVAC system, electrical, plumbing and lighting in good working condition. Prior to the Commencement Date Sublandlord shall replace all worn ceiling tiles. Otherwise, Subtenant agrees to accept the Premises in an “as is” condition. Subtenant acknowledges that Sublandlord has not made any representation or warranty with respect to this Sublease Agreement, including, without limitation, any representation or warranty as to the suitability of the Premises for the conduct of Subtenant’s business, except as specifically set forth in this Sublease. Subtenant shall, at Subtenant’s expense, comply promptly with all applicable statutes, ordinances, rules, regulations, orders, restrictions of record and requirements in effect during the term hereof regulating Subtenant’s specific use of the Premises, including, without limitation, making structural alterations or providing auxiliary aids and services for Subtenant’s specific use of the Premises as required by the Americans with Disabilities Act of 1990, 42 U.S.C. § 12101 etseq. (the “ADA”). In no event shall Subtenant be responsible for the failure of the Premises to comply currently with any such laws, except to the extent such compliance is triggered by Subtenant’s specific use of the Premises.   2.11 Address for payment of rent and notices: Subtenant: Sublandlord: Tegal Corporation. Silicon Genesis Corporation 51 East Daggett Drive 1 East Daggett Drive, San Jose, California 95134-2109 San Jose, California 95134 Att'n: Thomas Mika Att'n: Ted Fong Phone: 707-765-5630 Phone: (408) 288-5858 Facsimile: 707-763-0436 Facsimile: (408) 288-5859 Prior to the Commencement Date, however, Subtenant's address shall be Tegal Corporation 2201 S. McDowell Blvd Petaluma, CA 94954 Phone: (707) 763-5600 FAX: (707) 765-9311   2.12 Security Deposit: Subtenant shall deposit with Master Landlord within two (2) business days after receipt of the Master Landlord's consent to this Sublease Thirty-Five Thousand Dollars and No Cents ($35,000.00) ("Deposit"), which will be in the form of cash as security for Subtenant's faithful performance of Subtenant's obligations. No trust relationship is created herein between Sublandlord and Subtenant with respect to the Deposit. Any deposit under the Master Lease which may be returned by the Master Landlord shall be the property of Sublandlord at the end of the Sublease Term.   2.13 Brokers: Sublandlord is represented by Cornish & Carey Commercial (Fred Pilster, Agent) and Subtenant is represented by Equis (Dan Latini and Dede Satten, Agents) and both parties agree to such representation. 3.     Premises. Sublandlord hereby leases to Subtenant and Subtenant hereby leases from Sublandlord, on and subject to the terms and conditions hereinafter set forth, the Premises. 4.     Term. The term of this Sublease shall commence on the Commencement Date and end on the Expiration Date unless sooner terminated pursuant to any provision hereof, or of the Master Lease. 5.     Base Monthly Rent. Beginning on the Commencement Date, Tenant shall pay the Base Monthly Rent as set forth in Paragraph 2.6 above and after the Adjustment Date, the Adjusted Rent pursuant to Paragraph 2.8 above, on the first day of each calendar month of the term (provided that no Base Monthly Rent shall actually be due and payable for the first month of the term as Tenant has prepaid such amount pursuant to Paragraph 2.6 above). 6.     Delay of Possession. Notwithstanding said Commencement Date, if for any reason beyond Sublandlord's reasonable control Sublandlord cannot deliver possession of the Premises to Subtenant on said date, Sublandlord shall not be subject to any liability therefor, nor shall such failure affect the validity of this Sublease or the obligations of Subtenant hereunder or extend the term hereof, but in such case Subtenant shall not be obligated to pay rent until possession of the Premises is tendered to Subtenant; provided, however, that if Sublandlord shall not have delivered possession of the Premises within thirty (30) days from said Commencement Date, Subtenant may, at Subtenant's option, by notice in writing to Sublandlord within ten (10) days thereafter, cancel this Sublease, in which event the parties shall be discharged from all obligations thereunder. If this Sublease is canceled as herein provided, Sublandlord shall promptly return any monies previously deposited by Subtenant. 7.     Early Entry. From and after the date of this Sublease and until the Commencement Date, and only upon twenty-four (24) hours prior notice to Sublessor, Subtenant and its authorized agents, contractors, subcontractors and employees shall be granted a license by Sublandlord to enter upon the Premises, at Subtenant's sole risk and expense, during ordinary business hours, for the sole purpose of installing Subtenant's trade fixtures and equipment in the Premises; provided, however, that the provisions of this Sublease, other than with respect to the payment of Basic Monthly Rent or Additional Rent (as defined in the Master Lease), shall apply during such early entry, including, but not limited to, Paragraph 9.6 below. 8.     Prorations. Subtenant's Percentage Share of Common Operating Expenses (as defined in the Master Lease) payable by Sublandlord under the Master Lease and any other expenses incurred in the operation and maintenance of the Premises, shall be prorated as of the Commencement Date, with the Sublandlord being liable for all sums incurred prior to and the Subtenant being liable for all sums incurred subsequent to said Commencement Date; provided that if any of the aforesaid prorations cannot be calculated accurately as of the date of the execution of this Sublease, then the same shall be calculated as soon as reasonable practicable and either party owing the other party a sum of money based such subsequent proration(s) shall promptly pay said sums to the other party. 9.     Incorporation By Reference; Assumption.   9.1 All of the Paragraphs of the Master Lease applicable to the Premises during the term hereof are incorporated into this Sublease as if fully set forth in this Sublease except for the following: Article 2, Paragraphs 3.1, 3.2, and 3.5.   9.2 If any provisions of this Sublease conflict with any portion of the Master Lease, as incorporated herein, the terms of this Sublease shall govern.   9.3 Subtenant shall assume and perform to Sublandlord the tenant obligations under the Master Lease provisions incorporated into this Sublease pursuant to Paragraph 9.1 above, to the extent that the provisions are applicable to the Premises during the term hereof. Subtenant shall have no obligation or responsibility with respect to any tenant obligations required to be performed prior to the Commencement Date.   9.4 Subtenant shall pay to Sublandlord, as additional rent, Subtenant's Percentage Share of Common Operating Expenses payable by Sublandlord under the Master Lease applicable to the Premises not later than five (5) days prior to the date any such amounts are due and payable by Sublandlord; provided, however, Subtenant shall pay Subtenant's Percentage Share of estimated Common Operating Expenses (payable under Section 8.1 of the Master Lease) payable by Sublandlord under the Master Lease in advance in monthly installments on the first of the month with installments of Subtenant's Base Monthly Rent. Utilities shall be paid by Subtenant directly to the utility company.   9.5 With respect to work, services, repairs, repainting, restoration, the provision of utilities or HVAC services, or the performance of other obligations required of Master Landlord under the Master Lease, Sublandlord's sole obligation with respect thereto shall be to request the same, on request in writing by Subtenant, and to use reasonable efforts to obtain the same from Master Landlord. Subtenant shall cooperate reasonably with Sublandlord as may be required to obtain from Master Landlord any such work, services, repairs, repainting restoration, the provision of utilities, elevator or HVAC services, or the performance of any of Master Landlord other respective obligations under the Master Lease.   9.6 Subtenant shall comply with the provisions of Section 9.1 of the Master Lease by obtaining the required insurance policies and policy limits and naming Sublandlord as additional insured. Additionally, Subtenant shall be required to obtain and keep in force during the term of this Sublease, at its sole cost and expense, the statutory amount of worker's compensation insurance required by the State of California for the benefit of Subtenant's employees.   9.7 Sublandlord hereby agrees to provide Subtenant forty-eight (48) of the parking spaces granted to Sublandlord under the Master Lease.   9.8 In the event that pursuant to the Master Lease Sublandlord is entitled to any abatement of rent for reason of casualty, condemnation, failure to provide services, or the failure to perform obligations under the Master Lease, then Sublandlord shall likewise be entitled to an abatement of rent under this Sublease.   9.9 Notwithstanding anything contained herein to the contrary, upon expiration or earlier termination of this Sublease, Subtenant shall have no obligation to remove any furniture, equipment or improvements not placed in the Premises by Subtenant or its agents or contractors. 10.     Subtenant's Performance Under Master Lease. At any time and on reasonable prior notice to Subtenant, Sublandlord can elect to require Subtenant to perform its obligations under this Sublease directly to Master Landlord, as applicable, in which event Subtenant shall send to Sublandlord from time to time copies of all notices and other communications it shall send to and receive from Master Landlord. 11.     Covenant of Quiet Enjoyment. Sublandlord represents that the Master Lease attached hereto as Exhibit A is a true, complete and correct copy of the Master Lease, that the Master Lease is in full force and effect and that, to Sublandlord's actual knowledge, there are no defaults on Sublandlord's or Master Landlord's part under the Master Lease as of the Commencement Date. Subject to this Sublease terminating as provided herein or in the Master Lease (other than by reason of Sublandlord's default thereunder), Sublandlord represents that if Subtenant performs all the provisions in this Sublease to be performed by Subtenant, Subtenant shall have and enjoy throughout the term of this Sublease the quiet and undisturbed possession of the Premises by anyone claiming by or through Sublandlord. Sublandlord shall have the right to enter the Premises at any time, in the case of an emergency, and otherwise at reasonable times upon at least twenty-four (24) hours' advance notice, for the purpose of inspecting the condition of the Premises and for verifying compliance by Subtenant with this Sublease and the Master Lease and to permit Sublandlord to perform its obligations under this Sublease and the Master Lease. 12.     Master Lease.   12.1 Subtenant shall not do or permit to be done anything which would constitute a violation or breach of any of the terms, conditions or provisions of the Master Lease or which would cause the Master Lease to be terminated or forfeited by virtue of any risks of termination or forfeiture reserved by or vested in Master Landlord, except to the extent that such act or occurrence shall have resulted, directly or indirectly, from a default by Sublandlord under this Sublease or the failure of Sublandlord to comply with its obligations under the Master Lease not required to be performed by Subtenant pursuant to this Sublease.   12.2 Sublandlord shall not do or permit to be done anything which would constitute a violation or breach of any of the terms, conditions or provisions of the Master Lease or which would cause the Master Lease to be terminated or forfeited by virtue of any risks of termination or forfeiture reserved by or vested in Master Landlord, except to the extent that such act or occurrence shall have resulted, directly or indirectly, from a default by Subtenant under this Sublease (including without limitation, the failure of Subtenant to pay any amount of Base Monthly Rent or Subtenant's Percentage Share of Common Operating Expenses).   12.3 If the Master Lease terminates, this Sublease shall terminate and the parties shall be relieved from all liabilities and obligations under this Sublease; except that if the Master Lease or this Sublease terminates as a result of a default of Subtenant under this Sublease, Subtenant shall be liable to the Sublandlord for all damages suffered by Sublandlord as a result of the termination; and except that if the Master Lease or this Sublease terminates as a result of a default of Sublandlord under this Sublease, Sublandlord shall be liable to the Subtenant for all damages suffered by Subtenant as a result of the termination. 13.     Hazardous Materials.   13.1 Subtenant shall provide Subtenant shall not store, use or dispose of any Hazardous Materials (as defined in the Master Lease) on, in or about the Premises in violation or breach of any of the terms, conditions or provisions of the Master Lease.   13.2 Subtenant has provided to Sublandlord and Master Landlord an accurately completed response to Master Landlord's standard form of Hazardous Materials Questionnaire attached hereto as Exhibit B (the "Questionnaire").   13.3 Subtenant's handling, storage, and use of Hazardous Materials on the Premises shall be limited to the types, amounts, and use identified on the Questionnaire. Subtenant shall provide written notice to Sublandord updating the Questionnaire prior to bringing any new Hazardous Materials onto the Premises.   13.4 Subtenant shall comply with all rules, regulations and requirements promulgated by national, state or local governmental agencies or utility suppliers concerning its use and disposal of Hazardous Materials on the Premises and shall obtain and comply with all required operating permits and regulatory approvals, including, without limitation, transportation permits, wastewater discharge permits, and air emissions permits, and remain in compliance with all such permits or approvals while operating in the Premises during the term of this Sublease.   13.5 To the best of Sublanlord's knowledge, after reasonable inquiry, the Premises are not in violation of any federal, state, local or administrative agency ordinance, law, rule, regulation, order or requirement relating to environmental conditions or Hazardous Material. Subtenant expressly understands and agrees that the phrase "to the best of Sublandlord's knowledge" as used in this paragraph means the actual knowledge only of Mr. Ted Fong. 14.     Indemnity. Subtenant will indemnify, defend (by counsel reasonably acceptable to Sublandlord), protect and hold Sublandlord harmless from and against any and all claims, demands, losses, damages, costs and expenses (including reasonable attorneys' fees) arising out of or relating to Subtenant's breach or default under this Sublease or use or occupancy of the Premises, or, to the extent incorporated herein, the Master Lease. Sublandlord will indemnify, defend (by counsel reasonably acceptable to Subtenant), protect and hold Subtenant harmless from and against any and all claims, demands, losses, damages, costs and expenses (including reasonable attorneys' fees) arising out of or relating to Sublandlord's willful misconduct or active negligence of which Sublandlord has actual notice and a reasonable opportunity to cure but fails to so cure). 15.     Attorneys' Fees. If there is any legal or arbitration action or proceeding between Sublandlord and Subtenant to enforce any provision of this Sublease or to protect or establish any right or remedy of either Sublandlord or Subtenant hereunder, the unsuccessful party to such action or proceeding will pay to the prevailing party all costs and expenses, including reasonable attorneys' fees incurred by such prevailing party in such action or proceeding and in any appearance in connection therewith, and if such prevailing party recovers a judgment in any such action, proceeding or appeal, such costs, expenses and attorney's fees will be determined by the court or arbitration panel handling the proceeding and will be included in and as a part of such judgment. 16.     Removal of Personal Property and Surrender. All articles of personal property, and all business and trade fixtures, machinery and equipment, cabinet work, furniture and movable partitions, if any, owned or installed by Subtenant at its expense in the Premises shall be and remain the property of Subtenant and may be removed by Subtenant at any time, provided that Subtenant, at its expense, shall repair any damage to the Premises caused by such removal or by the original installation. Sublandlord may elect to require Subtenant to remove all or any part of such property at the expiration or sooner termination of this Sublease (unless extended by Subtenant), in which event such removal shall be done at Subtenant's expense, and Subtenant shall at its own expense repair any damage to the Premises caused by such removal prior to the termination of this Sublease. Notwithstanding the above, at the termination of this Sublease, Subtenant shall surrender the Premises in as good condition as received on the Commencement Date of this Sublease, wear and tear, casualty and condemnation excepted. 17.     Maintenance and Repairs. Subtenant shall be responsible for all maintenance and repairs required to be performed by the tenant under the Master Lease with respect to the Premises during the term hereof. 18.     Personal Property. The cubicles, furniture, cubicle cabling, telephone sets, and clean room equipment and support systems currently in place in the Premises including the De-ionized Water System, Acid Neutralization System, Life Safety Systems, Alarm System, Scrubber and Exhaust, Burn Box, Clean Dry Air System, Evaporative Cooling System, and Generator (the "Personal Property"), will be delivered by Sublandlord to Subtenant on the Commencement Date, in good working condition. Subtenant will have the use of the Personal Property during the term of this Sublease and any Extension periods at no additional charge of rent or fee. Subtenant accepts the Personal Property in its "as is" condition and Sublandlord makes no warranty as to the condition of the Personal Property or its present or future suitability for Subtenant's purposes. 19.     Shared Building Systems.   19.1 Services Provided at No Charge:   (a) Subtenant shall provide Sublandlord reasonable access to the Clean Dry Air System at no charge to Sublandlord.   (b) For as long as Sublandlord requires De-ionized water from the Subtenant, Subtenant shall provide Sublandlord reasonable access to the De-ionized Water System at no charge. Subtenant shall use commercially reasonable efforts to maintain such equipment in good working order and to provide de-ionized water of quality no less than the specifications listed in Exhibit C attached hereto.   19.2 Services Provided at a Mutually Agreed Charge:   (a) Subtenant shall allow Sublandlord to purchase nitrogen at the most favorable costs obtainable by either Sublandlord or Subtenant's cost on contract. Subtenant shall pay for the costs, if any, for installing a meter to determine the allocated usage of the nitrogen by Subtenant and Sublandlord.   (b) The Sublandlord may provide Internet access, Internet security, network services, security camera surveillance or other services, provided that the cost for such services can be mutually agreed to.   19.3 During the term of this Sublease, Sublandlord shall provide to Subtenant the alarm and security services at the Premises (timed with Sublandlord's regular schedule and including security badge access capability).   19.4 In the event Subtentant, or its successors or assigns, continue to lease the Premises as a tenant of the Master Landlord following the expiration of the term of this Sublease and Sublandlord, or its successors or assigns, continue to lease the adjacent premises as a tenant of the Master Landlord the provisions of this Paragraph 19 shall survive for so long as Subtenant and Sublandlord or their respective successors and/or assigns continue to lease their respective premises. 20.     Real Estate Brokers. Each party warrants to the other that there are no brokerage commissions or fees payable in connection with this Sublease except to the brokers set forth in Paragraph 2.13. Each party further agrees to indemnify and hold the other party harmless, from any cost, liability and expense (including attorney's fees), which the other party may incur as the result of any breach of this Paragraph 20. 21.     Master Landlord Default; Consents. Notwithstanding any provision of this Sublease to the contrary, (a) Sublandlord shall not be liable or responsible in any way for any loss, damage, cost, expense, obligation or liability suffered by Subtenant by reason or as the result of any breach, default or failure to perform by the Master Landlord under the Master Lease; and (b) whenever the consent or approval of Sublandlord is required for a particular act, event or transaction (i) any such consent or approval by Sublandlord shall be subject to the consent or approval of Master Landlord, and (ii) should Master Landlord refuse to grant such consent or approval, under all circumstances, Sublandlord shall be released from any obligation to grant its consent or approval. 22.     Notices. All notices given under this Sublease must be in writing and shall be delivered (a) in person, (b) by certified mail, postage prepaid, return receipt requested, (c) by a commercial overnight courier that guarantees next day delivery and provides a receipt, or (d) by telefacsimile or telecopy, and such notices shall sent to the party at its address set forth in Paragraph 2.11 above. Those addresses may be changed by either party by written notice to the other party. 23.     Special Notice. Should either party receive any notice of default under the Master Lease from Master Landlord, such party shall promptly cause a copy of such notice of default to be transmitted via facsimile to the other party at the fax number provided in Paragraph 2.11 above as well as mailing a copy to such other party at the addresses provided in Paragraph 2.11 above, provided that such requirement shall be deemed waived in any instance where the notice of default reflects on its face that it is being sent simultaneously to Sublandlord and Subtenant. Any further written communications between the parties and the Master Landlord regarding the status of such default shall be similarly noticed via facsimile and mail as provided in this Paragraph. 24.     No Encumbrance. Subtenant shall not voluntarily or by operation of law mortgage or otherwise encumber all or any part of Subtenant's interest in the Sublease or the Premises. 25.     Authority. Sublandlord and Subtenant each represents and warrants to the other that it is authorized to execute and deliver and perform its obligations under this Sublease. Each individual executing this Sublease on behalf of Sublandlord and Subtenant, respectively, represents and warrants that he or she is duly authorized to execute and deliver this Sublease on behalf of the entity in accordance with its organizational documents and that this Sublease is binding upon the entity in accordance with its terms. 26.     Entire Agreement. This Sublease constitutes the entire agreement between the parties, and there are no agreements or representations between the parties except as expressed herein. Except as otherwise provided herein, no subsequent change or addition to this Sublease shall be binding unless in writing and signed by the parties hereto. 27.     Successors and Assigns. This Sublease shall be binding on and shall inure to the benefit of the parties and their successors and assigns. 28.     Severability. If any term or provisions of this Sublease shall, to any extent, be determined by a court of competent jurisdiction to be invalid or unenforceable, the remainder of this Sublease shall not be affected thereby, and each term and provision of this Sublease shall be valid and be enforceable to the fullest extent permitted by law. 29.     Survival. All representations, warranties, obligations, indemnities and liabilities contained in this Sublease shall survive the expiration, termination or revocation of this Sublease. 30.     Counterparts; Facsimile Signatures. This Sublease may be executed in two or more counterparts and all such counterparts shall constitute one instrument binding on the parties in accordance therewith. This Sublease shall be deemed executed and delivered upon each party's delivery of executed signature pages of this Sublease to each other party, which signature pages may be delivered by facsimile with the same force and effect as delivery of the originals (with original signatures to follow via overnight courier). 31.     Master Landlord's Consent. This Sublease is expressly conditioned upon receipt within fifteen (15) days from the date of this Sublease of the written consent of Master Landlord and Subtenant and Master Landlord entering into a binding agreement to directly lease the Premises for a term commencing on the expiration of the term of this Sublease and which agreement shall provide that Subtenant assume the obligations of Sublandlord under Paragraphs 6 of the Fourth Amendment of the Master Lease related to the Premises. 32.     Assignment and Subleasing. Subject to the terms of Article 14 of the Master Lease which are incorporated into this Sublease pursuant to Paragraph 9.1 above, Subtenant shall have the right to sub-sublease the Premises or assign this Sublease subject to Sublandlord's prior written approval, which shall not be unreasonably withheld or delayed, and any approval required of Master Landlord under the Master Lease. Except as otherwise provided in the Master Lease, any profits (after payment of subleasing costs, including commissions and attorneys' fees) generated by such subleasing or assignment shall be divided equally between Sublandlord and Subtenant. 33.     Tenant Improvements. Sublandlord shall provide the Subtenant with an improvement allowance of up to Ten Thousand dollars ($10,000.00). The allowance shall be payable by Master Landlord from the Sublandlord's Security Deposit directly to Subtenant for reimbursement upon submittal of invoices after completion of such improvements. -------------------------------------------------------------------------------- IN     WITNESS WHEREOF, Sublandlord and Subtenant have executed this Sublease as of the day and year first above written. SUBLANDLORD: SILICON GENESIS, INC., a California corporation By: /s/ Theodore E. Fong Name: Theodore E. Fong Title: Vice President & CEO SUBTENANT: TEGAL CORPORATION., a Delaware corporation By: /s/ Thomas R. Mika Name: THOMAS R. MIKA Title: PRESIDENT & CEO CONSENT OF MASTER LANDLORD BRE/PCCP ORCHARD, L.L.C., a Delaware limited liability company (“Master Landlord”), hereby consents to the foregoing Sublease. Date: ____________, 2005 Master Landlord: BRE/PCCP ORCHARD, L.L.C. a Delaware limited liability company By: Orchard 702/703 Investors, LLC a Delaware limited liability company, its Managing Member By: __________________________________ Name: ________________________________ Its: ____________________________ CONSENT OF LANDLORD         Pursuant to a Lease Agreement (the “Lease”) dated for reference purposes as of December 22, 2000, as amended on October 1, 2001, December 12, 2001, May 20, 2002 and March 15, 2005 (collectively, including the Amendments, referred to as the “Lease”) between BRE/PCCP Orchard LLC, a Delaware limited liability company (“Landlord”), and Silicon Genesis Corporation, a California corporation (“Tenant”), relating to premises commonly known as 51 East Daggett Drive, San Jose, California (being 12,717 rentable square feet and referred to herein as the “Premises”) as well as other space not subleased herein, in the County of Santa Clara (the “Premises”), Tenant has requested that Landlord consent to Tenant’s Sublease dated December 10, 2005 and attached to this Consent as Exhibit “A” (the “Sublease”) to Tegal Corporation, a Delaware corporation (“Subtenant”) of the entire Premises to be subleased as described above (the “Subleased Premises”) on the terms and conditions set forth in the Sublease.         In consideration of Tenant’s and Subtenant’s execution of this Consent of Landlord and agreement to the terms and conditions set forth in this Consent, Landlord consents to the Sublease of the Subleased Premises on the following terms and conditions: 1.     Subrent: Tenant and Subtenant represent and warrant to Landlord that the Sublease contains a complete and accurate statement of all money, property, value, and other consideration received or to be received from Subtenant in regard to the Sublease. 2.     No Waiver: This Consent does not constitute consent to any subsequent subletting or assignment, nor a waiver of the restriction on assignment and subletting contained in the Lease. Tenant and Subtenant agree that notwithstanding any contrary provision in the Sublease, the provisions of the Lease whereby Landlord is entitled to receive a portion of the difference between the Lease Rent and amounts received from a subtenant or an assignee, shall be applicable to Subtenant in regard to any further sub-sublease of the Subleased Premises or any assignment of the Sublease, such that Subtenant will pay such portion of the difference directly to Landlord. 3.     Tenant’s Primary Obligations: Nothing herein shall release or alter the primary obligations of Tenant under the Lease, nor shall this Consent be deemed to create contractual obligations on the part of Landlord to the Subtenant. By executing this Consent, Subtenant agrees to assume all obligations of Tenant under the Lease related to the Subleased Premises arising after the date of the Sublease and to remain jointly and severally liable therefore with Tenant. Subtenant shall not, by this provision, assume any liability for obligations arising under the Lease but not relating to the Subleased Premises. 4.     Costs and Attorney’s Fees: Landlord is entitled to be paid it’s reasonable costs and attorney’s fees relating to this Consent. Tenant shall deliver to Landlord a check in the sum of $1,200 representing Landlord’s attorney’s fees and costs along with the executed original of this Consent. In the event of any litigation arising hereunder, the prevailing party shall be entitled to recover reasonable attorney’s fees and costs from the other party, and if due from Tenant, such fees shall constitute Additional Rent. 5.     No Effect On Lease: In no event shall Landlord’s consent to this Sublease be, or be construed as, a modification of the terms of the Lease, and in the event of any inconsistency between any term of the Sublease and the terms of the Lease, the terms of the Lease shall prevail. By consenting to the Sublease, Landlord has not agreed to any purported duties or agreements set forth in the Sublease. Further, Landlord has not agreed to any language or undertaken any duties set forth or referenced in the Sublease except as such language and/or such duties are explicitly stated and set forth in this Consent. 6.     Modifications; Notices: Tenant and Subtenant agree that they will not amend, modify, supplement, extend, renew, or otherwise change the terms and provisions of the Sublease without the prior written consent of the Landlord, and that any modification, supplementation, renewal, or extension, by agreement or pursuant to an option granted in the Sublease, requires further written consent of Landlord, and will be considered a new sublease or assignment transaction subject to all provisions of the Lease relating thereto. Tenant and Subtenant will provide Landlord with courtesy copies of any notices or legal complaints or cross-complaints given or served by either of them in connection with the Sublease. 7.     Hazardous Materials: (a) Subtenant, at its sole cost, shall comply with all laws relating to the storage, use, and disposal of Hazardous Materials (as defined in the Lease) that Subtenant, its agents, employees, contractors, or invitees bring or permit to be brought on to the Subleased Premises or on the Premises or the Property. If Subtenant does store, use, or dispose of any Hazardous Materials, Subtenant shall notify Landlord in writing at least five (5) days prior to their first appearance on the Subleased Premises, and unless disclosed prior to the execution of this Consent in a response provided by Subtenant to Landlord’s Hazardous Materials Questionnaire or other written disclosure, such Hazardous Materials shall not be stored, used, or disposed of on the Subleased or Premises without Landlord’s advance written approval. Subtenant shall be subject to all obligations of Tenant under the Lease relating to Hazardous Materials (as defined therein).     (b)        Subtenant shall be responsible for and shall defend, indemnify, and hold Landlord and its agents harmless from and against all claims, costs and liabilities, including attorney’s fees and costs, arising out of or in connection with the storage, use, or disposal of Hazardous Materials in or about the Subleased Premises, the Premises, or the Property by Subtenant, its agents, employees, contractors, or invitees which occur prior to or after the date of the Sublease, but Tenant shall remain responsible for any such matters to the extent set forth in the Lease, and Subtenant’s responsibility and duty as set forth above shall not relieve Tenant of its responsibilities and duties pursuant to the Lease. 8.     Construction and Signage: Any and all construction to be performed by Tenant or Subtenant on the Subleased Premises shall be subject to the advance written approval of Landlord as set forth in the Lease. Any signage called for in the Sublease shall be subject to Landlord’s approval as per the terms of the Lease, and subject to the procurement of approval and permits from the City in which the Premises are located. By approving the Sublease, Landlord shall not be deemed to have approved any signage or construction referenced therein. 9.     Insurance and Indemnity: The Subtenant shall comply with all of the insurance provisions of the Lease as if it were the Tenant named thereunder, and shall name the Landlord as an additional insured on all policies of insurance required by the Sublease and Lease, and provide the Landlord with a documentary proof thereof as required by the Lease. Subtenant releases Landlord and its agents and employees, from any liability for injury to any person or damage to property that is caused by or results from any risk insured against under (1) any insurance policy carried by Subtenant or Tenant and in force at the time of such injury or damage, and/or (2) any insurance policy which Subtenant was required by this Consent, the Lease, or the Sublease to have in force. Subtenant shall cause each insurance policy obtained by it to provide that the insurer waives all right of recovery by way of subrogation against Landlord and its agents and employees in connection with any injury or damage to property. Subtenant shall hold harmless, indemnify and defend Landlord and its employees and agents (with counsel reasonably satisfactory to Landlord) from all liability, penalties, losses, damages, costs, expenses, causes of action, claims and/or judgments arising by reason of any death, bodily injury, personal injury or property damage arising from (i) any occurrence on the Subleased Premises during the Sublease Term or any period of Subtenant’s occupancy (unless caused by the gross negligence or willful misconduct of Landlord or its agents), (ii) any occurrence on the Premises or Landlord’s Property caused by Subtenant or its employees or agents (unless caused by the gross negligence or willful misconduct of Landlord or its agents), and (iii) the negligence or willful misconduct of Tenant or its employees and agents wherever occurring. The provisions of this Paragraph shall survive the expiration or sooner termination of this Lease. 10.     Use: Subtenant shall use the Subleased Premises only for the uses allowed by the Lease and for no other purpose. 11.     Assignment Of Tenant’s Rights: Tenant irrevocably assigns to Landlord, as security for the performance of each and all of Tenant’s obligations under the Lease, all rent and other consideration received or to be received from Subtenant. Landlord, as assignee of Tenant, or a receiver appointed on Landlord’s application, may (but is not required to) collect such rent or other consideration, provided, however, that until and unless Tenant commits an Event of Tenant’s Default under the Lease, Tenant shall have the right to collect such rent or other consideration (subject to any obligation set forth in the Lease whereby Tenant is to pay all or a part of such rent or other consideration to Landlord). Such assignment shall be subject to the following terms and conditions:     (a)        Landlord may collect such rent or other consideration from Subtenant only so long as Tenant shall continue to be in default of its obligations under the Lease.     (b)        Upon Landlord’s written request following the occurrence of an Event of Default under the Lease, Tenant shall execute such documents as are reasonably requested by Landlord for the purpose of confirming to Subtenant that Landlord has the right to collect all rent and other consideration otherwise due to Tenant from such subtenant or assignee.     (c)        Subtenant has the right and duty to pay rent or other consideration otherwise due to Tenant directly to Landlord upon receipt from Landlord of a written statement that an Event of Tenant’s Default exists under the Lease, and in such event, each payment made by Subtenant to Landlord shall be deemed to satisfy the obligations of Subtenant to Tenant, but only to the extent of such payment.     (d)        Subtenant’s payment to Landlord pursuant to this assignment shall not create or evidence any direct landlord tenant relationship between Subtenant and Landlord, and Landlord may exercise all remedies to terminate the Lease (including the termination of Subtenant’s possession of the Premises or the Subleased Premises) in the event of any Event of Default by Tenant, notwithstanding its receipt of any payment from Subtenant pursuant to this assignment, unless the receipt of such payment completely cures Tenant’s default. The acceptance of a payment from Subtenant pursuant to this assignment shall not affect Landlord’s right to its remedies for Tenant’s default. 12.     Termination: The Sublease is and remains subject and subordinate to the Lease, and a termination of the Lease for any reason (including but not limited to a default of Tenant) shall terminate the Sublease. 13.     Brokerage Commissions: Notwithstanding anything set forth in the Sublease, Landlord has no obligation to pay and will not pay commissions or fees to any broker or finder in regard to the Sublease or Landlord’s consent thereto. Tenant and Subtenant will hold Landlord harmless and indemnify and defend Landlord against any claims for brokerage commissions arising in regard to the Sublease or Landlord’s consent thereto. 14.     Construction: This Consent has been reviewed and negotiated through discussions between the parties at arm’s length. No rule of construction under which ambiguities are to be resolved against drafting parties shall be applicable hereto or employed in the interpretation of the Consent. LANDLORD: TENANT: BRE/PCCP ORCHARD, L.L.C. Silicon Genesis Corporation, a California a Delaware limited liability company corporation By: ORCHARD 702/703 Investors, LLC, a /s/ Theodore E. Fong Delaware limited liability company, its Member By Theodore E. Fong By: /s/ Michael J. Biggar [Print Name and Title] Michael J. Biggar Dated: 12/29/05 Managing Member SUBTENANT Dated: 1/4/06 Tegal Corporation, a Delaware corporation /s/ Thomas R. Mika By THOMAS R. MIKA [Print Name and Title] Dated: 12/30/05 -------------------------------------------------------------------------------- EXHIBIT A MASTER LEASE 1.     Lease dated for reference purposes as of December 22, 2000 2.     First Amendment to Lease dated October 1, 2001 3.     Second Amendment to Lease dated December 12, 2001 4.     Third Amendment to Lease dated May 20, 2002 5.     Fourth Amendment to Lease dated March 15, 2005 -------------------------------------------------------------------------------- EXHIBIT B [ATTACH ORCHARD COMMERCIAL, INC. HAZARDOUS MATERIALS QUESTIONNAIRE] -------------------------------------------------------------------------------- EXHIBIT C De-ionized Water Specifications: Resistivity Sustained 18.1 Mohms @ 25(Degree)C as measured with flow-through cell and meter per ASTM-D-1125. Reported as meg ohm(s) per cm. 17.9 Mohms @ 25(Degree)C minimum Bacteria Less than 5 colony forming units per 100 ml tested per ASTM-F-6065T. TOC: Total oxidizable carbons less than 5 ppb as measured by a Sievers TOC analyzer. Reported as parts per billion. Excluding THMs. Silica: Less than 5 ppb. Reported as parts per billion.

  Exhibit 10.1     SECURITIES PURCHASE AGREEMENT by and among BUTLER INTERNATIONAL, INC., a Maryland corporation EACH OF ITS SUBSIDIARIES SIGNATORY HERETO, and LEVINE LEICHTMAN CAPITAL PARTNERS III, L.P., a California limited partnership ________________________________________________ $2,500,000 Principal Amount Unsecured Notes Due 2006 (Unsecured Notes) $10,000,000 Principal Amount Secured Senior Term B Notes Due 2011 (Term B Notes) $25,000,000 Principal Amount Secured Senior Subordinated Notes Due 2011 (Subordinated Notes) Warrant to Purchase 1,041,254 Shares of Common Stock of Butler International, Inc. ________________________________________________ Dated as of June 30, 2006         -------------------------------------------------------------------------------- SECURITIES PURCHASE AGREEMENT THIS SECURITIES PURCHASE AGREEMENT is entered into as of the 30th day of June, 2006 (this "Agreement"), by and among BUTLER INTERNATIONAL, INC., a Maryland corporation, (the “Parent”), BUTLER SERVICE GROUP, INC., a New Jersey corporation (“ BSG”), BUTLER SERVICES INTERNATIONAL, INC., a Delaware corporation (“BSI ”), BUTLER TELECOM, INC., a Delaware corporation (“Butler Telecom”), BUTLER SERVICES, INC., a Delaware corporation (“Butler Services”), BUTLER UTILITY SERVICE, INC., a Delaware corporation (“Butler Utility”), BUTLER PUBLISHING, INC. , a Delaware corporation (“Butler Publishing” and together with Parent, BSG, BSI, Butler Telecom, Butler Services, and Butler Utility are referred to hereinafter each individually as “Company ”, and individually and collectively, jointly and severally, as the “Companies”), and each of the Parent’s Subsidiaries signatory hereto (together with the Parent, each a "Guarantor" and collectively the "Guarantors"), and LEVINE LEICHTMAN CAPITAL PARTNERS III, L.P., a California limited partnership (the "Purchaser"). R E C I T A L S A.           The Companies and their Subsidiaries are engaged primarily in the business of providing outsourcing, project management and technical staff augmentation services. B.            The Companies have requested that the Purchaser purchase from the Companies (i) Secured Senior Term B Notes Due 2011 in the aggregate principal face amount of $10,000,000, (ii) Secured Subordinated Notes Due 2011 in the aggregate principal face amount of $25,000,000, and (iii) Unsecured Notes Due 2006 in the aggregate principal face amount of $2,500,000. C.            To induce the Purchaser to purchase the Term B Notes and the Subordinated Notes, and in consideration therefor, the Parent intends to issue and sell to the Purchaser, on the terms and subject to the conditions set forth herein, a Warrant which will entitle the Purchaser to purchase 1,041,254 shares of common stock of the Parent, which shares of common stock will represent, immediately following the Initial Closing, at least 6.25% of the Capital Stock of the Parent on a Fully Diluted Basis, as such number of shares may thereafter be adjusted pursuant to the terms of the Warrant. The net proceeds from the issuance and sale of the Notes and the Warrant will be used to (i) repay certain existing indebtedness of the Company Parties, (ii) fund the working capital of the Company Parties and (iii) pay the fees and expenses associated with the transactions contemplated by this Agreement. D.            To induce the Purchaser to purchase the Securities, and in consideration therefor, the Parent and certain of its Affiliates and other Persons will enter into other Investment Documents, including the Investor Rights Agreement under which, among other things, the Parent will grant to the Purchaser (or one of its Affiliates) certain investment monitoring and other rights with respect to the Company Parties and their Affiliates in connection with the transactions contemplated by this Agreement. E.            To further induce the Purchaser to purchase the Securities, and in consideration therefor, the Parent and the Subsidiaries of the Parent signatory hereto, as Guarantors, have   -------------------------------------------------------------------------------- agreed to guaranty absolutely and unconditionally, jointly and severally, all of the Guarantied Obligations (as defined in the Guaranty) and to enter into the Collateral Documents to secure the payment and performance of their obligations under the Guaranty. Each Guarantor has derived and expects to derive, directly or indirectly, a substantial benefit from the purchase by the Purchaser of the Securities. A G R E E M E N T NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:   1. DEFINITIONS; ACCOUNTING TERMS. 1.1           Definition. For purposes of this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to the singular and the plural forms thereof): “Acceptable Exchange” shall have the meaning set forth in the Investor Rights Agreement. “Adjusted Capital Stock” shall mean, with respect to any Person, as of any date of determination, the number of shares of Capital Stock that the holder of such Capital Stock would have owned or have been entitled to receive immediately after giving effect to any Capital Stock Adjustment. "Affiliate" shall mean, with respect to any specified Person, (i) any other Person that, directly or indirectly, owns or controls, or has the right to acquire, whether beneficially or of record, or as a trustee, guardian or other fiduciary (other than a commercial bank or trust company), five percent (5.0%) or more of the Capital Stock of such specified Person, (ii) any other Person that, directly or indirectly, controls, is controlled by, or is under direct or indirect common control with, such specified Person, (iii) any officer, director, joint venturer, partner or member of such specified Person, (iv) any member of the Immediate Family of any officer or director of such specified Person, and (v) any Person owned or controlled by any member of the Immediate Family of any officer or director of such specified Person. For the purposes of this definition, the term "control," when used with respect to any specified Person, shall mean the power (x) to direct or cause the direction of the management or policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise, or (y) to vote ten percent (10.0%) or more of the Voting Stock of such Person; and the terms "controlling" and "controlled" have correlative meanings. With respect to the Companies or any other Company Parties, “Affiliate” shall include Edward M. Kopko, Frederick Kopko, Jr. and Hugh G. McBreen. Notwithstanding anything to the contrary, for the purposes of this Agreement and the other Investment Documents, neither the Purchaser nor any of its Affiliates, officers, directors, members, partners or employees shall be deemed to be an Affiliate of the Companies. "Agreement" shall mean this Agreement, together with the Exhibits and the Disclosure Schedules, in each case as amended from time to time.   2   -------------------------------------------------------------------------------- "Agreements with Officers" shall have the meaning set forth in Section 6.1(i), as amended from time to time. “Alternative Transaction” shall have the meaning specified in Section 13.16. “Alternative Transaction Fee” shall have the meaning specified in Section 13.16. "Annual Financial Projections" shall have the meaning specified in Section 9.3(e). "Applicable Laws" shall mean all applicable provisions of all (i) constitutions, treaties, statutes, laws, rules, regulations and ordinances of any Governmental Authority and all common law duties, including all statutes, laws, rules and regulations applicable to any Company Party, (ii) Consents of any Governmental Authority and (iii) orders, decisions, rulings, judgments, directives or decrees of any Governmental Authority binding on, or applicable to, any Company Party. "Assignee" shall have the meaning specified in Section 13.5(b). "Assignment" shall have the meaning set forth in Section 13.5(b). “Audited Financial Statements” shall mean audited balance sheets of the Company Parties, on a Consolidated and Consolidating basis, as of December 31, 2004 and December 31, 2005, and, on a Consolidated and Consolidating basis, audited statements of operations, shareholders' equity and changes in financial position or cash flows for the Fiscal Year then ended, together with a report and either (A) an unqualified opinion of Grant Thorton, the independent public accountants of the Parent or (B) a qualified opinion of such public accountants which is qualified only with respect to the terms of the credit facility provided to the applicable Company Parties by General Electric Capital Corporation and the associated delay in refinancing such facility. “Average Billable Headcount” shall mean, as of any date of determination, the average number of employees of any Company Party that were engaged at such Company Party’s clients during the three month period ending as of such date of determination. “Bank Agent” shall mean Charter One Bank, N.A., in its capacity as agent under the Bank Credit Documents. “Bank Credit Documents” shall mean that certain Loan and Security Agreement, to be entered into by and among the applicable Company Parties, Bank Agent and the lenders from time to time party thereto, and all documents, agreements and instruments entered into by any Company Party in connection therewith. "Bankruptcy Laws" shall mean Title 11 of the United States Code (11 U.S.C. Section 101 et seq.), as amended from time to time (the "Bankruptcy Code"), and any other federal or state law relating to bankruptcy, insolvency or reorganization or for the relief of debtors. "Base Interest Rate" shall have the meaning set forth in the Notes.   3   -------------------------------------------------------------------------------- "Benefit Plan" shall have the meaning specified in Section 3.16. "Board of Directors" shall mean, with respect to any Person, the board of directors (or similar governing body) of such Person. “BSG” shall have the meaning specified in the preamble. "BSI" shall have the meaning specified in the preamble. "Business Day" shall mean any day that is not a Saturday, a Sunday or a day on which banking institutions in the City of New York, New York or in Los Angeles, California, are authorized or required by law to close. “Butler India” shall mean Butler Technical Services India Private Limited, a company organized under the laws of India. "Butler Publishing" shall have the meaning specified in the preamble. “Butler Realty” means Butler of New Jersey Realty Corp., a New Jersey corporation. "Butler Services" shall have the meaning specified in the preamble. "Butler Telecom" shall have the meaning specified in the preamble. "Butler Utility" shall have the meaning specified in the preamble. "Capital Expenditures" shall mean, for any period, the aggregate of all expenditures of the Parent and its Subsidiaries (whether paid in cash or accrued or financed by the incurrence of Indebtedness) during such period, including all Capitalized Lease Obligations for any property, plant, equipment or other fixed assets, or for improvements thereto, or for replacements, substitutions or additions thereto, that have a useful life of more than one (1) year or are required to be capitalized on the consolidated balance sheet of the Parent and its Subsidiaries in accordance with GAAP. "Capitalized Lease" shall mean any lease or agreement of the Parent and its Subsidiaries for property (whether real, personal or mixed) which has been or is required to be classified or accounted for as a capital lease on a consolidated balance sheet of the Parent and its Subsidiaries in accordance with GAAP. "Capitalized Lease Obligations" shall mean all liabilities or other obligations for the payment of rent for any property (whether real, personal or mixed) which has been or is required to be classified or accounted for as a capital lease on a consolidated balance sheet of the Parent and its Subsidiaries in accordance with GAAP. "Capital Stock" shall mean, with respect to any Person, (i) if such Person is a corporation, any and all shares of capital stock, participations in profits or other equivalents (however designated) or other equity interests of such Person, including any preferred stock of such Person, (ii) if such Person is a limited liability company, any and all membership units or   4   -------------------------------------------------------------------------------- other interests, or (iii) if such Person is a partnership or other entity, any and all partnership or entity units or other interests. “Capital Stock Adjustment” shall mean (a) any dividend or other distribution on the Capital Stock of any Person in shares of Capital Stock of such Person, (b) any subdivision (by stock split, reclassification or otherwise) of the Capital Stock of any Person into a larger number of shares of Capital Stock of such Person, or (c) any combination (by reverse stock split or otherwise) of the Capital Stock of any Person into a smaller number of shares of Capital Stock of such Person. "Cash Interest Expense" shall mean, for any period, without duplication and only to the extent deducted in determining Net Income (Loss), calculated without regard to any limitation on the payment thereof and determined in accordance with GAAP, (i) total consolidated interest expense of the Parent and its Subsidiaries (including interest paid to Affiliates (other than wholly owned Subsidiaries) and the portion of any Capitalized Lease Obligations allocable to interest expense), whether paid or accrued, minus (ii) to the extent included in total consolidated interest expense in clause (i) above, any non-cash interest expense, amortization of original issue discount, non-cash losses on hedging agreements and amortization of capitalized upfront costs. "Change in Control" shall mean the occurrence of one or more of the following events: (i)            any "person" or "group" (as such terms are used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act or any successor provisions to either of the foregoing), including any group acting for the purpose of acquiring, holding, voting or disposing of securities within the meaning of Rule 13d-5(b)(1) of the Exchange Act (other than the Purchaser, any Affiliate or transferee of the Purchaser, Edward M. Kopko or Edward M. Kopko and any other Designated Shareholder together), becomes the "beneficial owner" (as such term is defined in Rule 13d-3 of the Exchange Act (provided that a Person will be deemed to have "beneficial ownership" of all shares that any such Person has the right to acquire, whether such right is exercisable immediately or only after the passage of time)), directly or indirectly, of twenty-five percent (25%) or more of the outstanding Voting Stock of the Parent, other than transfers made by the Purchaser; (ii)           except as Permitted Business Combinations, the occurrence of a sale, transfer, assignment, lease, conveyance or other disposition, directly or indirectly, of a majority of the assets of any Company Party or the sale, transfer or other disposition of any Capital Stock of any Subsidiary of the Parent; (iii)          except as Permitted Business Combinations, the sale, transfer or other disposition of any Capital Stock of any Company Party or any Person after the date hereof otherwise acquires "control" (as such term is defined in the definition of the term "Affiliate") of any such Company Party; (iv)          except as Permitted Business Combinations, any Company Party is acquired by, or merges, consolidates or amalgamates with or into, any other Person; (v)           Edward M. Kopko either (A) ceases to be an officer of the Parent and of the applicable Company in the office held by him as of the date hereof, or (B) ceases to   5   -------------------------------------------------------------------------------- have the significant daily senior management responsibilities he had immediately prior to the Initial Closing Date; (vi)          Edward M. Kopko ceases to beneficially own at least the amount of shares Capital Stock of the Parent as set forth in Section 5.2(b) of the Investor Rights Agreement; or (vii)        the Board of Directors or the stockholders of any Company Party shall have approved any plan of liquidation, dissolution or bankruptcy of such Company Party. "Closing Fee" shall have the meaning specified in the Fee Letter. "COBRA" shall mean the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, as set forth in Section 4980B of the Code and Part 6 of Title I of ERISA. "Code" shall mean the Internal Revenue Code of 1986, as amended, or any successor statute, and the treasury regulations promulgated thereunder. "Collateral" shall mean the "Collateral" under the Collateral Documents, however defined. "Collateral Documents" shall mean, collectively, Security Agreement, the Intellectual Property Security Agreement, all landlord waivers and consents, the Deposit Account Control Agreements with respect to the each Company Party’s deposit accounts, the Intercompany Subordination Agreement, the Source Code Escrow Agreement, the Intercreditor Agreement, the UCC financing statements and any fixture filings naming any Company Party as a debtor and the Purchaser as secured party and any and all other agreements, instruments and documents delivered by any Company Party from time to time to secure the payment or performance of the Obligations, or any other obligations of the Company Parties or any other Person under this Agreement, the Notes, the Guaranties, the Investor Right Agreement or any other Investment Document, in each case as amended from time to time. "Commission" shall mean the Securities and Exchange Commission, or any successor agency. "Common Stock" shall mean the common stock, $0.001 par value per share, of the Parent, and any securities issued in exchange for or in replacement of such stock. "Company" and “Companies” shall have the meaning specified in the preamble. "Company Party" and "Company Parties" shall mean the Companies and the Guarantors. "Company Party Intellectual Property" shall have the meaning specified in Section 3.26. "Company SEC Documents" shall mean all registration statements, prospectuses, reports, schedules, forms, proxy or other statements and other documents (including all exhibits,   6   -------------------------------------------------------------------------------- schedules and other information included or incorporated by reference therein) which were filed or required to be filed by any Company Party prior to the date hereof, and which are required to be filed by such Company Party on or after the date hereof, with the Commission under the Securities Act, the Exchange Act or the rules and regulations promulgated thereunder, and all filings, reports and other documents which were filed or required to be filed by such Company Party, or are required to be filed by such Company Party, with the Nasdaq or any securities exchange on which its securities were or are listed. "Compliance Certificate" shall have the meaning specified in Section 9.3(f). "Consent" shall mean any consent, approval, authorization, waiver, permit, grant, franchise, license, exemption or order of, or any registration, certificate, qualification, declaration or filing with, or any notice to, any Person, including any Governmental Authority. "Consolidated and Consolidating Basis" shall have the meanings assigned to such term under GAAP. "Contingent Obligations" shall mean, with respect to any Person, any obligation, or arrangement, direct or indirect, contingent or otherwise, of such Person (i) with respect to any Indebtedness, lease, dividend, letter of credit or other obligation ("Primary Obligations") of another Person, including any direct or indirect guarantee of such Indebtedness (other than any endorsement for collection or deposit in the ordinary course of business) or any other direct or indirect obligation, by agreement or otherwise, to purchase or repurchase any such Primary Obligation or any property constituting direct or indirect security therefor, or to provide funds for the payment or discharge of any such Primary Obligation (whether in the form of loans, advances, or purchases of property, securities or services, capital contributions, dividends or otherwise), letters of credit and reimbursement obligations for letters of credit, (ii) to provide funds to maintain the financial condition of any other Person, (iii) otherwise to indemnify or hold harmless the holders of Primary Obligations of another Person against loss in respect thereof or (iv) in connection with any synthetic lease or other off-balance sheet lease transaction; provided, however, the following shall not constitute Contingent Obligations (x) any of the foregoing obligations owed by a Company Party to another Company Party and (y) unasserted indemnification obligations. The amount of any Contingent Obligation under clauses (i) and (ii) above shall be the maximum amount guaranteed or otherwise supported by the Contingent Obligation. "Convertible Securities" shall mean, with respect to any Person, any securities or other obligations issued or issuable by such Person or any other Person that are exercisable or exchangeable for, or convertible into, any Capital Stock of such Person. "Default" shall mean any Event of Default or any event or condition which, with the giving of notice or the lapse of time or both, becomes an Event of Default. "Default Interest Rate" shall have the meaning set forth in the Notes. "Deposit Account Control Agreements" or "Control Agreements" shall mean any control or similar agreements entered into at the Final Closing and from time to time thereafter, in form and substance satisfactory to the Purchaser, pursuant to which the Purchaser obtains   7   -------------------------------------------------------------------------------- "control" (within the meaning of Section 9104 of the UCC) over deposit or similar accounts of any Company Party. “Designated Officers” shall mean any “executive officer” as such term is defined in Rule 3b-7 of the Exchange Act. “Designated Shareholders” shall mean Edward M. Kopko, Hugh McBreen and Frederick Kopko, Jr. "Disclosure Schedules" shall have the meaning specified in the introductory paragraph of Section 3. "Due Diligence Statement" shall mean the statement regarding the provision of documentation to be used in the diligence review of the Company Parties by the Purchaser, executed by the Parent and delivered to Levine Leichtman Capital Partners, Inc. "EBITDA" shall mean, for any period, without duplication and determined on a consolidated basis and in accordance with GAAP: (i)            the sum of (A) Net Income (Loss), (B) interest expense deducted in determining Net Income (Loss) (including all Cash Interest Expense and all non-cash interest expense), (C) the amount of Taxes deducted in determining Net Income (Loss), (D) the amount of depreciation and amortization expense deducted in determining Net Income (Loss), and (E) any extraordinary or unusual non-cash losses of the Parent or any of its Subsidiaries; minus (ii)           any extraordinary or unusual income or gains of the Parent and its Subsidiaries for such period. "Environmental Conditions" shall mean any Release of any Hazardous Materials (whether or not such Release constituted at the time thereof a violation of any Environmental Laws) or any violation of any Environmental Law as a result of which any Company Party has or may become liable to any Person or by reason of which the business, condition or operations of such Company Party or any of its assets or properties may suffer or be subjected to any Lien or liability. "Environmental Laws" shall mean all Applicable Laws relating to Hazardous Materials or the protection of human health or the environment, including all requirements pertaining to reporting, permitting, investigating or remediating Releases or threatened Releases of Hazardous Materials into the environment, or relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials. Without limiting the generality of the foregoing, the term "Environmental Laws" shall include the Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C. §9601 et seq.) ("CERCLA"), the Hazardous Materials Transportation Act (49 U.S.C. §1801 et seq .), the Resource Conservation and Recovery Act (42 U.S.C. §6901 et seq.) ("RCRA"), the Federal Clean Water Act (33 U.S.C. §1251 et seq.), the Clean Air Act (42 U.S.C. §7401 et seq.), the Toxic Substances Control Act (15 U.S.C. §2601 et seq.) and the Occupational Safety and Health Act (29 U.S.C. §651 et seq.), as such laws may be amended from time to time, and any other   8   -------------------------------------------------------------------------------- present or future federal, state, local or foreign statute, ordinance, rule, regulation, order, judgment, decree, permit, license or request or binding determination of, or agreement with, any Governmental Authority relating to or imposing liability or establishing standards of conduct for the protection of human health or safety or the environment. "Equity Rights" shall mean, with respect to any Person, any warrants, options or other rights to subscribe for or purchase, or obligations to issue, any Capital Stock of such Person, or any Convertible Securities of such Person, including any options or similar rights issued or issuable under any employee stock option plan, stock appreciation rights plan, pension plan or other employee benefit plan of such Person. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended, and any successor statute, including the rules and regulations promulgated thereunder, in each case as amended from time to time. "ERISA Affiliate" shall mean any Person that is or was a member of the controlled group of corporations or trades or businesses (as defined in Sections (b), (c), (m) or (o) of Section 414 of the Code) of which any Company Party is or was a member at any time within the last six (6) years. "Event of Default" shall have the meaning specified in Section 11.1. "Event of Loss" shall mean, with respect to an asset of a Person, any of the following: (i) any loss, destruction or damage, of such asset; (ii) any pending or threatened institution of any proceedings for the condemnation or seizure of such asset or of any right of eminent domain; or (iii) any actual condemnation, seizure or taking, by exercise of the power of eminent domain or otherwise, of such asset, or confiscation of such asset or requisition of the use of such asset. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended from time to time, and the rules and regulations promulgated thereunder. "Excess Cash Flow" shall mean, for any Fiscal Year, (i) EBITDA for such Fiscal Year, minus (ii) the sum of (A) Cash Interest Expense; (B) payments of principal on any Indebtedness (including Capitalized Lease Obligations) of the Parent and its Subsidiaries (other than payments made in such Fiscal Year pursuant to Section 4(b) of the Notes), (C) cash Taxes paid by the Parent and its Subsidiaries; (D) cash dividends or distributions, if any, paid by the Company Parties; and (E) Capital Expenditures; in each of clauses (A) through (E) for such Fiscal Year. “Fee Letter” shall mean the Fee Letter, dated the date hereof, by and between the Purchaser and the Companies. "Federal Reserve Board" shall mean the Board of Governors of the Federal Reserve System and any successor thereto. "Final Closing" shall have the meaning specified in Section 2.4. "Final Closing Date" shall have the meaning specified in Section 2.4.   9   -------------------------------------------------------------------------------- “Final Disbursement Letter” shall have the meaning specified in Section 2.4(b). “Final Financial Projections” shall have the meaning specified in Section 6.2(n). "Fiscal Quarter" shall mean any of the four quarters of a Fiscal Year. "Fiscal Year" shall mean each calendar year, or such other period as the Parent may designate in writing and the Purchaser shall have approved in advance in writing, which approval shall not be unreasonably withheld; provided, however, that the Parent may designate the final day in the month of December of any calendar year as its fiscal year end. "Fixed Charge Coverage Ratio" shall mean, with respect to any period, the ratio of (i) EBITDA for such period to (ii) Fixed Charges for such period. "Fixed Charges" shall mean, for any period and without duplication, the sum of (i) Cash Interest Expense, (ii) scheduled payments of principal on any Indebtedness (including scheduled Capitalized Lease Obligations) of the Parent and its Subsidiaries, (iii) Taxes estimated to be paid by the Parent and its Subsidiaries, (iv) cash dividends or distributions, if any, paid by the Company Parties and (v) Capital Expenditures, in each of clauses (i) through (v) for such period. "Fully Diluted Basis" shall mean, with respect to any Person at any time, a basis that includes (i) any and all shares of Capital Stock of such Person issued and outstanding at such time, plus (ii) any and all additional shares of Capital Stock of such Person which would be issuable upon the exercise or conversion of all Equity Rights of such Person outstanding at such time. "GAAP" shall mean generally accepted accounting principles and practices set forth in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as may be approved by a significant segment of the accounting profession, all as in effect on the date hereof, applied on a basis consistent with prior periods. “GECC” shall mean General Electric Capital Corporation, a Delaware corporation. “GECC Credit Documents” shall mean that certain Credit Agreement, dated as of September 28, 2001 (as amended, modified, supplemented or restated from time to time), entered into by and between GECC, in its capacity as agent and lender, BSG, the other Company Parties signatory thereto and the lenders signatory thereto, and all documents, agreements and instruments entered into by any Company Party in connection therewith. “GMAC” shall mean GMAC Commercial Mortgage Corporation and any successor or assignee thereof. “GMAC Credit Documents” shall mean that certain Promissory Note dated as of September 30, 2002 made by Butler Realty for the benefit of GMAC, that certain Mortgage and Security Agreement dated September 30, 2002, by and among Butler Realty and GMAC, and all   10   -------------------------------------------------------------------------------- documents, agreements and instruments entered into by any Company Party in connection therewith. "Governmental Authority" shall mean any nation or government, and any state or political subdivision thereof, any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government (including the Commission, the United States Environmental Protection Agency, the Federal Trade Commission and the Federal Drug Administration), and any court, tribunal or arbitrator(s) of competent jurisdiction, and any self-regulatory organization. "Government Reports" shall mean any reports issued by any Governmental Authority with respect to the compliance or non-compliance of any Company Party with Applicable Laws. "Guarantied Obligations" shall have the meaning set forth in the Guaranty or any other Guaranty, as the context may require. "Guaranties" shall mean the Guaranty and any other guaranty of the Obligations at any time delivered to the Purchaser. "Guarantors" shall mean, collectively, AAC Corp., a Delaware corporation, Sylvan Insurance Co., Ltd., a company organized under the laws of Bermuda, Data Performance, Inc., a New Jersey corporation, and each other Subsidiary that executes and delivers after the Initial Closing a joinder agreement to the Guaranty, in form and substance satisfactory to the Purchaser, and becomes a "Guarantor" under the Guaranty. "Guaranty" shall mean a General and Continuing Guaranty, dated the date hereof, made by the Guarantors in favor of the Purchaser, in form and substance satisfactory to the Purchaser, and all other guaranties made by any Subsidiary in favor of the Purchaser, in form and substance satisfactory to the Purchaser, in each case as amended from time to time. "Hazardous Materials" shall mean any substance (i) the presence of which requires investigation or remediation under any Environmental Laws; (ii) that is defined or becomes defined as a "hazardous waste" or "hazardous substance" under any Environmental Laws or by any Governmental Authority; (iii) that is toxic, explosive, corrosive, inflammable, infectious, radioactive, carcinogenic, mutagenic or otherwise hazardous and is or becomes regulated under any Environmental Laws; (iv) the presence of which on any real property causes or threatens to cause a nuisance upon the real property or to adjacent properties or poses or threatens to pose a hazard to any real property or to the health or safety of Persons on or about any real property; or (v) that contains gasoline or other petroleum hydrocarbons, polychlorinated biphenyls or asbestos. "Hazardous Materials Claim" shall have the meaning set forth in Section 9.13(b). "Holders" shall mean any Person (including the Purchaser) in whose name any of the Notes are registered in the register required to be maintained by the Parent pursuant to Section 10 of the Notes.   11   -------------------------------------------------------------------------------- “Immediate Family” shall mean, with respect to any Person, such Person's spouse, and the parents, children, grandchildren and siblings of such Person or his or her spouse and their spouses. "Indebtedness" shall mean, with respect to any Person and without duplication, (i) any indebtedness, liabilities or other obligations, contingent or otherwise, for borrowed money (whether in the form of a term loan, revolving line of credit, credit extension or otherwise); (ii) all obligations evidenced by bonds, notes, debentures or similar instruments; (iii) all obligations to pay the deferred purchase or acquisition price of property or services (other than trade accounts payable arising in the ordinary course of business so long as such trade accounts payable are Permitted Trade Payables) and any installment payment with respect to non-compete agreements; (iv) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights or remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property); (v) all Capitalized Lease Obligations; (vi) all obligations of others secured by a Lien to which any property or assets owned by such Person is subject, whether or not the obligations secured thereby have been assumed by such Person; (vii) all obligations of such Person, contingent or otherwise, in respect of any letters of credit or bankers' acceptances; (viii) all reimbursement or other obligations of such Person in respect of any bank guaranties, surety bonds and similar instruments issued for the account of such Person or as to which such Person is otherwise liable for reimbursement of drawings or payments; (ix) all obligations under facilities for the discount or sale of receivables; (x) the maximum repurchase price of any redeemable Capital Stock of such Person; (xi) all Contingent Obligations; and (xii) all obligations, other than deferred revenue, which are required to be classified as long-term liabilities on the balance sheet of such Person under GAAP. The Indebtedness of any Person shall include all recourse Indebtedness of any partnership, joint venture or limited liability company in which such Person is a general partner, joint venturer or member. "Indemnified Environmental Costs" shall mean all actual or threatened liabilities, claims, actions, causes of action, judgments, orders, damages (including foreseeable and unforeseeable consequential damages), costs, expenses, fines, penalties and losses (including sums paid in settlement of claims and all reasonable consultant, expert and legal fees and reasonable expenses of counsel) incurred in connection with any Hazardous Materials Claim, any investigation of Site conditions or any clean up, Remedial Work or other remedial, removal or restoration work (whether of any Real Property or any other real property), or any resulting damages, harm or injuries to the Person or property of any third parties or to any natural resources. "Indemnified Parties" shall have the meaning specified in Section 8.2(a). "Initial Closing" shall have the meaning specified in Section 2.4. "Initial Closing Date" shall have the meaning specified in Section 2.4. “Initial Disbursement Letter” shall have the meaning specified in Section 2.4(b). "Initial Financial Projections" shall have the meaning set forth in Section 6.1(m).   12   -------------------------------------------------------------------------------- "Intellectual Property" shall mean all intellectual property, including (i) inventions, whether or not patentable, whether or not reduced to practice, and whether or not yet made the subject of a pending patent application or applications, (ii) ideas and conceptions of potentially patentable subject matter, including any patent disclosures, whether or not reduced to practice and whether or not yet made the subject of a pending patent application or applications, (iii) national (including the United States) and multinational statutory invention registrations, patents, patent registrations and patent applications (including all reissues, divisions, continuations, continuations-in-part, extensions and reexaminations) and all rights therein provided by international treaties or conventions and all improvements to the inventions disclosed in each such registration, patent or application, (iv) recipes, formulas, mixtures, trademarks, service marks, domain names, trade dress, logos, trade names and corporate names, whether or not registered, including all common law rights, and registrations and applications for registration thereof, including all marks registered in the United States Patent and Trademark Office, the Trademark Offices of the States and Territories of the United States of America, and the Trademark Offices of other nations throughout the world, and all rights therein provided by international treaties or conventions, (v) copyrights (registered or otherwise) and registrations and applications for registration thereof, (vi) computer software, (vii) trade secrets and confidential, technical and business information (including ideas, formulas, compositions, inventions, and conceptions of inventions whether patentable or unpatentable and whether or not reduced to practice), (viii) whether or not confidential, technology (including know-how and show-how), manufacturing and production processes and techniques, research and development information, drawings, specifications, designs, plans, proposals, technical data, copyrightable works, financial, marketing and business data, pricing and cost information, business and marketing plans and customer and supplier lists and information, (ix) copies and tangible embodiments of all the foregoing, in whatever form or medium, (x) all rights to obtain and rights to apply for patents, and to register trademarks and copyrights, and (xi) all rights to sue or recover and retain damages and costs and attorneys' fees for present and past infringement of any of the foregoing. "Intellectual Property Security Agreement" shall mean, collectively, the Patent Security Agreement, the Trademark Security Agreement, and the Copyright Security Agreement (as such terms are defined in the Security Agreement), each dated as of the Final Closing Date made by the applicable Company Parties in favor of the Purchaser, in form and substance satisfactory to the Purchaser, as amended from time to time. “Intercompany Subordination Agreement” shall mean a subordination agreement executed and delivered by the Company Parties and their respective Subsidiaries, and Purchaser, the form and substance of which is satisfactory to Purchaser. “Intercreditor Agreement” shall mean that certain Intercreditor Agreement, dated as of the Final Closing Date, by and between Bank Agent and the Purchaser. “Interest Rate Event” shall have the meaning specified in Section 11.3. "Investment Documents" shall mean, collectively, this Agreement, the Notes, the Warrant, the Guaranties, the Fee Letter, the Collateral Documents, the Investor Rights Agreement, the Personal Guaranty, the Registration Rights Agreement and all other agreements,   13   -------------------------------------------------------------------------------- instruments, certificates, closing and other letters and other documents executed and/or delivered in connection herewith or therewith, in each case as amended from time to time. The term Investment Documents excludes the Bank Credit Documents. "Investments" shall mean, as applied to any Person, (i) any direct or indirect acquisition by such Person of Capital Stock, other securities or other interests of, or investments in, any other Person, or all or any substantial part of the business or assets of any other Person, and (ii) any direct or indirect loan, gift, advance or capital contribution by such Person to any other Person. "Investor Rights Agreement" shall mean an Investor Rights Agreement dated as of the Initial Closing Date, in form and substance satisfactory to the Purchaser, among the Parent, Edward M. Kopko, an individual, Frederick Kopko, Jr., an individual, and the Purchaser, as amended from time to time. "Key Man Life Insurance" shall have the meaning specified in Section 9.8(b). “Knott Settlement” shall mean that certain Settlement and Release Agreement, dated May 5, 2004, by and among Parent, the Designated Shareholders, the Estate of John F. Hegarty, Old Oak Partners, LLC, a Connecticut limited liability company, Knott Partners, LP, a New Jersey limited partnership, Robert W. Frank, an individual, and David M. Knott, an individual. “Kopko Employment Agreement” shall mean that certain Second Amended and Restated Employment Agreement among Edward M. Kopko, the Parent and BSG dated December 12, 2002, as in effect on the date hereof. “Late SEC Documents” shall mean the Company SEC Documents relating to the Parent’s third quarter 2005 Form 10-Q, fiscal year 2005 Form 10-K, and first quarter 2006 Form 10-Q, together with all other documents required to be filed pursuant to the Securities Act or the Exchange Act. “Leverage Ratio” shall mean, with respect to any period, the ratio of (i) the sum of all Indebtedness of the Parent and its Subsidiaries outstanding as of the end of such period to (ii) EBITDA for such period. "Lien" shall mean any lien (statutory or other), pledge, mortgage, deed of trust, assignment, deposit arrangement, priority, security interest, or other charge or encumbrance or other preferential arrangement of any kind or nature whatsoever (including the interest of a lessor under a Capitalized Lease having substantially the same economic effect), any conditional sale or other title retention agreement, any lease in the nature thereof and the filing or existence of any financing statement or other similar form of notice under the laws of any jurisdiction or any security agreement authorizing any Person to file such a financing statement, whether arising by contract, operation of law, or otherwise. "Losses" shall have the meaning specified in Section 8.2(a). "Majority in Interest" shall mean, at any time, the Holders who hold a majority of the outstanding principal balance of all Notes in the aggregate at such time, or, if the Notes are no   14   -------------------------------------------------------------------------------- longer outstanding, the holders of a majority of the outstanding Warrant and rights to purchase the Warrant Shares pursuant to the Warrant, at such time. "Margin Regulations" shall mean Regulations T, U and X of the Federal Reserve Board, as amended from time to time. "Margin Stock" shall mean "margin stock" as defined in the Margin Regulations. "Material Adverse Effect" or "Material Adverse Change" shall mean any event, matter, condition or circumstance which (i) has or would reasonably be expected to have a material adverse effect on or material adverse change in, as the case may be, the business, assets, condition (financial or otherwise), results of operations, properties (whether real, personal or otherwise), operations, profitability or prospects of (A) any of BSG, BSI, Butler Telecom and Butler Services, individually, or (B) the Company Parties and their Subsidiaries taken as a whole, (ii) would materially impair the ability of any Company Party to perform or observe its obligations under this Agreement, the Notes, the Warrant, any other Investment Document to which it is a party or the Bank Credit Documents or the GMAC Credit Documents; or (iii) affects the legality, binding effect, validity or enforceability of this Agreement, the Notes, or any other Investment Document or the perfection or priority of any Lien granted to the Purchaser under any Collateral Document. "Material Contracts" shall have the meaning specified in Section 3.13. "Monthly Reporting Package" shall have the meaning specified in Section 9.3(b). “Mortgages” shall mean, individually and collectively, one or more mortgages, deeds of trust, or deeds to secure debt, executed and delivered by the Company in favor of Purchaser, in form and substance satisfactory to Purchaser, that encumber the Real Property. "Nasdaq" shall mean the Nasdaq National Market System or The Nasdaq SmallCap Market, as the case may be, or any successor reporting system thereof. "Net Income (Loss)" shall mean, for any period, net income (loss) after Taxes of the Parent and its Subsidiaries on a consolidated basis for such period taken as a single accounting period, all computed in accordance with GAAP. "Notes" shall mean the Notes as set forth in Section 2.1 and shall include any other notes issued, jointly and severally, by the Companies in favor of the Purchaser, and shall also include, where applicable, any additional note or notes issued by the Company Parties in connection with any Assignments. "Obligations" shall mean any and all present and future loans, advances, Indebtedness, claims, guarantees, liabilities or obligations (monetary and non-monetary) of the Company Parties, or of any other Person for or on behalf of the Company Parties, owing to the Purchaser, Levine Leichtman Capital Partners, Inc., or any of their Affiliates, or owing to any Indemnified Party under Section 8.2, of whatever nature, character or description, the payment and performance of which is provided for or arises under or in connection with this Agreement, the Notes, the Warrant, the Guaranties, the Investor Rights Agreement, the Collateral Documents,   15   -------------------------------------------------------------------------------- the Registration Rights Agreement and any other Investment Document, any and all agreements, instruments or other documents heretofore or hereafter executed or delivered in connection with any of the foregoing, in each case whether due or not due, direct or indirect, joint and/or several, absolute or contingent, voluntary or involuntary, liquidated or unliquidated, determined or undetermined, now or hereafter existing, amended, renewed, extended, exchanged, restated, refinanced, refunded or restructured, whether or not from time to time decreased or extinguished and later increased, created or incurred, whether for principal, interest, premiums, fees, costs, expenses (including attorneys' fees) or other amounts incurred for administration, collection, enforcement or otherwise, whether or not arising after the commencement of any proceeding under the Bankruptcy Laws (including post-petition interest) and whether or not allowed or allowable as a claim in any such proceeding, and whether or not recovery of any such obligation or liability may be barred by any statute of limitations or such Indebtedness, claim, liability or obligation may otherwise be unenforceable. "Operating Licenses" shall mean, collectively, all licenses, franchises, permits, consents, approvals, registrations, certificates and authorizations of all Governmental Authorities necessary or advisable to the conduct of the businesses of the Company Parties. "Organizational Documents" shall mean, with respect to any Person, the articles of incorporation, certificate of incorporation, articles of formation, bylaws, regulations, operating agreement, partnership agreement and similar governing documents of such Person. "Other Debt Document" shall mean any agreement, instrument or other document evidencing or governing any Indebtedness of any Company Party (other than Indebtedness under the Notes and the other Obligations), including the Bank Credit Documents and the GMAC Credit Documents. "Parent" shall have the meaning specified in the preamble. "Participant" shall have the meaning set forth in Section 13.5(c). "Participation" shall have the meaning set forth in Section 13.5(c). "PBGC" shall mean the Pension Benefit Guaranty Corporation, as defined in Title IV of ERISA. “Permitted Asset Sales” shall mean the sale of Butler Fleet or Butler Technical Group, each a division of Butler Services, so long as (A) such sale occurs after the first day after the first anniversary of the Final Closing Date, (B) all proceeds of such sale are applied to prepay the outstanding principal balance of the Notes on the date such sale is consummated, (C) Purchaser has received 30 days prior written notice of such Sale and such documentation with respect thereto as may be requested by Purchaser, in form and substance satisfactory to Purchaser, (D) Parent has provided to Purchaser, in form and substance satisfactory to Purchaser, updated Annual Financial Projections giving effect to such sale and such other financial information, together with a certificate executed by Parent’s Chief Financial Officer as to such financial information, as Purchaser may request, (E) Purchaser shall have revised the financial covenants contained in this Agreement based on such updated Annual Financial Projections using the same methodology as was employed in formulating such financial covenants as of the Final Closing   16   -------------------------------------------------------------------------------- Date and received evidence of the Companies’ pro forma compliance therewith, (F) the Parent has provided to Purchaser, in form and substance satisfactory to Purchaser, a certificate executed by Parent’s Chief Financial Officer certifying that the Leverage Ratio prior to such sale shall not be greater than the Leverage Ratio after giving pro forma effect to such sale, together with any supporting financial information as may be reasonably required by the Purchaser, and (G) after giving pro forma effect to such sale, no Default or Event of Default shall have occurred and be continuing. “Permitted Business Combinations” shall mean (a) the sale of all or substantially all the assets of a Company Party or the Subsidiary of a Company Party to another Company Party, (b) the sale of all the Capital Stock of a Company Party or the Subsidiary of a Company Party to another Company Party or (c) the merger of a Company Party or the Subsidiary of a Company Party with and into another Company Party in which such Company Party is the surviving entity, so long as (i) no Default or Event of Default has occurred and is continuing or would result therefrom, (ii) such sale or merger, as the case may be, is completed upon terms and conditions reasonably satisfactory to Purchaser, (iii) the documents related thereto are in form and substance reasonably satisfactory to Purchaser, and (iv) such sale or merger is not materially disadvantageous to the Purchaser, as reasonably determined by Purchaser. "Permitted Investments" shall mean any one or more of the following: (i)            any direct obligations of the United States of America (including obligations issued or held in book entry form on the books of the Department of the Treasury of the United States of America) or obligations the timely payment of the principal of and interest on which are fully guaranteed by the United States of America, all of which mature within three (3) months from the date of acquisition thereof; or (ii)           any interest bearing demand or time deposits or certificates of deposit that mature no more than sixty (60) days from the date of creation thereof and that are either (a) insured by the Federal Deposit Insurance Corporation or (b) held in any United States commercial bank having general obligations rated at least "AA" or equivalent by Standard & Poor's Rating Group Corporation or Moody's Investors Service, Inc. and having capital and surplus of at least $500,000,000 or the equivalent. "Permitted Liens" shall mean: (i)            judgment and attachment Liens in connection with (a) judgments that do not constitute an Event of Default so long as the judgment creditor has not succeeded in the foreclosure thereof, reserves have been established to the extent required by GAAP as in effect at such time and such judgment does not pose a material risk of loss or forfeiture to any material properties or assets of any Company Party and (b) litigation and legal proceedings that are being contested in good faith by appropriate proceedings so long as such litigation or legal proceedings do not pose a material risk of loss or forfeiture to any material properties or assets of any Company Party, reserves have been established to the extent required by GAAP as in effect at such time;   17   -------------------------------------------------------------------------------- (ii)           Liens for Taxes, assessments or other governmental charges or levies on property of the Company Parties if the same shall not at the time be delinquent or thereafter can be paid without penalty, or are being contested in good faith by appropriate proceedings; (iii)          pledges or deposits by any Company Party under worker's compensation laws, unemployment insurance laws or similar legislation; (iv)          Liens on the property of any Company Party incurred in the ordinary course of business to secure performance of obligations with respect to statutory or regulatory requirements, performance or return-of-money bonds, surety or indemnity bonds or other obligations of like nature and incurred in a manner consistent with industry practice, in each case which are not incurred in connection with the borrowing of money, the obtaining of advances or credit or the payment of the deferred purchase price of property; (v)           Liens imposed by operation of law, such as carriers', warehousemen's, mechanics', materialmen's, repairmen's, landlord's or other like Liens, on property of any Company Party with an aggregate fair market value of no more than $100,000 in the aggregate arising in the ordinary course of business and securing payment of obligations which are not more than sixty (60) days' past due or are being contested in good faith by appropriate proceedings and, if required by GAAP, are appropriately reserved for on the books of the Company Parties; and (vi)          utility easements, building restrictions and such other encumbrances or charges against real property as are of a nature generally existing with respect to properties of a similar character. provided, however, that each of the Liens described in the foregoing clauses (i) through (vi) inclusive shall only constitute a Permitted Lien so long as such Liens do not materially interfere with the conduct of the business of the Company Parties or their Subsidiaries, individually or taken as a whole, or create a Material Adverse Change. “Permitted Trade Payables” shall mean, with respect to any Company Party, (a) for the period commencing as of the date hereof and ending on the date that is thirty (30) days after the Final Closing, all trade accounts payable arising in the ordinary course of business of any Company Party, and (b) at all other times, (i) trade accounts payable that remain unpaid more than one hundred twenty-one (121) days past their due dates so long as such trade accounts payable are being diligently contested by the applicable Company Party in good faith, (ii) trade accounts payable that remain unpaid sixty (60) days past their due dates but not later than one hundred twenty (120) days past their due dates so long as such trade accounts payable are (y) being diligently contested by the applicable Company Party in good faith or (z) not in excess of $100,000 in the aggregate, and (iii) trade accounts payable that remain unpaid for less than sixty (60) days past their due dates.   18   -------------------------------------------------------------------------------- "Person" shall mean any individual, trustee, sole proprietorship, partnership (general or limited), joint venture, trust, unincorporated organization, association, corporation, limited liability company, limited liability partnership and other entity or any Governmental Authority. "Personal Guaranty" shall mean a Personal Guaranty, dated the date hereof, made by Edward M. Kopko in favor of the Purchaser, in form and substance satisfactory to the Purchaser, as amended from time to time. "Pledged Interests" shall have the meaning specified in the Security Agreement. "Pro Forma Closing Balance Sheet" shall have the meaning specified in Section 3.10(c). "Purchase Price" shall have the meaning specified in Section 2.3. "Purchaser" shall have the meaning set forth in the preamble. "Real Property" shall mean any and all real property now or hereafter owned, leased or operated by the Company Parties. "Registration Rights Agreement" shall mean the Registration Rights Agreement dated as of the Initial Closing Date, in substantially the form attached as Exhibit A to the Investor Rights Agreement, to be entered into by the Purchaser and the Parent pursuant to the Investor Rights Agreement. "Release" shall mean any release (whether threatened or actual), migration, spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, seeping, leaching, dumping or disposing into the environment or the workplace of any Hazardous Materials, and otherwise as defined in any Environmental Laws. "Remedial Work" shall have the meaning specified in Section 9.13(c). “Restated SEC Documents” shall mean the Company SEC Documents relating to Parent’s fiscal year 2004 Form 10-K, first quarter 2005 Form 10-Q and second quarter 2005 Form 10-Q, together with all other documents required to be filed pursuant to the Securities Act or the Exchange Act. "Restricted Payment" shall mean any one or more of the following: (i)            any dividend or other distribution (whether made in cash, securities or other property), whether direct or indirect, declared or paid on account of or with respect to any Capital Stock or other securities of any Company Party now or hereafter outstanding; (ii)           any redemption, retirement, sinking fund or similar payment, purchase or other acquisition for value, direct or indirect, of any shares of any Capital Stock of any Company Party now or hereafter outstanding;   19   -------------------------------------------------------------------------------- (iii)          any payment or prepayment of principal of, premium, if any, or interest, fees or other charges on or with respect to, or any redemption, purchase or other acquisition for value, retirement, defeasance, sinking fund or similar payment with respect to, any Indebtedness of any Company Party, except for regularly scheduled or otherwise required or permitted payments or redemptions or defeasance of the (A) Obligations or (B) Indebtedness arising under the Bank Credit Documents and the GMAC Credit Documents; (iv)          notwithstanding clause (iii), any payment made in violation of the written subordination terms of any Indebtedness permitted under Section 10.1; (v)           any management, consulting or similar fees or any other payments of any kind payable by any Company Party to any other Company Party or any Affiliate of any Company Party; and (vi)          any Investment (other than Permitted Investments or Investments permitted under Section 10.3) in any Person. "Securities" shall mean, collectively, (i) the Notes to be issued and sold by the Companies to the Purchaser and (ii) the Warrant to be issued and sold by the Parent to the Purchaser, in each case as provided in this Agreement. "Securities Act" shall mean the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder, all as the same shall be in effect at the time. "Security Agreement" shall mean a Security Agreement dated as of the Final Closing Date, in form and substance satisfactory to the Purchaser, made by the Company Parties in favor of the Purchaser, as amended from time to time. "Site" shall mean any real property previously, currently or hereafter owned, leased or operated directly or indirectly by the Company Parties or any Subsidiary. "Solvent" shall mean, with respect to any Person, that on the date of determination: (i) the present fair saleable value of the assets (i.e., the price a buyer is willing to pay for such asset in an arms-length transaction) of such Person will exceed the amount that will be required to pay the probable liability on the existing debts (whether matured or unmatured, liquidated or unliquidated, absolute, fixed or contingent) of such Person as they become absolute and matured; (ii) the sum of the debts (whether matured or unmatured, liquidated or unliquidated, absolute, fixed or contingent) of such Person will not exceed all of the property of such Person at a fair valuation; (iii) the assets of such Person do not constitute unreasonably small capital for such Person to carry on its businesses as now conducted or proposed to be conducted; and (iv) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person's ability to pay such debts and liabilities as they mature. For purposes of the preceding sentence, the amount of contingent obligations outstanding at any time shall be computed as the amount that, in the light of all the facts and circumstances existing at such time, represents the amount that are reasonably expected to become an actual or matured liability. “Subordinated Notes” shall have the meaning specified in Section 2.1.   20   -------------------------------------------------------------------------------- "Subsidiary" and "Subsidiaries" shall mean, with respect to any specified Person, any other Person of which more than fifty percent (50%) of the total voting power of Capital Stock entitled to vote (without regard to the occurrence of any contingency) in the election of directors (or other Persons performing similar functions) are at the time directly or indirectly owned by such specified Person. In addition, unless otherwise indicated, when used herein, the term "Subsidiary" refers to any Subsidiary of any Company or any other Company Party, whether direct or indirect. "Tax" shall mean any income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, property, environmental, windfall profit, customs, vehicle, airplane, boat, vessel or other title or registration, capital stock, franchise, employees' income withholding, foreign or domestic withholding, social security, unemployment, disability, real property, personal property, sales, use, transfer, value added, alternative, add-on minimum and other tax, fee, assessment, levy, tariff, charge or duty of any kind whatsoever and any interest, penalty, addition or additional amount thereon imposed, assessed or collected by or under the authority of any governmental body or payable under any tax-sharing agreement or any other contract. “Term B Notes” shall have the meaning specified in Section 2.1. "Termination Event" shall mean (i) a Company Party, any Benefit Plan or any fiduciary (within the meaning of Section 3(21) of ERISA) of a Benefit Plan being named as a defendant in a lawsuit filed under ERISA; (ii) the Internal Revenue Service giving notice that it intends to revoke the tax-qualified status of any Benefit Plan; (iii) the occurrence of a "Reportable Event" described in Section 4043 of ERISA with respect to a Benefit Plan, regardless of whether the PBGC has waived the notice requirements with respect to such event in its regulations; (iv) the imposition of liability (whether absolute or contingent) as a result of a complete or partial withdrawal from a multiemployer plan; (v) the filing of a notice to terminate a Benefit Plan in a distress termination under Section 4041(c) of ERISA; (vi) the institution of proceedings by the PBGC to terminate a Benefit Plan or to appoint a trustee pursuant to Section 4042 of ERISA, or the occurrence of any event or set of circumstances that might reasonably constitute grounds for the PBGC to do either; (vii) the restoration of a plan by the PBGC pursuant to Section 4047 of ERISA; or (viii) a Company Party's withdrawal from a single-employer plan during the plan year in which it is a substantial employer pursuant to Section 4063 of ERISA. "Third Party Intellectual Property Rights" shall have the meaning specified in Section 3.26(a). "UCC" shall mean the Uniform Commercial Code, as adopted and in force in the State of California as from time to time in effect, and the Uniform Commercial Code of any other jurisdiction as required under Division 9103 of the California Commercial Code. “Unaudited Financial Statements” shall mean unaudited financial statements, on a Consolidated and Consolidating basis, of the Company Parties consisting of a balance sheet as of May 31, 2006, and a statement of operations and cash flows for the five (5) month period ended May 31, 2006.   21   -------------------------------------------------------------------------------- “Unsecured Notes” shall have the meaning specified in Section 2.1. "Voting Stock" shall mean, with respect to any Person, all classes of Capital Stock of such Person then outstanding and normally entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof. "Warrant" shall have the meaning specified in Section 2.2. "Warrant Shares" shall have the meaning specified in the Warrant. “Weekly Report” shall have the meaning set forth in Section 9.3(c). 1.2           Accounting Terms and Computations. For purposes of this Agreement and any other Investment Document, (a) all accounting terms used in this Agreement that are not expressly defined herein have the meanings given to them under GAAP, (b) all computations made pursuant to this Agreement or any other Investment Document shall be made in accordance with GAAP, (c) all financial statements and other financial information to be delivered by any Company Party hereunder or under any other Investment Document shall be prepared in accordance with GAAP, except that any interim financial statements or other financial information which are unaudited may be subject to year-end audit adjustments and may omit footnotes and (d) after the Initial Closing, all computations, financial statements and other financial information of the Company Parties hereunder shall be determined on a consolidated basis in accordance with GAAP. In the event that any Accounting Change (as defined below) shall occur and such change results in a change in the method of calculation of financial covenants, standards or terms in this Agreement, the Companies and the Purchaser agree to enter into negotiations in order to amend such provisions of this Agreement so as to equitably reflect such Accounting Changes with the desired result that the criteria for evaluating the Companies' financial condition shall be the same after such Accounting Changes as if such Accounting Changes had not been made. Until such time as such an amendment shall have been executed and delivered by the necessary parties thereto, all financial covenants, standards and terms in this Agreement shall continue to be calculated or construed as if such Accounting Changes had not occurred. The term "Accounting Changes" shall refer to changes in accounting principles required by the promulgation of any rule, regulation, pronouncement or opinion by the Financial Accounting Standards Board of the American Institute of Certified Public Accountants or, if applicable, the Commission. 1.3           Covenants. To the extent that this Agreement contains any covenants or agreements of any Company Party not a signatory hereto, the Companies shall be responsible for causing such Company Party to perform, comply with and observe such covenants and agreements. If a particular action, condition or covenant as set forth in the Investment Documents is not permitted pursuant to the terms of the Bank Credit Documents, such covenant or condition shall be deemed to also be prohibited by the terms of the Investment Documents. 1.4           Captions; Construction and Interpretation. The headings in this Agreement and any other Investment Document are for convenience of reference only, do not constitute a part of this Agreement or such other Investment Document and are not to be considered in construing or interpreting this Agreement or such other Investment Document. All   22   -------------------------------------------------------------------------------- section, preamble, recital, exhibit, schedule, disclosure schedule, annex, clause and party references contained in this Agreement or any other Investment Document are to this Agreement or such other Investment Document unless otherwise stated. Unless the context of this Agreement or any other Investment Document clearly requires otherwise, the use of the word "including" is not limiting and the use of the word "or" has the inclusive meaning represented by the phrase "and/or." References in this Agreement or any other Investment Document to any agreement or other document "as amended" or "as amended from time to time," or amendments of any agreement or document, shall include any amendments, supplements, restatements, replacements, renewals, refinancings or other modifications thereto. References to laws, statutes or regulations are to be construed as including all statutory and regulatory provisions promulgated under, consolidating, amending, supplementing, interpreting, or replacing the statute or regulation referred to. Wherever required by the context of this Agreement or any other Investment Document, the masculine, feminine and neuter gender shall each include the other. No party, nor its counsel, shall be deemed the drafter of this Agreement or any other Investment Document for purposes of construing the provisions hereof or thereof. Accordingly, all provisions of this Agreement and each other Investment Document shall be construed in accordance with their fair meaning, and not strictly for or against any party. This Agreement and each other Investment Document has been negotiated by, and entered into between or among, persons that are sophisticated and knowledgeable in business matters. Accordingly, any rule of law or legal decision that would, notwithstanding any of the foregoing provisions, require interpretation of this Agreement or any other Investment Document against the party deemed the drafter thereof shall not be applicable and is irrevocably and unconditionally waived. Any reference herein to a "shareholder" or “stockholder” with regard to any Company Party, shall mean and refer to a “member” if such Company Party is a limited liability company, or a “limited partner” if such Company Party is a limited partnership and any reference herein to an "officer" or a "director" of any Company Party shall mean and refer to the equivalent position at a limited liability company or limited partnership which is a Company Party. 1.5           Determinations. Any determination involving a numeric or mathematical calculation contemplated by this Agreement or any other Investment Document that is made by the Purchaser shall be final and conclusive and binding upon the Company Parties in the absence of manifest error. Any other determination contemplated by this Agreement or any other Investment Document that is made by the Purchaser shall be prima facie evidence of the correctness of such determination. 1.6           Definition of Knowledge. The term "knowledge of the Company Parties," when used in this Agreement or any other Investment Document with respect to any Company Party, and references to the awareness of a Company Party, shall mean the actual knowledge or awareness of each Designated Officer of such Company Party and the knowledge or awareness that each such Person would have obtained after reasonable due diligence or inquiry in light of the circumstances.     23   --------------------------------------------------------------------------------   2. PURCHASE AND SALE OF THE SECURITIES.   2.1 Authorization of Notes. (a)           Prior to the Initial Closing, the Companies shall have authorized the issuance and sale to the Purchaser of the Unsecured Notes Due 2006 in the principal face amount of $2,500,000, in substantially the form of Exhibit A (as the same may be amended from time to time, the "Unsecured Notes" ). (b)           Prior to the Initial Closing, the Companies shall have authorized the issuance and sale to the Purchaser of (a) the Secured Senior Term B Notes Due 2011 in the principal face amount of $10,000,000, in substantially the form of Exhibit B (as the same may be amended from time to time, the "Term B Notes" ) and (b) a Secured Senior Subordinated Notes Due 2011 in the principal face amount of $25,000,000, in substantially the form of Exhibit C (as the same may be amended from time to time, the "Subordinated Notes" and, collectively with the Unsecured Notes and the Term B Notes, the "Notes"). 2.2           Authorization of Warrant. Prior to the Initial Closing, the Parent shall have authorized the issuance and sale to the Purchaser of Warrant to Purchase 1,041,254 Shares of Common Stock (which number of shares shall represent immediately following the Initial Closing not less than six and one quarter percent (6.25%) of the Common Stock of the Parent on a Fully Diluted Basis), in substantially the form of Exhibit D (as the same may be amended from time to time, the "Warrant" ). The payment and performance of the Notes, the Warrant and all other Obligations shall be secured by the Collateral and guarantied under the Guaranties. 2.3           Purchase of the Securities; Purchase Price. On the terms and subject to the conditions contained herein and in the other Investment Documents, and in reliance upon the representations, warranties, covenants and agreements contained herein, at the Initial Closing, the Companies and the Parent, as applicable, shall issue, sell and deliver to the Purchaser the Unsecured Notes and the Warrant, and at the Final Closing, the Companies shall issue, sell and deliver to the Purchaser the Term B Notes and the Subordinated Notes. The aggregate purchase price to be paid by the Purchaser for the Term B Notes and the Subordinated Notes shall be $35,000,000 payable as provided in Section 2.4. The aggregate purchase price to be paid by the Purchaser for the Unsecured Notes and the Warrant (the "Purchase Price") shall be $2,500,000, consisting of a purchase price for the Unsecured Notes of $1,960,000 and a purchase price for the Warrant of $540,000, in each case payable as provided in Section 2.4. The Companies and the Purchaser agree that, for purposes of Section 1271 et seq. of the Code, the original issue price of the Unsecured Notes will be 78.4% of their principal face amounts, and that this agreement is intended to constitute an agreement as to the issue prices of the Unsecured Notes and the Warrant for all federal, state and local income Tax purposes.   2.4 Closing. (a)           The closing of the purchase and sale of the Unsecured Notes and the Warrant under this Agreement (the "Initial Closing") shall take place at the offices of Bingham McCutchen LLP, 355 South Grand Avenue, Suite 4400, Los Angeles, California 90071, as soon as practicable following the satisfaction or waiver of the conditions precedent set   24   -------------------------------------------------------------------------------- forth in Section 6.1 and Section 7 (such date being referred to as the "Initial Closing Date"). At the Initial Closing, the Companies and the Parent, as applicable, shall deliver to the Purchaser the Unsecured Notes and the Warrant, each duly executed by the Companies and the Parent, as applicable, in each case against payment of the Purchase Price therefor (net of amounts permitted to be withheld pursuant to Sections 6.1(c) and 8.5) to the Companies by wire transfer to a bank account or accounts as the Companies may request in writing pursuant to a disbursement letter duly executed by the Companies (the “Initial Disbursement Letter”). (b)           The closing of the purchase and sale of the Term B Notes, and the Subordinated Notes under this Agreement (the "Final Closing") shall take place at the offices of Bingham McCutchen LLP, 355 South Grand Avenue, Suite 4400, Los Angeles, California 90071, as soon as practicable following the satisfaction or waiver of the conditions precedent set forth in Section 6.2 and Section 7 (such date being referred to as the "Final Closing Date"). At the Final Closing, the Companies and the Parent, as applicable, shall deliver to the Purchaser the Term B Notes and the Subordinated Notes, each duly executed by the Companies, in each case against payment of the purchase price therefor (net of amounts permitted to be withheld pursuant to Sections 6.2(c) and 8.5) to the Companies by wire transfer to a bank account or accounts as the Companies may request in writing pursuant to a disbursement letter duly executed by the Companies (the “Final Disbursement Letter”). 2.5           Use of Proceeds. The Companies shall use the gross proceeds from the issuance and sale of the Securities as contemplated hereunder solely for the purposes of (a) repaying certain existing indebtedness of the Company Parties, (b) funding the working capital of the Company Parties and (iii) paying the fees and expenses associated with the transactions contemplated by this Agreement. 3.             REPRESENTATIONS AND WARRANTIES OF THE COMPANY. In connection with the following representations and warranties, the Company Parties have delivered to the Purchaser (or has caused the delivery to the Purchaser of) disclosure schedules (the "Disclosure Schedules") arranged in numbered parts corresponding to the section numbers in this Agreement of the following representations and warranties. The information disclosed in any particular Disclosure Schedule shall be deemed to relate to and to qualify only the particular representation or warranty set forth in the corresponding numbered section in this Agreement and shall not be deemed to relate to or to qualify any other representation or warranty. To induce the Purchaser to purchase the Securities under this Agreement, the Company Parties hereby jointly and severally represent and warrant to the Purchaser that, except as expressly set forth in the respective Disclosure Schedules: 3.1           Organization and Qualification. As of the Initial Closing Date, each Company Party is a corporation duly organized, validly existing and (other than AAC Corp., a Delaware corporation, Sylvan Insurance Co., Ltd., a company organized under the laws of Bermuda, and Data Performance, Inc., a New Jersey corporation) in good standing under the laws of its state of incorporation. As of the Final Closing Date, each Company Party is a corporation duly organized, validly existing and in good standing under the laws of its state of incorporation. Each Company Party has all requisite power and authority, and all Operating Licenses, necessary to own or lease and operate its properties and assets and to carry on its business as now conducted and as proposed to be conducted, and is duly qualified or licensed to   25   -------------------------------------------------------------------------------- do business in each jurisdiction in which the character of the properties or assets owned, leased or operated by it or the nature of the activities conducted makes such qualification or licensing necessary, except where the failure to be so qualified or licensed could not reasonably be expected to result in a Material Adverse Effect. 3.2           Corporate or Other Power. Each Company Party has the requisite power and authority to execute, deliver, carry out and perform its obligations under this Agreement and each other Investment Documents to which it is a party, including the power and authority to issue, sell and deliver the Securities to be issued and sold by it to the Purchaser hereunder. 3.3           Authorization; Binding Obligations. The execution, delivery and performance of this Agreement and each other Investment Document to which each Company Party is a party, the issuance, sale and delivery by the Companies and the Parent, as applicable, of the Securities, the issuance of the Guaranties, the grant of the Liens under the Collateral Documents, the Bank Credit Documents and the consummation of the other transactions contemplated hereby and thereby, have been duly authorized by all requisite action on the part of such Company Party, as applicable, and by the stockholders, board of directors and officers of each entity, as applicable. This Agreement has been duly executed and delivered by the Company Parties and, at the Initial Closing, the Unsecured Notes, the Warrant and each of the other Investment Documents will be, and as of the Final Closing, the Term B Notes, the Subordinated Notes and each of the other Investment Documents will be, duly executed and delivered by each Company Party that is a party thereto. This Agreement is, and at the Initial Closing the Unsecured Notes, the Warrant and the other Investment document will be, and at the Final Closing, each of the Term B Notes, the Subordinated Notes and the other Investment Documents will be, a legal, valid and binding obligation of each Company Party that is a party thereto, enforceable against such Company Party in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or conveyance or similar laws relating to or limiting creditors' rights generally or by equitable principles relating to enforceability, and except as rights of indemnity or contribution may be limited by federal or state securities laws or the public policy underlying such laws.   3.4 Subsidiaries. (a)            Schedule 3.4 sets forth a true, complete and correct list of all direct and indirect Subsidiaries of each Company Party, setting forth, as to each such Subsidiary, its name, its state or other jurisdiction of organization, the address of its principal executive offices, its federal and state tax identification numbers, its stockholders (except that with respect to the Parent, its stockholders of 5% or more the outstanding Capital Stock of the Parent) and all states and other jurisdictions in which each such Subsidiary is duly qualified or licensed to conduct business as a foreign corporation or other entity. Except for Butler India, Butler Realty and Butler International Charitable Foundation Corp., a New Jersey corporation, each such Subsidiary is a Company Party. Except as set forth on Schedule 3.4, no Company Party owns, directly or indirectly, any Capital Stock of any other Person and all Capital Stock of each Subsidiary is owned by a Company Party. (b)           Butler India is an entity of the type indicated on Schedule 3.4, duly organized, validly existing and in good standing under the laws of its jurisdiction of organization   26   -------------------------------------------------------------------------------- and has all requisite power and authority, and all Operating Licenses, necessary to own or lease and operate its properties and assets and to carry on its business as now conducted and as proposed to be conducted. (c)           Butler India is duly qualified or licensed to do business in good standing in each jurisdiction in which the character of the properties or assets owned, leased or operated by such Subsidiary or the nature of the activities conducted makes such qualification or licensing necessary, except where the failure to be so qualified or licensed could not reasonably be expected to result, individually or in the aggregate, in a Material Adverse Effect.   3.5 Conflict with Other Instruments; Existing Defaults; Ranking . (a)           The execution, delivery and performance by the Company Parties of this Agreement and each other Investment Document (including the issuance, sale and delivery by the Companies and the Parent, as applicable, of the Notes and the Warrant, the issuance of the Guaranties and the grant of the Liens under the Collateral Documents), each Bank Credit Document to which any Company Party is a party and the consummation of the other transactions contemplated hereby and thereby do not and will not violate, or cause a default under, or give rise to a right of termination under, (i) the Organizational Documents of any Company Party or Subsidiary, as applicable, (ii) any Material Contract or (iii) any Applicable Laws. (b)           No Company Party is (i) in default, breach or violation of its Organizational Documents, as in effect as of the date hereof, as applicable, or (ii) in default, breach or violation of (A) any Material Contract, except for the GECC Credit Documents as disclosed to the Purchaser or (B) any Applicable Laws. Without limiting the generality of the foregoing, there does not exist any "default" or "event of default" (in each case as defined in any Other Debt Document) or any default under any other credit or financing agreement to which any Company Party is a party or by which any of its properties or assets are bound, except for the GECC Credit Documents as disclosed to the Purchaser. (c)           There are no contractual or other restrictions or limitations which prohibit the issuance and sale by any Company Party of the Securities to be issued and sold by it hereunder or the issuance of the Guaranties, prohibit or restrict any merger, sale of assets or other event which could cause a Change in Control, or otherwise prohibit any other financings by any Company Party, including any public or private debt or equity financings. (d)           Payment of (i) all principal of, premium, if any, and interest on the Term B Notes and Guarantied Obligations related thereto shall rank senior to or pari passu with all present and future other Indebtedness and obligations of the Company Parties, and, other than the Indebtedness under the Bank Credit Documents, there is no present and future other Indebtedness or other obligations of the Company Parties that ranks pari passu with the Term B Notes or such Guarantied Obligations; and (ii) all principal of, premium, if any, and interest on the Subordinated Notes, Guarantied Obligations related thereto and of all other Obligations (other than the Term B Notes) shall rank senior to or pari passu with all present and future other Indebtedness and obligations of the Company Parties other than the Indebtedness under the Bank Credit Documents, and, other than the Indebtedness under the Bank Credit Documents, there is   27   -------------------------------------------------------------------------------- no present and future other Indebtedness or other obligations of the Company Parties that ranks senior to the Obligations or such Guarantied Obligations. 3.6           Governmental and Other Third Party Consents. No Company Party is required to obtain any Consent from, or is required to make any declaration or filing with, any Governmental Authority or any other Person in connection with the execution, delivery and performance of this Agreement or any other Investment Document, including the issuance, sale and delivery of the Notes and the Warrant by the Companies and the Parent, as applicable, the issuance of the Guaranties and the grant of the Liens under the Collateral Documents, or the Bank Credit Documents, or for the purpose of maintaining in full force and effect any Operating Licenses. All Consents required to be obtained or made in connection with the execution, delivery and performance of this Agreement, any other Investment Document or any Bank Credit Document will at the Initial Closing be in full force and effect. The time within which any administrative or judicial appeal, reconsideration, rehearing or other review of any such Consent of any Governmental Authority may be taken or instituted has lapsed, and no such appeal, reconsideration or rehearing or other review has been taken or instituted. 3.7           Capitalization. Schedule 3.7 sets forth a true, correct and complete description of the authorized and issued outstanding Capital Stock of each Company Party, including the holders thereof, except that for the holders of the outstanding Capital Stock of the Parent, Schedule 3.7 sets forth a true, correct list of the holders of 5% or more the outstanding Capital Stock of the Parent. All of such issued and outstanding shares of Capital Stock have been duly authorized and are validly issued, fully paid and non-assessable, and are free and clear of any Liens and other restrictions (including any restrictions on the right to vote, sell or otherwise dispose of such Capital Stock) and of any preemptive or other similar rights to subscribe for or to purchase any such Capital Stock except as set forth on Schedule 3.7 . Except as set forth on Schedule 3.7 (which Schedule sets forth a true, correct and complete description of, with respect to each security, the title, the name of the holder or Person, as applicable, the name of, and units of or percentage interest (on a Fully Diluted Basis) in, the Company Parties underlying such security, the exercise price, and the expiration date if applicable), as of the date hereof, there are: (i) no outstanding Equity Rights of any Company Party; (ii) other than the Investor Rights Agreement (A) no voting trusts or other agreements or undertakings to which any Company is a party or otherwise bound with respect to the voting of the Capital Stock of any Company Party, and (B) to the knowledge of the Companies, no other voting trusts or other agreements or undertakings with respect to the voting of the Capital Stock of any Company Party; (iii) other than as set forth in the Knott Settlement, no obligations or rights (whether fixed or contingent) on the part of any Company Party or Subsidiary, any of its directors or officers, or any other Person to purchase, repurchase, redeem or "put" any outstanding shares of the Capital Stock of any Company Party or Equity Rights of any Company Party; and (iv) no agreements to which any Company Party, any of their directors or officers, or any other Person is a party granting any other Person any rights of first offer or first refusal, registration rights or "drag along," "tag along" or similar rights with respect to any transfer of any Capital Stock or Equity Rights of any Company Party, except as set forth in the Investment Documents. All outstanding shares of Capital Stock and Equity Rights of each Company Party have been issued have been issued and offered in compliance with all applicable federal and state securities laws. Except as set forth on Schedule 3.7, no additional shares of Capital Stock of any Company Party will become issuable to any Person pursuant to any "anti-dilution" provisions of any such issued and   28   -------------------------------------------------------------------------------- outstanding securities of such Company Party on account of the issuance of the Securities, the exercise of the Warrant or the application of the "anti-dilution" provisions contained in the Warrant. The shares of Common Stock issuable upon exercise of the Warrant constitute not less than 6.25% of the total Common Stock of the Parent on a Fully Diluted Basis, not including adjustments to such percentage pursuant to the terms of the Warrant. 3.8           Validity and Issuance of Warrant Shares. The Warrant Shares have been duly authorized, reserved and, when issued, delivered and paid for pursuant to the terms of the Warrant, will be duly and validly issued, fully paid and non-assessable and free of restrictions on transfer other than the restrictions under the Investor Rights Agreement and applicable federal and state securities laws.   3.9 Company SEC Documents. (a)           Except for the Late SEC Documents, each Company Party has filed with the Commission all Company SEC Documents which were required to be filed by it with the Commission. Schedule 3.9 sets forth a true, complete and correct list of all Company SEC Documents filed by any Company Party since May 15, 1995 and the respective dates on which they were filed. (b)           Each Company SEC Document previously filed by each Company Party complies with all applicable requirements of the Securities Act and the Exchange Act, and, when filed with the SEC, did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. Except for the Restated SEC Documents to be filed with the Commission, the financial statements of the Company Parties included in each Company SEC Document filed by each Company Party complied as to form, as of the dates of its filing with the Commission, with applicable accounting requirements and the published rules and regulations of the Commission with respect thereto, were prepared in accordance with GAAP (except, in the case of unaudited statements, as permitted by the Commission) and fairly present the consolidated financial position of the Company Parties as of the dates thereof and the consolidated results of their operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments consistent with past practices and consistently applied).   3.10 Financial Statements. (a)           As of the Initial Closing Date, the Parent has delivered to the Purchaser copies of the Unaudited Financial Statements and as of the Final Closing Date, the Parent shall have delivered to the Purchaser copies of the Audited Financial Statements. The Unaudited Financial Statements (including, in each case, the related schedules and notes), and the Audited Financial Statements, when delivered, fairly present the consolidated financial position of the Company Parties and their Subsidiaries as of the respective dates of such balance sheets and the results of operations of the Company Parties and their Subsidiaries for the respective periods covered by such statements of operations, shareholders' equity and changes in financial position or cash flows, as the case may be, and have been prepared in accordance with   29   -------------------------------------------------------------------------------- GAAP (subject to normal year-end audit adjustments consistent with past practices and consistently applied).   (b)           Neither any Company Party nor any of its officers, directors or other Affiliates (i) is contemplating the filing of a petition under the Bankruptcy Laws with respect to any Company Party or its Subsidiaries, or the liquidation of all or any major portion of its or their assets or properties, or (ii) is aware of any Person contemplating the filing of any petition against any Company Party or Subsidiary under the Bankruptcy Laws. No Company Party or Subsidiary is contemplating changing its business, as such business is being conducted on the date hereof. (c)           The Parent has furnished to the Purchaser, on a Consolidated and Consolidating basis, balance sheet of the Parent and its Subsidiaries as of the Initial Closing Date, as adjusted to give pro forma effect to the consummation of the transactions contemplated by this Agreement as if such transactions had occurred on such date, and as of the Final Closing date, balance sheet of the Parent and its Subsidiaries as of the Initial Closing Date, as adjusted to give pro forma effect to the consummation of the transactions contemplated by this Agreement and the Bank Credit Documents as if such transactions had occurred on such date (the "Pro Forma Closing Balance Sheet"). Schedule 3.10(c) sets forth a true, correct and complete copy of the Pro Forma Closing Balance Sheet, together with footnotes describing the pro forma adjustments and the assumptions underlying the Pro Forma Closing Balance Sheet. The Pro Forma Closing Balance Sheet fully presents the pro forma consolidated financial position of the Company Parties as of the Initial Closing Date and the Final Closing Date, and properly gives effect to the application of the pro forma adjustments described therein and contemplated herein. All assumptions underlying the Pro Forma Closing Balance Sheet were made in good faith and are reasonable under the circumstances and neither the Company Party nor any Subsidiary is aware of any facts or information that would lead it to believe that such pro forma adjustments are incorrect or misleading in any respect.   3.11 Existing Indebtedness and Liens; Investments. (a)            Schedule 3.11(a) sets forth a true, correct and complete list, and describes, as of the date or dates indicated therein, as applicable: (i)            all Indebtedness of any Company Party existing immediately prior to the Initial Closing Date, showing, as to each Indebtedness, the payee thereof, the total amount outstanding (by principal, interest and other amounts, if applicable) and the maturity date; (ii)           all Liens existing immediately prior to the Initial Closing Date (other than Permitted Liens) in respect of any property or assets of any Company Party, showing, as to each Lien, the name of the grantor and secured party, the Indebtedness (as of the Final Closing Date) secured thereby, the name of the debtor (if different from the grantor) and the assets or other property covered by such Lien;   (iii) all recorded Permitted Liens;   30   -------------------------------------------------------------------------------- (iv)         all Investments of the Company Parties and the Subsidiaries existing immediately prior to the Initial Closing Date; (v)           all UCC financing statements on file as of the Initial Closing Date, naming any Company Party or Subsidiary as a debtor, showing, as to each financing statement, the basis for the filing; and (vi)         a trade payables aging schedule for the Companies and its Subsidiaries as of June 28, 2006. (b)           No Company Party has on the date hereof, or will have on the Initial Closing Date, any Contingent Obligations, liabilities for Taxes, unusual forward or long-term commitments or unrealized or anticipated losses from any unfavorable commitments, except as reflected in the Pro Forma Closing Balance Sheet. (c)            Immediately following the Initial Closing or the Final Closing, as the case may be, the Company Parties will not have any Indebtedness, whether accrued, absolute, contingent or otherwise (whether individually or in the aggregate), except for the Indebtedness set forth on Schedule 3.11(c). (d)           As of the Final Closing Date, “Availability” under the Bank Credit Documents, after giving effect to (i) the initial Loans (as defined in the Bank Credit Documents) and the issuance of the Notes, (ii) the issuance or procurement by the Bank Agent of the initial Letters of Credit and LC Guaranties (as such terms are defined in the Bank Credit Documents) contemplated in the Bank Credit Documents, and (iii) the closing costs and expenses incurred in connection with the transactions contemplated in the Bank Credit Document and the Investment Documents, will be at least $8,000,000. 3.12        Absence of Certain Changes. Since December 31, 2005, there has not been and there is no agreement, commitment or obligation to do any of the following: (a)           Any transaction involving any Company Party not in the ordinary course of business, including, without limitation, any sale of any assets or properties (other than inventory in the ordinary course of business); (b)           Except with respect to the Parent’s 7 1/2% Senior Cumulative Preferred Stock or Series B 7% Cumulative Preferred Stock as set forth in the Organizational Documents of the Parent, any declaration, setting aside or payment of any dividend or other distribution or payment (whether in cash, stock or property) with respect to the Capital Stock of any Company Party, or any redemption, purchase or other acquisition of securities of any Company Party, or any payment to any stockholder of the Parent not in his, her or its capacity as a stockholder; (c)           Any damage, destruction or loss, whether or not covered by insurance, to any material assets or properties of any Company Party;   (d) Any Material Adverse Change;   31   -------------------------------------------------------------------------------- (e)           Any loan or advance made by any Company Party to any Person, except normal travel advances or other reasonable business expense advances made in the ordinary course of business to its own employees; (f)            Any Indebtedness for borrowed money incurred by any Company Party or any commitment to incur Indebtedness for borrowed money entered into by any Company Party (other than as contemplated by this Agreement); (g)           Any Capital Expenditures or commitments to make Capital Expenditures in excess of the amount reflected in the Initial Financial Projections; (h)           Any indemnity or other claims made by or against any Company Party with respect to or in connection with any acquisition or sale or other disposition, whether direct or indirect, of the Capital Stock or assets of any other Person; (i)            Any amendment or other modification to any Organizational Document of any Company Party; (j)            The formation or creation of any direct or indirect Subsidiary of any Company Party, or the disposition of the Capital Stock or assets of any Company Party; (k)           Any waiver by any Company Party of a valuable right or of Indebtedness owed to it; (l)            Any payment, satisfaction, discharge or cancellation of any debts or claims of any Company Party other than in the ordinary course of business consistent with past practices; (m)         Any amendment, modification or termination of (i) any Material Contract or (ii) any material employment or consulting agreement; (n)           Any material change in the Contingent Obligations of any Company Party, by way of guarantee or otherwise; (o)           Any mortgage, pledge or Lien (other than Permitted Liens) encumbering any of the assets or properties of any Company Party, or any assumption of, or taking any assets or properties subject to, any liability; (p)           Any resignation by, or termination of the employment of, any director or Designated Officer of any Company Party; (q)           Any Investment by any Company Party in the Capital Stock of any Person; (r)            Except as set forth in Schedule 3.12(r), any payment of management, consulting or similar fees by any Company Party to any of its Affiliates;   32   -------------------------------------------------------------------------------- (s)            Except as set forth in Schedule 3.12(s) , any offer, issuance or sale of any shares of Capital Stock or Equity Rights of any Company Party; (t)            Any alteration or change in any Company Party's credit guidelines and policies, charge-off policies or accounting methods, quality control procedures or policies or manner of preparing its financial statements or maintaining its books of account; (u)           Any increase in, or commitment to increase, the salaries, wages, bonuses or other compensation payable or to become payable to any officer or other employee of any Company Party, other than increases in salaries and wages in the ordinary course of business consistent with past practices; (v)           Any adoption by any Company Party of any new Benefit Plan or amendment to any Benefit Plan to provide any new or additional plans, programs, contracts, benefits or arrangements involving direct or indirect compensation to any officer, director, employee, former employee, or their dependents or beneficiaries, of the Company Parties; (w)         Any settlement of any litigation, entry of a consent decree or entry of any judgment against any Company Party with a value of $250,000 or more; (x)           Any revaluation by any Company Party of any of its assets, including without limitation, any write-offs, increases in any reserves except in the ordinary course of business consistent with past practice or any write-up or write-down of the value of inventory, property, plant, equipment or any other asset; (y)           Any revaluation or repricing of any Equity Rights of any Company Party; or (z)           The occurrence of any other event or the development of any other condition which has had or could have a Material Adverse Effect.   3.13 Material Contracts. (a)           As of the Initial Closing, Schedule 3.13(a) sets forth a true, correct and substantially complete list of all contracts, commitments, licenses, agreements, obligations or binding arrangements, whether oral or written, to which any Company Party is a party (or intends to become a party) or to which any of its assets or properties is bound. As of the Final Closing, Schedule 3.13(a) sets forth a true, correct and complete list of all contracts, commitments, licenses, agreements, obligations or binding arrangements, whether oral or written, to which any Company Party is a party (or intends to become a party) or to which any of its assets or properties is bound: (i)            under which any Company Party is indemnified for or against any liability in excess of $100,000 or under which any Company Party is or could be obligated to indemnify any Person in excess of $100,000, other than agreements containing indemnity provisions entered into in the ordinary course of business;   33   -------------------------------------------------------------------------------- (ii)           under which any Company Party leases personal property from or to third parties under Capitalized Leases which involve rental payments of at least $50,000 per annum or under operating leases which involve rental payments of at least $50,000 per annum; (iii)         for the purchase or sale of products or other personal property or for the furnishing or receipt of services (A) which calls for performance over a period of more than one (1) year and which involves payments of more than the $100,000 per year in the aggregate or (B) in which any Company Party has agreed to purchase at least $100,000 in goods or services or has agreed to purchase goods or services exclusively from any Person; (iv)         (A) granting representation, marketing or distribution rights or (B) relating to Intellectual Property (including license, development or similar agreements other than those listed in response to item (xiv) below); (v)           under which any Company Party has created, incurred, assumed or guaranteed (or may create, incur, assume or guarantee) Indebtedness in excess of $100,000; (vi)          establishing or maintaining any partnership, joint venture or strategic alliance; (vii)        under which there is or may be imposed a security interest or other Lien on any of its assets (except for such Liens permitted to be incurred pursuant to Sections 10.2(a), (b) and (f)) whether tangible or intangible, the net book value or fair market value of which is in excess of $50,000 (other than the security interests or Liens granted in favor of the Purchaser); (viii)       concerning any confidentiality or non-solicitation obligations entered into outside the ordinary course of business; (ix)          under which any Company Party is restricted from carrying on its business or any part thereof, or from competing in any line of business or with any Person, except for customer agreements entered into in the ordinary course of business and consistent with past practices; (x)           with Designated Officers or directors of any Company Party;   (xi) involving any Affiliates of any Company Party; (xii)        under which the consequences of a default or termination would reasonably be expected to have a Material Adverse Effect; (xiii)      under which any Company Party will (A) receive aggregate payments from customers who constitute one of the Company Parties’ top 30 customers as of the Initial Closing Date, (B) be obligated to make aggregate payments to vendors or other suppliers   34   -------------------------------------------------------------------------------- in excess of $500,000 or (C) be obligated to make or receive aggregate payments to or from any other Persons who are not customers or vendors, in excess of $100,000 per annum; and (xiv)       not entered into in the ordinary course of business and not otherwise disclosed on Schedule 3.13(a) in response to any of the foregoing clauses. All of the contracts, commitments, licenses, agreements, obligations or arrangements described in clauses (i) through (xiv) above, the Bank Credit Documents, the GMAC Credit Documents, the real property leases, subleases, licenses and other interests described in Section 3.24, in each case whether entered into prior to, on or after the Initial Closing Date, and the Agreements with Officers, are collectively referred to herein as the "Material Contracts." The Company Parties have delivered to the Purchaser true, correct and complete copies of each Material Contract in existence as of the date hereof other than those constituting real property leases that are not material to a Company Party in the ordinary course of its business. (b)           Except as disclosed on Schedule 3.13(b), each Material Contract existing as of the date hereof is a legal, valid and binding obligation of the Company Parties that are party thereto, on the one hand, and the other parties thereto, on the other hand, enforceable against each of them in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or conveyance or similar laws relating to or limiting creditors' rights generally or by equitable principles relating to enforceability, and is in full force and effect. Except as disclosed on Schedule 3.13(b), the Company Parties and, to the knowledge of the Company Parties, each other party to each Material Contract existing as of the date hereof are in compliance with the terms thereof, and no default or event of default by any Company Party or any other party thereto exists thereunder. 3.14         Accounts Receivable. All accounts receivable of the Company Parties (a) to the knowledge of the Company Parties, are legal, valid and binding obligations of the Persons shown in the accounting records of the Company Parties as the obligor with respect thereto (and if any such accounts receivable is not legal, valid and binding obligations of such Persons, the appropriate Company Party has established reserves therefor, which reserves are adequate in accordance with GAAP), (b) arose out of bona fide sales actually made or services actually performed on or prior to such date in the ordinary course of business, (c) are not subject to discount, rebate, offset, return privilege (other than return privileges granted in the ordinary course of business consistent with past practice) or claim (other than as reflected in the reserves taken in recording the accounts receivable on the books of the Company Parties, which reserves are adequate in accordance with GAAP), and (d) are valid and collectible in the ordinary course of business (other than as reflected in the reserves taken in recording the accounts receivable on the books of the Company Parties, which reserves are adequate in accordance with GAAP). No customer of a Company Party has indicated an unwillingness or an inability to pay any amount included in the accounts receivable of the Company Parties and not reserved against.   3.15 Labor Relations. (a)           To the knowledge of the Company Parties, each Company Party is in compliance with the Fair Labor Standards Act (29 U.S.C. §201 et seq .), all state wage and   35   -------------------------------------------------------------------------------- hour laws and all worker's compensation laws and is not engaged in any unfair labor practice which has had or could have a Material Adverse Effect; (b)           There is no labor strike, slowdown, work stoppage or charge of unfair labor practice, and there are no labor disputes, grievances, complaints or arbitration proceedings, pending or affecting any Company Party nor, to the knowledge of the Company Parties, is there any basis therefor or threat thereof; (c)           Except as disclosed on Schedule 3.15, no Company Party is bound by or subject to any written or oral, express or implied, contract, commitment or arrangement with any labor union or other employee organization, and no labor union or other employee organization has requested or sought to represent any of the employees, representatives or agents of the Company Parties; (d)           Except as disclosed on Schedule 3.15, no Company Party is aware of (i) any labor union or other employee organization activity involving employees of any Company Party, or (ii) any officer who intends to terminate his or her employment with any Company Party; (e)           Except as disclosed on Schedule 3.15, there are no petitions against any Company Party pending before the National Labor Relations Board in connection with any pending claim for union representation; and (f)            To the knowledge of the Company Parties, there is no fact or circumstance which could, with the passage of time or otherwise, cause this representation and warranty to be no longer true and correct. 3.16       Employee Benefit Plans; ERISA. For purposes of this Section 3.16, the term "Company" or “Companies” shall include all Company Parties, affiliated service groups, and any Person that is or could be aggregated with the Company Parties under Section 414(b), (c), (m), or (o) of the Code. However, this Section 3.16 will not apply to a "Multiemployer Plan" (as defined in Section 4001(a)(3) of ERISA), except as expressly referred to herein.   (a) Schedule 3.16 sets forth a true, correct and complete list of: (i)            Each separate termination or severance agreement involving (A) any Company Party, on the one hand, and any of its respective employees whose annual compensation is at a base rate equal to or exceeding $200,000, on the other hand, or (B) total payments in excess of $200,000; (ii)           All employee benefit plans, as defined in ERISA Section 3(3); and (iii)         All other profit sharing, bonus, stock option, stock purchase, stock bonus, restricted stock, stock appreciation right, phantom stock, vacation pay, holiday pay, tuition reimbursement, scholarship, severance, dependent care assistance, excess benefit, incentive compensation, salary continuation, supplemental retirement, employee loan or loan guarantee program, split dollar, cafeteria plan, and other compensation arrangements;   36   -------------------------------------------------------------------------------- in each case maintained or contributed to by the Company Parties for the benefit of its employees (or former employees) and/or their beneficiaries. All of these types of arrangements shall be collectively referred to as "Benefit Plans". An arrangement will not fail to be a Benefit Plan simply because it only covers one individual, or because the obligations of a Company Party under the plan arise by reason of its being a "successor employer" under Applicable Laws. Furthermore, a Voluntary Employees' Beneficiary Association under Section 501(c)(9) of the Code will be considered a Benefit Plan for this purpose. (b)           The Company Parties have delivered to Purchaser a true and complete copy of the following documents, to the extent that they are applicable: (i)            Each Benefit Plan and any related funding agreements (e.g., trust agreements or insurance contracts), including all amendments (and Schedule 3.16 includes a description of any such amendment that is not in writing); (ii)           The current draft of the summary plan description and all subsequent summaries of material modifications of each Benefit Plan; (iii)         The most recent Internal Revenue Service determination letter or opinion letter for each Benefit Plan that is intended to qualify for favorable income tax treatment under Section 401(a) or 501(c)(9) of the Code, which letter reflects all amendments that have been made to the plan (except as set forth in Schedule 3.16); (iv)         The two (2) most recent Form 5500s (including all applicable Schedules and the opinions of the independent accountants) that were filed on behalf of the Benefit Plan; and (v)           Any self-correction statement or application prepared under formal or informal programs sponsored by the Internal Revenue Service or the Department of Labor. (c)           All costs of administering and contributions required to be made to each Benefit Plan under the terms of that Benefit Plan, ERISA, the Code, or any other applicable law have been timely made, and are fully deductible in the year for which they were paid. All other amounts that should be accrued to date as liabilities of the Company Parties under or with respect to each Benefit Plan (including administrative expenses and incurred but not reported claims) for the current plan year of the plan have been recorded on the books of the Company Parties. To the knowledge of the Companies, there will be no liability of the Company Parties (i) with respect to any Benefit Plan that has previously been terminated or (ii) under any insurance policy or similar arrangement procured in connection with any Benefit Plan in the nature of a retroactive rate adjustment, loss sharing arrangement, or other liability arising wholly or partially out of events occurring before the Initial Closing. (d)           Except as disclosed in Schedule 3.16, each Benefit Plan has been operated at all times in accordance with its terms, and complies currently, and has complied in the past, both in form and in operation, with all Applicable Laws, including ERISA and the Code. Except as disclosed in Schedule 3.16 , the Internal Revenue Service has issued a favorable determination letter or opinion letter with respect to each Benefit Plan that is intended to qualify   37   -------------------------------------------------------------------------------- under Section 401(a) or 501(c)(9) of the Code, and no event has occurred (either before or after the date of the letter) that could disqualify the plan. (e)           Except as indicated in Schedule 3.16, the Company Parties do not maintain any plan that provides (or will provide) medical or death benefits to one or more former employees or independent contractors (including retirees) following termination of employment, other than benefits that are required to be provided under COBRA or any state law continuation coverage or conversion rights. The Company Parties have complied with the continuation coverage requirements of COBRA. (f)            Except as indicated in Schedule 3.16, there are no investigations, proceedings, lawsuits or claims pending (other than claims pending in the ordinary course of the administration of a Benefit Plan) or threatened relating to any Benefit Plan. (g)           Except as required pursuant to this Agreement, no Company Party has any intention or commitment, whether legally binding or not, to create any additional Benefit Plan, or to modify any existing Benefit Plan so as to increase benefits to participants or the cost of maintaining the plan. The benefits under all Benefit Plans are as represented, and have not been, and will not be increased subsequent to the date documents are provided to the Purchaser except in the ordinary course of business and consistent with competitive business standards. No statement, either oral or written, has been made by any Company Party (or any agent of a Company Party) to any Person regarding any Benefit Plan that is not in accordance with the Plan that could have materially adverse economic consequences to the Purchaser. (h)           To the knowledge of the Companies, none of the persons performing services for a Company Party are improperly classified as being independent contractors, leased employees, or as being exempt from the payment of wages for overtime. (i)            None of the Benefit Plans provide any benefits that (i) become payable or become vested solely as a result of the consummation of the transactions contemplated by this Agreement or (ii) would result in excess parachute payments (within the meaning of Section 280G of the Code), either (A) solely as a result of the consummation of the transactions contemplated by this Agreement or (B) as a result of the consummation of the transactions contemplated by this Agreement and any actions taken by the Purchaser after the Initial Closing Date. Furthermore, the consummation of the transactions contemplated by this Agreement will not require the funding (whether formal or informal) of the benefits under any Benefit Plan (e.g., contributions to a "rabbi trust"). (j)            None of the assets of any Benefit Plan that is a "pension plan" within the meaning of Section 3(2) of ERISA are invested in a group annuity contract or other insurance contract that is subject to any surrender charge, interest rate adjustment, or other similar expense upon its premature termination that could reasonably be expected to have a Material Adverse Effect. (k)           To the knowledge of the Companies, no Benefit Plan has any interest in any annuity contract or other investment or insurance contract issued by an insurance company that is the subject of bankruptcy, conservatorship, rehabilitation, or similar proceeding.   38   --------------------------------------------------------------------------------   (l) No Benefit Plan is a Multiemployer Plan. (m)         To the knowledge of the Companies, no Benefit Plan is subject to Code Section 419.   3.17 Taxes. (a)           Each Company Party has filed within the required time periods (after giving effect to any permitted extensions) all federal, state and other Tax returns required to have been filed by it or them, and has paid all Taxes which were due and payable by it or them, prior to the date hereof, other than Taxes that are being contested in good faith and for which reserves have been properly established and specifically set forth on the Pro Forma Closing Balance Sheet. (b)           Each Company Party has withheld and paid all Taxes required to be withheld and paid by it or them in connection with amounts paid or owing to any employee, creditor, shareholder or other third party. (c)            (i) No Company Party has been advised that any of its Tax returns or the Tax returns filed by any of its current or former holders of its Capital Stock have been or are being audited by any Governmental Authority; (ii) there are no agreements, waivers or other arrangements providing for an extension of time with respect to the assessment of any Taxes or deficiency against any Company Party; (iii) there are no actions, suits, proceedings or claims now pending by or against any Company Party in respect of any Taxes or assessments; and (iv) there is no pending or, to the knowledge of the Company Parties, threatened audit or investigation of any Company Party by any Governmental Authority relating to any Taxes or assessments, or any claims for additional taxes or assessments asserted by any Governmental Authority. (d)           No Company Party is a party to or bound by any tax sharing, tax indemnity or tax allocation agreement or other similar arrangement. (e)           The accruals and reserves for Taxes payable or its equivalent on the books of the Parent and its Subsidiaries are adequate (determined in accordance with GAAP) and are at least equal to the liability for Taxes of such entity for each period. There exists no proposed Tax assessment against the Parent or any of its Subsidiaries. All Taxes that the Parent or any of its Subsidiaries is or was required by Applicable Law to withhold or collect have been duly withheld or collected and, to the extent required, have been paid to the proper Governmental Authority or other Person. (f)            Each plan, program, or arrangement which is a nonqualified deferred compensation plan within the meaning of Section 409A of the Code is identified as such on Schedule 3.17. Since December 31, 2004, each Company Party has operated and maintained each such identified plan, program, or arrangement in accordance with the requirements of IRS Notice 2005-1 and a good faith, reasonable interpretation of Section 409A of the Code and its purpose with respect to amounts deferred (within the meaning of Section 409A of the Code) after December 31, 2004.   39   -------------------------------------------------------------------------------- 3.18        Litigation. Schedule 3.18 sets forth a true, complete and correct list of all actions, suits, arbitration proceedings, investigations, inquiries or other proceedings, whether governmental or non-governmental, before any Governmental Authority pending or, to the knowledge of the Company Parties, threatened as of the date hereof, against, relating to or affecting any Company Party, or any officer, director or employee thereof, or any of its or their respective assets, properties or businesses, in his or her capacity as such, and which involve a monetary claim or claims in excess of $25,000 or injunctive or other equitable relief. Without limiting the generality of the foregoing, there are no actions, suits, arbitration proceedings, investigations, inquiries or other proceedings, whether governmental or non-governmental, before any Governmental Authority pending or threatened with respect to claims with respect to the federal Fair Debt Collections Practices Act. Schedule 3.18 sets forth, as to each matter identified therein, the names of the parties thereto, the forum for such matter, a summary of the details of the matter, the settlement or other disposition of the matter (including the monetary value of such settlement or other disposition) or, if such matter is still pending, a statement to that effect. Except as set forth on Schedule 3.18: (a)           There is not in effect any order, judgment, decree, injunction or ruling of any Governmental Authority against, relating to or affecting any Company Party, or any officer, director or employee thereof in his or her capacity as such, enjoining, barring, suspending, prohibiting or otherwise limiting the same from conducting or engaging in any aspect of the business of the Company Parties, or requiring any Company Party or any such officer, director or employee to take certain action with respect to any aspect of its or their business; (b)           No Company Party is in default under any order, judgment, decree, injunction or ruling of any Governmental Authority, or is subject to or a party to any order, judgment, decree or ruling arising out of any action, suit or proceeding under any Applicable Laws, respecting antitrust, monopoly, restraint of trade, unfair competition or similar matters; and (c)           There is no action, suit, arbitration or other proceeding, investigation or inquiry pending or, to the knowledge of the Company Party, threatened before any Governmental Authority which questions the validity of this Agreement, the Notes, the Warrant, the Guaranties, the Collateral Documents or any other Investment Document, or any Bank Credit Document, or any actions taken or to be taken pursuant hereto or thereto, or which could, individually or in the aggregate, have a Material Adverse Effect.   3.19 Transactions with Affiliates. (a)           Except as set forth on Schedule 3.19, there is no Indebtedness owing by any Company Party to any of its Affiliates or by any Affiliate of any Company Party to such Company Party or any other Company Party. (b)           Except as set forth on Schedule 3.19, immediately following the Initial Closing Date:   40   -------------------------------------------------------------------------------- (i)            no Company Party will be (A) indebted, directly or indirectly, to any of its own officers, directors, managers, members, partners, shareholders holding 5% or more of the Capital Stock of any Company Party or employees, any member of the Immediate Family of any of the foregoing, any Person owned or controlled by any member of the Immediate Family or the officers, directors, managers, members, partners, shareholders owning 5% or more of the Capital Stock of any of its Affiliates or employees of its Affiliates except for, in the case of employees or directors, compensation payable in the ordinary course of business and reasonable travel advances accrued in the ordinary course of business consistent with past practices or (B) to the knowledge of any Company Party, indebted, directly or indirectly, to any of its shareholders holding less than 5% of the Capital Stock of any Company Party or shareholder owning less than 5% of the Capital Stock of any Affiliate of any Company Party; (ii)           no officer, director, manager, member, partner, shareholder holding 5% or more of the Capital Stock of any Company Party or employee of any Company Party or member of the Immediate Family of any of the foregoing or any Person owned or controlled by any member of the Immediate Family of any of the foregoing will be indebted to any Company Party in any amount whatsoever; (iii)         no officer, director, manager, member, partner, shareholder holding less than 5% of the Capital Stock of any Company Party or employee of any Company Party or member of the Immediate Family of any of the foregoing or any Person owned or controlled by any member of the Immediate Family of any of the foregoing will, to the knowledge of the Company Parties, have any direct or indirect ownership interests in any Person which competes, directly or indirectly, with the Company Party; and (iv)          there are no voting or similar agreements between or among the equity holders of any Company Party (other than the Investor Rights Agreement). (c)           Except for the matters set forth on Schedule 3.16 or Schedule 3.35, to the knowledge of the Company Parties, no officer, director, manager, member, partner, shareholder or employee of any Company Party, no member of the Immediate Family of any officer or director of any Company Party and no Person owned or controlled by any member of the Immediate Family or Affiliate of any of the foregoing, has any direct or indirect interest in any contract, commitment, license, agreement, obligation or arrangement to which any Company Party is a party. (d)           No Company Party is a party to any agreement relating to the voting or disposition of the Capital Stock of any other Company Party. (e)           Except as set forth in Schedule 3.19, no Company Party has any outstanding loan or advance of funds to any of its or their Affiliates' officers, directors, employees, members, managers, partners or shareholders or members of the Immediate Family of any of the foregoing or any Person owned or controlled by any member of the Immediate Family of any of the foregoing.   41   -------------------------------------------------------------------------------- 3.20         Investment Company Act. No Company Party is an "investment company," or a company "controlled" by an "investment company," within the meaning of the Investment Company Act of 1940, as amended. 3.21         Governmental Regulation. To the knowledge of the Company Parties, no Company Party is subject to regulations under the Federal Power Act, the Interstate Commerce Act, any state public utilities code or any other federal or state statute or regulation limiting its ability to incur Indebtedness. 3.22         Compliance with Laws; Operating Licenses. Each of the Company Parties is in compliance with all Applicable Laws (including, without limitation, franchise laws), except to the extent that non-compliance could not reasonably be expected to have a Material Adverse Effect. Without limiting the generality of the foregoing, each of the Company Parties' and their employees, agents and other representatives is in compliance with the Foreign Corrupt Practices Act of 1977, as amended (15 U.S.C. §78dd-2 et seq.)). Schedule 3.22 sets forth a true, correct and complete list of all Operating Licenses held by the Company Parties in connection with the ownership of its or their assets or the conduct of its or their businesses (which Schedules shall set forth, with respect to each Operating License, its name, the issuing Person, the date it was issued and the date of expiration), and such Operating Licenses constitute all of the Operating Licenses required under Applicable Laws to own their respective assets or conduct their respective businesses as now conducted and as proposed to be conducted. All of the Operating Licenses are validly issued and in full force and effect, and the Company Parties have fulfilled and performed in all material respects their obligations with respect thereto and have full power and authority to operate thereunder. Except as set forth on Schedule 3.22, no Company Party is aware of any law, rule, regulation, decree, order or position issued, enacted or published by any Governmental Authority to the effect that the business of the Company Parties or any aspect thereof is unlawful or is being or will be challenged. 3.23       Title to Property; Liens. Each Company Party has good and marketable title to its real properties (or holds valid leasehold interests in real property) and good and merchantable title to all of its other properties, and none of such properties is subject to any Liens except for the Liens in favor of the Purchaser from and after the Initial Closing and for the Permitted Liens. Each Company Party enjoys quiet possession under all real property leases to which they are parties as lessees, and all of such leases are valid, subsisting and in full force and effect. None of such leases contain any provision restricting the incurrence of indebtedness by the lessee or any unusual or burdensome provision adversely affecting the current and proposed operations of the Company Parties.   3.24 Real Property. (a)            Schedule 3.24 sets forth a true, correct and complete list of all Real Property in which any Company Party owns or holds a fee interest, which list includes, as to each parcel of such Real Property, the legal owner, its common name, a legal description and the name of any mortgagee or trustee thereof. (b)           Schedule 3.24 sets forth a true, correct and complete list of all Real Property leases, subleases or licenses pursuant to which any Company Party is a lessor, lessee,   42   -------------------------------------------------------------------------------- sublessor, sublessee, licensor or licensee, in each case as amended through the date hereof, which list includes the street address, the identity of the lessors, lessees, sublessors, sublessees, licensors or licensees, or with respect to which a Company Party has guarantied the obligations of any other Person, the term thereof (referencing applicable extension or renewal periods, the rent payment terms, maximum potential exposure and the current use). The Company Parties have delivered to the Purchaser true, correct and complete copies of the material leases, subleases or licenses. The Real Property interests described or listed on Schedule 3.24 constitute all of the interests in Real Property owned, leased or otherwise held for use by any Company Party. (c)            With respect to each such lease, sublease and license, except as set forth on Schedule 3.24: (i)            there are no disputes, oral agreements or forbearance programs in effect as to any such lease, sublease or license; and (ii)           no Company Party has assigned, transferred, conveyed, mortgaged, deeded in trust or encumbered any interest therein. (d)           No Consent of any Person to any lease, sublease, license or mortgage is required in connection with the consummation of the transactions contemplated by this Agreement, the other Investment Documents or the Bank Credit Documents, including the issuance and sale of the Securities, and no such event shall be prohibited by, or shall constitute a default under, any such lease, sublease, license or mortgage. (e)           To the knowledge of the Company Parties, all parking lots located on any Real Property subject thereto are in compliance with Applicable Laws, including zoning requirements, and are adequate for the employees and business operations of the Company Parties.   3.25 Environmental Matters . Except as set forth in Schedule 3.25: (a)           Each Company Party and each Site is in compliance with all, and no Company Party has any liability under any, Environmental Laws, and no Hazardous Materials are being used by any Company Party on any Real Property in violation of Environmental Laws. (b)           No Release by any Company Party, or to the knowledge of the Company Parties, no release by any Person other than a Company Party, has occurred at any Site and there are no present or past Environmental Conditions in any way relating to any Company Party, any Site or the business or operations of any Company Party. (c)           As of the Initial Closing Date Schedule 3.25 sets forth a true, correct and complete list of all locations for which environmental site assessments, audits, studies or reports relating to any Environmental Condition or relating to a Site, business, condition or operations of any Company Parties have been conducted since January 1, 2001. As of the Final Closing Date, Schedule 3.25 sets forth a true, correct and complete list of all environmental site assessments, audits, studies or reports relating to any Environmental Condition or relating to a Site, business, condition or operations of any Company Parties   43   -------------------------------------------------------------------------------- conducted since January 1, 2001. The Company Parties have delivered to Purchaser true, correct and complete copies of all such environmental site assessments, audits, studies and reports. (d)           No Company Party has received notice of any alleged, actual or potential responsibility, inquiry, investigation or administrative or judicial proceeding regarding (i) any Release directly or indirectly by any Company Party at any Site or other location or (ii) any violation of or non-compliance by any Company Party with the conditions of any Operating License required under any Environmental Laws or the provisions of any Environmental Laws. No Company Party has received notice of any other claim, demand or action by any Person alleging any actual or threatened material injury or damage to any Person, property, natural resources or the environment arising from or relating to any Release of any Hazardous Materials. No Company Party is a "potentially responsible party" within the meaning of CERCLA with respect to any federal, state, local or foreign environmental clean-up site or with respect to investigations or corrective actions under any Environmental Laws. (e)           Each Company Party has furnished all notices and warnings, made all material reports and has kept and maintained all material records required by, and in compliance with, all Environmental Laws, including any notices and Consents required under any Environmental Laws in connection with the consummation of the transactions contemplated by the Investment Documents.   3.26 Intellectual Property. (a)           Each Company Party owns, licenses or otherwise possesses legally enforceable rights to use all patents, trademarks, trade names, service marks, copyrights, and any applications therefor, maskworks, net lists, schematics, technology, know-how, trade secrets, recipes, formulas, mixtures, inventory, ideas, algorithms, processes, computer software programs or applications (in both source code and object code form), tangible or intangible proprietary information or material and other Intellectual Property that are currently used in, and material to, its or their business (the "Company Party Intellectual Property"). Schedule 3.26 contains a true, correct and complete list of (i) all registered patents, trademarks, trade names, service marks, and copyrights owned, used or licensed by any Company Party, (ii) the registration number, date of registration and jurisdiction of registration thereof, (iii) the name of the registered owner and, if different, the user or users thereof and (iv) any applications for any of the foregoing. (b)           The Company Parties have provided to the Purchaser (i) true, correct and complete list relative to patents and patent applications and all registered and unregistered trademarks, trade names and service marks, registered and unregistered copyrights, and maskworks owned by the Company Parties and included in the Company Party Intellectual Property, including the jurisdictions in which each such Intellectual Property right has been issued or registered or in which any application for such issuance and registration has been filed, (ii) all licenses, sublicenses and other agreements as to which any Company Party is a party and pursuant to which any person is authorized to use any Company Party Intellectual Property, and (iii) all licenses, sublicenses and other agreements as to which any Company Party is a party and pursuant to which any Company Party is authorized to use any third party patents, trademarks or copyrights, including software (other than “off-the-shelf” software), or any other third party   44   -------------------------------------------------------------------------------- Intellectual Property ("Third Party Intellectual Property Rights") which are or are presently expected to be incorporated in, or are or expected to form a part of any existing or proposed Company Party product, or which are or are presently expected to be utilized in the development, modification or support of any existing or proposed Company Party product. (c)           There is no unauthorized use, disclosure, infringement or misappropriation of any Company Party Intellectual Property, any trade secret material to any Company Party, or any Third Party Intellectual Property Right to the extent licensed by or through any Company Party, by any third party. No Company Party has entered into any agreement to indemnify any other person against any charge of infringement of any Company Party Intellectual Property, other than indemnification provisions arising in the ordinary course of business, such as those in purchase orders, customer agreements in the ordinary course of business consistent with past practices, invoices or similar sales-related documents. (d)           No Company Party is, or will be as a result of the execution and delivery of this Agreement or any other Investment Document or the Bank Credit Documents or the performance of its obligations hereunder and thereunder, in breach of any license or other agreement currently used in, or material to, the Company Party Intellectual Property or Third Party Intellectual Property Rights. (e)           All registered patents, registered trademarks and service marks and registered copyrights held by any Company Party are validly issued and presently subsisting. Except as set forth on Schedule 3.26, no Company Party (i) has been sued in any suit, action or proceeding which involves a claim of infringement of any patents, trademarks, service marks, copyrights or violation of any trade secret or other proprietary or Intellectual Property right of any third party and (ii) has brought any action, suit or proceeding for infringement of Company Party Intellectual Property or breach of any license or agreement involving Company Party Intellectual Property against any third party. The manufacture, marketing, licensing and sale of the Company Parties’ products and the provision of services by any Company Party as currently conducted and proposed to be conducted do not, to the knowledge of the Company Parties, infringe any patent, trademark, service mark, copyright, trade secret, other proprietary right of any third party or other Third Party Intellectual Property Rights. (f)            The Company Parties have taken steps which they believe to be sufficient to protect and preserve the confidentiality of all Company Party Intellectual Property not otherwise protected by patents, or patent applications or copyright. All use, disclosure or appropriation by the Company Parties of such Intellectual Property owned by any Company Party by or to a third party has been pursuant to written agreements between the Company Parties and such third party except where the failure to do so could not result in a Material Adverse Effect. All use, disclosure or appropriation of such Intellectual Property not owned by any Company Party has been pursuant to written agreements between the Company Parties and the owner of such Intellectual Property, or is otherwise lawful. 3.27        Nature of Business. The Parent is engaged only in the holding of Capital Stock of its Subsidiaries and activities reasonably incidental thereto and its Subsidiaries are engaged only in the business described in recital A and activities reasonably incidental thereto.   45   -------------------------------------------------------------------------------- 3.28        Powers of Attorney. There are no stand alone outstanding powers of attorney with respect to the Company Parties other than as set forth in the Bank Credit Documents. 3.29        Listing of Common Stock. No Capital Stock or any securities of any Company Party or Subsidiary is listed for trading on any securities exchange or on the Nasdaq, except for the Parent’s Common Stock which may become listed for trading on an Acceptable Exchange.   3.30 Insurance. (a)           There is in full force and effect one or more policies of insurance issued by insurers of recognized national standing insuring the properties and business of each Company Party against such losses and risks and in such amounts as are usual and customary in the industry in which any Company Party operates or conducts business. (b)           Schedule 3.30 identifies each of the policies of insurance currently maintained by, or on behalf of, each Company Party, its business and properties (including workers' compensation insurance), setting forth the name of the insurer, the holder of each such policy, the nature of coverage, the amount of such coverage, the expiration dates thereof and other material information. None of the Company Parties or any other insured named on Schedule 3.30 is in default with respect to its obligations under any of such outstanding insurance policies and all premiums with respect thereto are current. None of the Company Parties (including their respective officers, directors, stockholders, partners, employees, insurance managers and risk managers) or any other insured named on Schedule 3.30 has failed to give any notice or to present any material claim under any such policy in a due and timely fashion. Such policies are in full force and effect on the date hereof and will continue to be kept in full force and effect on substantially equivalent terms, except to the extent policies expire and are replaced in the ordinary course of business with policies on substantially equivalent terms. All premiums due under the policies identified on Schedule 3.30 have been paid and none of the Company Parties nor any such insured has been issued or has received any notice of cancellation, material modification or termination in respect of any such policy or is in default thereunder. (c)           Except as set forth in Schedule 3.30, none of the Company Parties or any such insured has been issued or has received any notice that any insurer under any policy referred to on Schedule 3.30 is denying liability with respect to a claim in excess of $50,000 thereunder or defending under a reservation of rights clause. The insurance policies listed on Schedule 3.30 constitute insurance protection against all liability, claims and risks occurring in the ordinary course of business customarily included within comprehensive liability coverage and at amounts and levels customarily maintained for a business of this type. Schedule 3.30 also sets forth all claims made by the Company Parties under such policies during the past five (5) years. 3.31         Customers. Schedule 3.31 lists the ten (10) largest customers (by gross revenues) for which any of the Company Parties provided services during each of the last three Fiscal Years ended as of or prior to December 31, 2005, and the four (4) month period ended April 30, 2006, and the amount of revenues derived from each such customer during each such   46   -------------------------------------------------------------------------------- period. Except as set forth on Schedule 3.31 as updated and delivered on the Final Closing Date, all such contracts can be terminated upon 90 or fewer days' prior written notice without any payment.   3.32 [Intentionally Omitted] 3.33        Business Relationships. There exists no actual or threatened termination or cancellation of, or limitation on, or any adverse modification or change in, the business relationship between any Company Party, on the one hand, and any customer set forth on Schedule 3.31, on the other hand, and there exists no present condition or state of facts or circumstances known to the Company Parties which could materially and adversely affect the Company Parties or prevent the Company Parties from conducting such business after the consummation of the transactions contemplated by this Agreement, the other Investment Documents or the Bank Credit Documents in substantially the same manner in which it has been heretofore conducted. 3.34         Personal Property Leases. Schedule 3.34 sets forth a true, correct and complete list and description of all agreements (or group of related agreements) to which any Company Party is a party for the lease of personal property, including, with respect to each such lease, the name of the lessor and the lessee, the type of lease (whether operating, capital or otherwise), a description of the leased property, the monthly rental payments due and the expiration date. Except as disclosed on Schedule 3.34, no Company Party has breached any agreement pertaining to, is in default with respect to, or is overdue in payment of, any amounts owing under any lease agreement disclosed on Schedule 3.34. No such lease agreement contains any provisions which restrict or prohibit (a) the issuance or sale of the Securities as contemplated herein, (b) any other financings by any Company Party, including any public or private debt or equity financings or (c) other than ordinary restrictions on assignment, any merger, sale of assets or other event which could cause a Change in Control. 3.35        Employment Agreements. Schedule 3.35 sets forth, as of the Initial Closing Date, a true, correct and substantially complete list of all (a) employment contracts or agreements for all Designated Officers, agency, material independent contractor contracts, material management agreements and sales representative (or similar) agreements, golden parachute agreements, change of control agreements, Agreements with Officers and material employee-related non-competition and non-solicitation agreements, in each case to which any Company Party or, with respect to any Company Party, any of their Affiliates, is a party. Schedule 3.35 sets forth, as of the Final Closing Date, a true, correct and complete list of all (a) employment contracts or agreements for all Designated Officers, agency, material independent contractor contracts, material management agreements and sales representative (or similar) agreements, golden parachute agreements, change of control agreements, Agreements with Officers and material employee-related non-competition and non-solicitation agreements, in each case to which any Company Party or, with respect to any Company Party, any of their Affiliates, is a party. The Company Parties have previously delivered to the Purchaser true, correct and complete copies of all such agreements, including all amendments thereto. Each such agreement is in writing, is a valid and binding agreement enforceable against the respective parties thereto in accordance with its terms, and no Company Party nor any other Person that is a party to any such agreement is in breach of, or in default with respect to, any of its material obligations   47   -------------------------------------------------------------------------------- thereunder, nor is any Company Party aware of any facts or circumstances which might give rise to any breach or default thereunder which would reasonably be expected to have a Material Adverse Effect. 3.36         Solvency. Each of (a) the Company Parties taken as a whole and (b) the Company Parties on a stand-alone basis are, and immediately following the consummation of the transactions contemplated by this Agreement and the Bank Credit Documents, will be, Solvent. No Company Party will, by virtue of the consummation of the transactions contemplated hereby, by the other Investment Documents, or by the Bank Credit Documents, incur debts that will be beyond its ability to pay as they mature. No transfer of property is being made and no obligation is being incurred in connection with the transactions contemplated by this Agreement, the other Investment Documents or the Bank Credit Documents with the intent to hinder, delay or defraud either present or future creditors of the Company Parties. 3.37        Use of Proceeds; Margin Stock. The proceeds to be received by the Company Parties from the issuance and sale of the Securities as contemplated hereunder shall be used solely for the purposes set forth in Section 2.5 and applied in accordance with the uses described therein. No Company Party is engaged in extending credit for the purposes of purchasing or carrying Margin Stock. No Company Party has any Margin Stock, as determined in accordance with the Margin Regulations. None of the proceeds from the issuance and sale of the Notes will be used to buy or carry any Margin Stock. 3.38         Depository and Other Accounts. Schedule 3.38 sets forth a true, correct and complete list of all banks and other financial institutions and depositories at which any Company Party maintains (or has caused to be maintained) deposit accounts, securities accounts, spread accounts, yield supplement reserve accounts, operating accounts, trust accounts, trust receivable accounts or other accounts of any kind or nature into which funds of any Company Party is deposited from time to time. Such Schedule 3.38 correctly identifies the name and address of each depository, the name in which each account is held, the purpose of the account, the account number, the contact person at such depository and his or her telephone number. 3.39        Books and Records. The minute books and similar records of the Parent and each Subsidiary (a) contain true and substantially complete records of all actions taken at any meeting of the Company Party's members, partners, managers or any committees thereof, as the case may be, and of all written consents executed in lieu of the holding of any such meeting and (b) accurately reflect the assets, liabilities, business, financial condition and results of operations of the Company Parties, respectively, and have been maintained in accordance with GAAP (to the extent applicable) and good business, accounting and bookkeeping practices. 3.40        Burdensome Obligations; Future Expenditures. No Company Party is a party to or bound by any agreement, instrument, deed, lease or other document, or is subject to any charter, bylaw or other restriction, commitment or requirement, which, in the opinion of its management, is so unusual or burdensome that in the foreseeable future it would reasonably be expected to have a Material Adverse Effect. No Company Party anticipates that future expenditures, if any, by the Company Parties, as the case may be, needed to meet the provisions of any Applicable Laws will be so burdensome as to have or cause, or create a material risk of having or causing, a Material Adverse Effect.   48   -------------------------------------------------------------------------------- 3.41        Brokers; Certain Expenses. No Company Party nor any of its Affiliates has paid or is obligated to pay any fee or commission to any broker, finder, investment banker or other intermediary, other than Sheridan Road Capital, LLC, in connection with this Agreement, any other Investment Document, any Bank Credit Document or any of the transactions contemplated hereby or thereby. No Company Party is bound by any agreement or commitment for the provision of investment banking or financial advisory services with respect to any recapitalization, issuance of debt or equity securities or other capital or financing transactions involving the Company Parties that would operate to restrict or prevent the Initial Closing. Any fees or commissions due to any broker, finder, investment banker or other intermediary retained by any Company Party shall be for the sole account of such Company Party or Affiliate, as the case may be, and the Purchaser shall not have any liability with respect thereto. 3.42         Disclosure. After due inquiry of the directors, officers and employees of the Company Parties having knowledge of the matters represented, warranted or stated herein, neither this Agreement, the Disclosure Schedules nor any other Investment Document, nor any certificate, report, questionnaire, statement or other document furnished by or on behalf of any Company Party, nor any representation or warranty contained in any of the foregoing, whether included in any materials provided to the Purchaser prior to the date hereof or included in this Agreement or any other Investment Document or in any Exhibit or Disclosure Schedule or in any other document or instrument delivered at any time prior to the Initial Closing or the Final Closing, is, or will be, untrue with respect to any material fact or omits, or will omit, to state a material fact necessary in order to make the statement made herein or therein, in light of the circumstances in which such statement was made, not misleading. To the knowledge of the Company Parties, there are not facts or circumstances existing which could reasonably be expected to have a Material Adverse Effect, either individually or in the aggregate. The Company Parties have used their best efforts to deliver all of the agreements, instruments and other documents requested in the Purchaser's Due Diligence Request dated April 20, 2006, to the extent such documents existed. The information contained in each of the management questionnaires completed by certain officers, directors and employees of the Company Parties, the corporate questionnaire dated May 18, 2006 and the Due Diligence Statement each as prepared by the Company Parties and delivered to the Purchaser prior to the date of this Agreement, is true, correct and complete. 4.             REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser represents and warrants to the Companies as follows: 4.1           Organization. The Purchaser is a limited partnership formed and validly existing under the laws of the State of California and has all requisite power and authority to enter into this Agreement and each other Investment Document to which it is a party and to consummate the transactions contemplated hereby and thereby. 4.2           Authorization. The execution, delivery and performance by the Purchaser of this Agreement and of each of the other Investment Documents to which the Purchaser is a party, and the consummation of the transactions contemplated hereby and thereby, have been duly authorized by all necessary action taken on the part of the Purchaser and its partners.   49   -------------------------------------------------------------------------------- 4.3           Due Execution and Delivery; Binding Obligations. This Agreement has been duly executed and delivered by the Purchaser. This Agreement is, and at the time of the Initial Closing and the Final Closing each of the other Investment Documents to which the Purchaser is a party will be, a legal, valid and binding obligation of the Purchaser, enforceable against the Purchaser in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or conveyance or similar laws relating to or limiting creditors' rights generally or by equitable principles relating to enforceability, and except as rights of indemnity or contribution may be limited by federal or state securities laws or the public policy underlying such laws. 4.4           No Violation. The execution, delivery and performance by the Purchaser of this Agreement and each of the other Investment Documents to which the Purchaser is a party, and the consummation of the transactions contemplated hereby and thereby, do not violate and will not cause a default under (a) the Organizational Documents of the Purchaser as in effect on the date hereof, (b) any material Applicable Laws or (c) any material indenture, mortgage, lease, agreement or instrument to which the Purchaser is a party. 4.5           Governmental and Other Third Party Consents. Except for Consents that have already been obtained or made, the Purchaser is not required to obtain any material Consent from, and is not required to make any declaration or filing with, any Governmental Authority or any other Person in connection with the execution, delivery and performance of this Agreement or any other Investment Document. Each of the Consents which have been obtained or made by the Purchaser in connection with the execution, delivery and performance of this Agreement or any other Investment Document is in full force and effect. 4.6           Investment Intent. The Purchaser is acquiring the Securities for its own account, for investment purposes, and not with a view to or for sale in connection with any distribution thereof in violation of applicable federal or state securities laws. The Purchaser understands that the Securities have not been registered under the Securities Act or registered or qualified under any state securities laws in reliance upon specific exemptions therefrom, which exemptions may depend upon, among other things, the bona fide nature of the Purchaser's investment intent as expressed herein. Therefore, the Securities are "restricted securities" which cannot be sold without registration under the Securities Act or pursuant to an exemption therefrom, and may have to be held indefinitely, subject, however, to the Purchaser's registration rights under the Registration Rights Agreement, and the Purchaser accepts the risk of such restrictions on resale. 4.7           Accredited Investor Status. The Purchaser is an "accredited investor" (as such term is defined in Rule 501(a) of Regulation D promulgated under the Securities Act). By reason of its own business and financial experience, the Purchaser has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the investment in the Securities, has the capacity to protect its own interests in connection with the purchase of the Securities contemplated hereby and is able to bear the economic risk of such investment. 4.8           Brokers; Certain Expenses. The Purchaser has not paid and is not obligated to pay any fee or commission to any broker, finder, investment banker or other   50   -------------------------------------------------------------------------------- intermediary in connection with this Agreement, any other Investment Document or any of the transactions contemplated hereby or thereby.   5. [Intentionally Omitted.]   6. CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER . 6.1           Initial Closing. The obligations of the Purchaser to consummate the transactions contemplated hereby, including the obligation to purchase the Unsecured Notes and the Warrant as provided herein, is subject to the fulfillment to the satisfaction of Purchaser in its sole discretion, prior to or at the Initial Closing, of the conditions set forth in this Section 6.1; provided, however, that any or all of such conditions may be waived, in whole or in part, by the Purchaser in its sole and absolute discretion. (a)            Initial Closing Date. The Initial Closing Date shall occur on or before June 30, 2006. (b)           Representations and Warranties; No Default. Each of the representations and warranties made by the Company Parties in this Agreement shall be true and correct in all respects as of the date made, and shall be true and correct in all respects as of the Initial Closing Date, with the same effect as if made on and as of the Initial Closing Date; each of the covenants, agreements and obligations of the Company Parties under this Agreement to be performed or satisfied by it on or prior to the Initial Closing Date shall have been performed or satisfied by it in all respects on or before the Initial Closing Date; and no Default or Event of Default shall exist or result from the execution and delivery of this Agreement, any other Investment Document or the issuance and sale of the Unsecured Notes or the consummation of the other transactions contemplated by this Agreement, or the other Investment Documents. The Parent shall have delivered to the Purchaser an officers' certificate, signed by the President and Chief Executive Officer and the Chief Financial Officer of the Parent, on behalf of itself and the Company Parties, dated as of the Initial Closing Date, to such effect and to the effect that each of the other conditions precedent set forth in this Section 6.1 has been satisfied and fulfilled. (c)            Payment of Fees and Expenses. The Companies shall have paid to the Purchaser at the Initial Closing, in immediately available funds to a bank account designated by the Purchaser, or the Purchaser shall have withheld the same from the proceeds to be delivered by the Purchaser against delivery of the Unsecured Notes, (a) the Closing Fee applicable to the Initial Closing, and (c) all fees, costs and expenses incurred by or on behalf of the Purchaser in connection with this Agreement and the transactions contemplated hereby, as provided in Section 8.5. (d)           Purchase Permitted By Applicable Laws. The consummation of the transactions contemplated by this Agreement shall not be prohibited by or violate any Applicable Laws and shall not subject any party to any Tax, penalty or liability, under or pursuant to any Applicable Laws, and shall not be enjoined (temporarily or permanently) under, or prohibited by or contrary to, any injunction, order, decree or ruling. Without limiting the generality of the foregoing, the consummation of the transactions contemplated hereby shall   51   -------------------------------------------------------------------------------- otherwise comply with all applicable requirements of federal securities and state securities or "blue sky" laws. (e)            No Material Adverse Change. No Material Adverse Change shall have occurred in the sole judgment of the Purchaser since December 31, 2005, and the Parent shall have delivered to the Purchaser an officer's certificate, dated as of the Initial Closing Date and signed by the President and Chief Executive Officer and the Chief Financial Officer of the Parent, on behalf of the Parent and the Company Parties, certifying that no Material Adverse Change shall have occurred since such date. (f)            No Injunction, Order or Suit. There shall not have been issued any injunction, order, decree or ruling that prohibits or limits any of the transactions contemplated by this Agreement, or the other Investment Documents and there shall not be any action, suit, proceeding or investigation pending or, to the knowledge of the Company Parties, threatened that (a) draws into question the validity, legality or enforceability of this Agreement or the other Investment Documents or the consummation of the transactions contemplated hereby or thereby or (b) could result, in the sole judgment of the Purchaser, (i) in the imposition of a penalty if the Securities were delivered as contemplated hereunder or (ii) in any Material Adverse Change. (g)           Delivery of Certain Closing Documents. The Companies shall have delivered to the Purchaser the following closing documents, each in form and substance satisfactory to the Purchaser: (i)            This Agreement, duly executed by the Company Parties, together with the Exhibits and Disclosure Schedules;   (ii) The final form of the Term B Notes;   (iii) The final form of the Subordinated Notes;   (iv) The Warrant, duly executed by the Parent;   (v) The Guaranty, duly executed by each Guarantor; (vi)         The Personal Guaranty, duly executed by Edward M. Kopko; (vii)        The Investor Rights Agreement, duly executed by Edward M. Kopko, Frederick Kopko, Jr. and the Parent; (viii)      The Registration Rights Agreement, duly executed by the Parent; (ix)         The Fee Letter, duly executed by the Companies in favor of the Purchaser; (x)           The Intercompany Subordination Agreement, duly executed by the Company Parties and each of its Subsidiaries in favor of the Purchaser;   52   --------------------------------------------------------------------------------   (xi) The final form of the Security Agreement; (xii)        The letter agreement, dated the date hereof, duly executed by the Company Parties regarding the prepayment or defeasance of Designated Indebtedness (as defined in such letter agreement); (xiii)      The letter agreement, dated the date hereof, duly executed by the Company Parties regarding the issuance to GECC of the warrants to purchase Common Stock; and (xiv)       Such other documents as the Purchaser may reasonably request. (h)           Opinion Letters of Counsel. The Purchaser shall have received legal opinion letters from McBreen & Kopko, counsel to the Company Parties, dated as of the Initial Closing Date and addressed to the Purchaser, in form and substance satisfactory to the Purchaser and its legal counsel. (i)            Agreements with Officers. The Purchaser shall have received copies of the following agreements (collectively, the "Agreements with Officers"): (i)            A Non-Competition and Non-Solicitation Agreement among Edward M. Kopko, the Parent and any other applicable Company Party, dated on or before the date hereof, in form and substance satisfactory to the Purchaser. (j)            Delivery of Corporate Documents. The Companies shall have delivered to the Purchaser the following with respect to each Company Party: (i)            Certified copies of its Organizational Documents as amended through the Initial Closing Date, certified by its Secretary or other authorized agent as being in full force and effect as of the Initial Closing Date; (ii)           A good standing certificate and a tax good standing certificate, issued by the Secretary of State of its state of incorporation or organization and the taxing authority of such state, in each case dated as of the most recent practicable date prior to the Initial Closing Date; (iii)          Good standing certificates from each jurisdiction in which it is required to be qualified to transact business as a foreign corporation or other entity, in each case dated as of the most recent practicable date prior to the Initial Closing Date; (iv)          Resolutions of its Board of Directors approving and authorizing the execution, delivery and performance of this Agreement and the other Investment Documents to which it is a party, and, in the case of the Companies and the Parent, as applicable, approving and authorizing the execution, issuance, sale and delivery of the Securities; (v)           Incumbency certificates of its officers or other agents who are authorized to execute, deliver and perform this Agreement, the other Investment Documents   53   -------------------------------------------------------------------------------- and any other agreements, instruments, certificate or other documents required to be executed by it in connection herewith; (vi)         The Initial Disbursement Letter, duly executed by the Companies; and   (vii) Such other documents as the Purchaser may request. (k)           Certain Closing Certificates. The Companies shall have delivered to the Purchaser the following certificates, each dated as of the Initial Closing Date: (i)            A Solvency Certificate, in form and substance satisfactory to the Purchaser, duly executed by the Chief Financial Officer of the Parent, certifying that the Parent on a stand-alone basis, and the Company Parties taken as a whole, is and will be Solvent, before and after giving effect to (i) the issuance and sale of the Securities and the incurrence of the other Obligations; and (ii) all of the other transactions contemplated hereby. (ii)           A Compliance Certificate signed by the Chief Financial Officer of the Parent, on behalf of itself and the Company Parties, certifying that he has reviewed this Agreement and the other Investment Documents and that, after giving effect to the (i) incurrence of Indebtedness hereunder and (ii) all the transactions contemplated hereby and thereby, the Company Parties will be in compliance with the covenants of Section 10.1. (l)            Environmental Reports. The Purchaser shall have received a phase-I environmental report with respect to all Real Property owned in fee by any Company Party and the environmental consultants and surveyors retained for such reports or surveys, the scope of the reports or surveys, and the results thereof shall be acceptable to the Purchaser. (m)          Delivery of Projections. At least two (2) Business Days prior the Initial Closing Date, the Parent shall have finalized and delivered to the Purchaser prior to the Initial Closing Date, and the Purchaser shall have approved (a) the Unaudited Financial Statements and (b) the financial projections of the Company Parties for the five (5) Fiscal Years ending December 31, 2010 (the "Initial Financial Projections"). The Initial Financial Projections shall specify the assumptions on which they are based and shall be made in good faith. The Initial Financial Projections shall be accompanied by an officer's certificate, in form and substance satisfactory to the Purchaser, duly executed on behalf of the Parent and the Company Parties by the Chief Financial Officer of the Parent, specifying, among other things, the assumptions on which the Initial Financial Projections are based. (n)           Third-Party Consents. The Companies shall have obtained all other Consents required to be obtained from all Governmental Authorities and other Persons, including GECC, in form and substance satisfactory to the Purchaser, in connection with the transactions contemplated by this Agreement and the Purchaser shall have approved the terms and conditions thereof, and all applicable waiting periods shall have expired. (o)           Structure. The Purchaser shall have approved the form, substance and scope of the legal, tax and capital structure of the Company Parties.   54   -------------------------------------------------------------------------------- (p)           Sources and Uses of Funds. The Purchaser shall have approved the use of proceeds of the Securities as described in Section 2.5. (q)           Proceedings Satisfactory. All proceedings taken prior to or at the Initial Closing in connection with the issuance and sale of the Securities and the consummation of the other transactions contemplated hereby and all papers and other documents relating thereto, shall be in form and substance satisfactory to the Purchaser and its counsel, and the Purchaser shall have received copies of such documents and papers, all in form and substance satisfactory to the Purchaser, all such documents, where appropriate, to be counterpart originals and/or certified by proper authorities, corporate officials and other Persons. Without limiting the generality of the foregoing, the Companies shall have made such arrangements as may be requested by the Purchaser to ensure that the proceeds from the issuance and sale of the Securities are applied in the manner set forth in Section 2.5, including provision for the direct payment of the obligations of the Companies under Section 8.5 to be paid from such proceeds as provided in Section 6.1(c), the withholding of fees payable to the Purchaser as provided in Section 6.1(c) and the segregation of funds to be paid to third parties concurrent with or following the Initial Closing. 6.2           Final Closing. The obligations of the Purchaser to consummate the transactions contemplated hereby, including the obligation to purchase the Term B Notes, and the Subordinated Notes as provided herein, is subject to the fulfillment to the satisfaction of Purchaser in its sole discretion, prior to or at the Final Closing, of the conditions set forth in this Section 6.2; provided, however, that any or all of such conditions may be waived, in whole or in part, by the Purchaser in its sole and absolute discretion: (a)            Final Closing Date. The Final Closing Date shall occur on or before September 30, 2006. (b)            Representations and Warranties; No Default. Each of the representations and warranties made by the Company Parties in this Agreement shall be true and correct in all respects as of the date made, and shall be true and correct in all respects as of the Final Closing Date, with the same effect as if made on and as of the Final Closing Date; each of the covenants, agreements and obligations of the Company Parties under this Agreement to be performed or satisfied by it on or prior to the Final Closing Date shall have been performed or satisfied by it in all respects on or before the Final Closing Date; and no Default or Event of Default shall exist or result from the execution and delivery of this Agreement, any other Investment Document or any of the Bank Credit Documents or the issuance and sale of the Securities or the consummation of the other transactions contemplated by this Agreement, the other Investment Documents or the Bank Credit Documents. The Parent shall have delivered to the Purchaser an officers' certificate, signed by the President and Chief Executive Officer and the Chief Financial Officer of the Parent, on behalf of itself and the Company Parties, dated as of the Final Closing Date, to such effect and to the effect that each of the other conditions precedent set forth in this Section 6.2 has been satisfied and fulfilled. (c)            Payment of Fees and Expenses. The Companies shall have paid to the Purchaser at the Final Closing, in immediately available funds to a bank account designated by the Purchaser, or the Purchaser shall have withheld the same from the proceeds to be   55   -------------------------------------------------------------------------------- delivered by the Purchaser against delivery of the Term B Notes or the Subordinated Notes, (a) the Closing Fee applicable to the Final Closing, and (c) all fees, costs and expenses incurred by or on behalf of the Purchaser in connection with this Agreement and the transactions contemplated hereby, as provided in Section 8.5. (d)           Purchase Permitted By Applicable Laws. The consummation of the transactions contemplated by this Agreement and the Bank Credit Documents shall not be prohibited by or violate any Applicable Laws and shall not subject any party to any Tax, penalty or liability, under or pursuant to any Applicable Laws, and shall not be enjoined (temporarily or permanently) under, or prohibited by or contrary to, any injunction, order, decree or ruling. Without limiting the generality of the foregoing, the consummation of the transactions contemplated hereby shall otherwise comply with all applicable requirements of federal securities and state securities or "blue sky" laws. (e)            No Material Adverse Change. No Material Adverse Change shall have occurred in the sole judgment of the Purchaser since December 31, 2005, and the Parent shall have delivered to the Purchaser an officer's certificate, dated as of the Final Closing Date and signed by the President and Chief Executive Officer and the Chief Financial Officer of the Parent, on behalf of the Parent and the Company Parties, certifying that no Material Adverse Change shall have occurred since such date. (f)            No Injunction, Order or Suit. There shall not have been issued any injunction, order, decree or ruling that prohibits or limits any of the transactions contemplated by this Agreement, the other Investment Documents and the Bank Credit Documents, or, and there shall not be any action, suit, proceeding or investigation pending or, to the knowledge of the Company Parties, threatened that (a) draws into question the validity, legality or enforceability of this Agreement or the other Investment Documents or the consummation of the transactions contemplated hereby or thereby or (b) could result, in the sole judgment of the Purchaser, (i) in the imposition of a penalty if the Securities were delivered as contemplated hereunder or (ii) in any Material Adverse Change. (g)           Delivery of Certain Closing Documents. The Companies shall have delivered to the Purchaser the following closing documents, each in form and substance satisfactory to the Purchaser:   (i) The Term B Notes, each duly executed by the Companies; (ii)           The Subordinated Notes, each duly executed by the Companies; (iii)         The Intercreditor Agreement, duly executed by the Bank Agent; (iv)         A subordination agreement, duly executed by Purchaser in respect of the Term B Notes and the Subordinated Notes;   56   -------------------------------------------------------------------------------- (v)           A Borrowing Base Certificate (as defined in the Bank Credit Documents) as of the last day of the immediately preceding month, with such supporting materials as Purchaser shall reasonably request; (vi)         A letter, in form and substance satisfactory to Purchaser, from GECC to Purchaser respecting the amount necessary to repay in full all of the obligations of the Company Parties and their respective Subsidiaries owing pursuant to the GECC Credit Documents and obtain a release of all of the Liens existing in favor of GECC in and to the assets of the Company Parties and their respective Subsidiaries, together with termination statements and other documentation evidencing the termination by GECC of its Liens in and to the properties and assets of the Company Parties and their respective Subsidiaries; (vii)        The Final Disbursement Letter, duly executed by the Companies; and (viii)       Such other documents as the Purchaser may reasonably request. (h)           Actions and Documents Relating to the Collateral. The Purchaser shall have received the following in form and substance satisfactory to them: (i)            The Security Agreement, duly executed by the Company Parties, together with (A) the exhibits and schedules thereto, and (B) all promissory notes pledged thereunder along with allonges endorsing such notes to Purchaser; (ii)           Except to the extent delivered to the Bank Agent in accordance with the Bank Credit Documents, the Pledged Interests (as defined in the Security Agreement), together with stock powers duly executed by the applicable Company Parties in blank; (iii)         The Intellectual Property Security Agreement, duly executed by the Company Parties, together with the exhibits and schedules thereto; (iv)          UCC-1 Financing Statements naming each Company Party as debtor, as applicable, in form and substance satisfactory to the Purchaser; (v)           Evidence that all filings, registrations and recordings have been made in the appropriate governmental offices, and all other action has been taken, which shall be necessary to create, in favor of the Purchaser, a perfected first priority Lien on the Collateral (subject only to the Lien of the Bank Agent and the Permitted Liens); (vi)          Evidence that the Liens on the Collateral are subject only to the Permitted Liens, such evidence including the results of searches conducted in the UCC filing records in each of the governmental offices in which UCC financing statements have been, or shall be, filed;   57   -------------------------------------------------------------------------------- (vii)        Deposit Account Control Agreements, duly executed by each of the appropriate Company Parties and the banks and other financial institutions at which such Company Party's deposit and similar accounts are maintained; (viii)      Landlord waivers, in form and substance satisfactory to the Purchaser, duly executed by the applicable Company Party and the respective landlords/lessees designated by the Purchaser; and (ix)         Such other documents relating to the Collateral as the Purchaser may request. (i)            Bank Credit Documents and Related Matters. The Company Parties shall have consummated, and the Purchaser shall be satisfied in all respects with the structure, terms and conditions of, the Bank Credit Documents. In addition, the Purchaser shall have received copies of the Bank Credit Documents, together with all exhibits and schedules thereto, in each case duly executed by the parties thereto. (j)            Opinion Letters of Counsel. The Purchaser shall have received legal opinion letters from McBreen & Kopko, counsel to the Company Parties, and any other applicable local counsel, each dated as of the Final Closing Date and addressed to the Purchaser, in form and substance satisfactory to the Purchaser and its legal counsel. (k)           Delivery of Corporate Documents. The Companies shall have delivered to the Purchaser the following with respect to each Company Party: (i)            Certified copies of its Organizational Documents as amended through the Final Closing Date, certified by its Secretary or other authorized agent as being in full force and effect as of the Final Closing Date; (ii)           A good standing certificate and a tax good standing certificate, issued by the Secretary of State of its state of incorporation or organization and the taxing authority of such state, in each case dated as of the most recent practicable date prior to the Final Closing Date; (iii)          Good standing certificates from each jurisdiction in which it is required to be qualified to transact business as a foreign corporation or other entity, in each case dated as of the most recent practicable date prior to the Final Closing Date; and   (iv) Such other documents as the Purchaser may request. (l)            Certain Closing Certificates. The Companies shall have delivered to the Purchaser the following certificates, each dated as of the Final Closing Date: (i)            A Solvency Certificate, in form and substance satisfactory to the Purchaser, duly executed by the Chief Financial Officer of the Parent, certifying that the Parent on a stand-alone basis, and the Company Parties taken as a whole, is and will be Solvent, before and after giving effect to (i) the transactions contemplated by the Bank Credit Documents;   58   -------------------------------------------------------------------------------- (ii) the issuance and sale of the Securities and the incurrence of the other Obligations; and (iii) all of the other transactions contemplated hereby. (ii)           A Compliance Certificate signed by the Chief Financial Officer of the Parent, on behalf of itself and the Company Parties, certifying that he has reviewed this Agreement and the other Investment Documents and that, after giving effect to the (i) the incurrence of Indebtedness under the Bank Credit Documents, (ii) incurrence of Indebtedness hereunder and (iii) all the transactions contemplated hereby and thereby, the Company Parties will be in compliance with the covenants of Sections 10.1 and 10.15 ; (m)          Insurance. The Companies shall deliver to the Purchaser certificates of liability and property insurance with respect to the insurance policies required to be maintained by the Company Parties as of the Final Closing Date pursuant to Section 9.8, together with additional insured and lender's loss payable endorsements in favor of the Purchaser, all in form and substance satisfactory to the Purchaser. (n)           Delivery of Projections. At least two (2) Business Days prior the Final Closing Date, the Parent shall have finalized and delivered to the Purchaser prior to the Final Closing Date, and the Purchaser shall have approved (a) the Audited Financial Statements and (b) the financial projections of the Company Parties for the five (5) Fiscal Years ending December 31, 2010 (the "Final Financial Projections"). The Final Financial Projections shall specify the assumptions on which they are based and shall be made in good faith. The Final Financial Projections shall be accompanied by an officer's certificate, in form and substance satisfactory to the Purchaser, duly executed on behalf of the Parent and the Company Parties by the Chief Financial Officer of the Parent, specifying, among other things, the assumptions on which the Final Financial Projections are based. (o)           Third-Party Consents. The Companies shall have obtained all other Consents required to be obtained from all Governmental Authorities and other Persons in connection with the transactions contemplated by this Agreement and the Bank Credit Documents, and the Purchaser shall have approved the terms and conditions thereof, and all applicable waiting periods shall have expired. (p)           Sources and Uses of Funds. The Purchaser shall have approved the use of proceeds of the Securities as described in Section 2.5. (q)           Proceedings Satisfactory. All proceedings taken prior to or at the Final Closing in connection with the issuance and sale of the Securities and the consummation of the other transactions contemplated hereby and by the Bank Credit Documents, and all papers and other documents relating thereto, shall be in form and substance satisfactory to the Purchaser and its counsel, and the Purchaser shall have received copies of such documents and papers, all in form and substance satisfactory to the Purchaser, all such documents, where appropriate, to be counterpart originals and/or certified by proper authorities, corporate officials and other Persons. Without limiting the generality of the foregoing, the Companies shall have made such arrangements as may be requested by the Purchaser to ensure that the proceeds from the issuance and sale of the Securities are applied in the manner set forth in Section 2.5, including provision for the direct payment of the obligations of the Companies under Section 8.5 to be paid from   59   -------------------------------------------------------------------------------- such proceeds as provided in Section 6.2(c), the withholding of fees payable to the Purchaser as provided in Section 6.2(c) and the segregation of funds to be paid to third parties concurrent with or following the Final Closing. (r)            SEC Documents. The Companies shall have provided copies of the Late SEC Documents and the Restated SEC Documents to be filed pursuant to the Securities Act or the Exchange Act in final form satisfactory to Purchaser. 7.             CONDITIONS TO THE OBLIGATIONS OF THE COMPANY PARTIES. The obligations of the Companies to consummate the transactions contemplated hereby are subject to the satisfaction, prior to the Initial Closing or the Final Closing, as the case may be, of the conditions set forth in this Section 7; provided , however, that any or all of such conditions may be waived, in whole or in part, by the Companies in their sole and absolute discretion: 7.1           Representations and Warranties. The representations and warranties of the Purchaser contained in Section 4 shall be true and correct in all respects at and as of the Initial Closing Date or the Final Closing Date, as the case may be, after giving effect to the transactions contemplated by this Agreement, as if made on and as of such date, and the Purchaser shall have performed or satisfied all of its covenants and agreements hereunder to be performed or satisfied on or prior to the Initial Closing Date or the Final Closing Date, as the case may be. 7.2           Purchase Permitted By Applicable Laws. The consummation of the transactions contemplated by this Agreement or other Investment Documents, shall not be prohibited by or violate any Applicable Laws and shall not subject any party to any Tax, penalty or liability, under or pursuant to any Applicable Laws, and shall not be enjoined (temporarily or permanently) under, or prohibited by or contrary to, any injunction, order, decree or ruling. Without limiting the generality of the foregoing, the consummation of the transactions contemplated hereby shall otherwise comply with all applicable requirements of federal and state securities laws. 7.3           Payment for Securities. With respect to the Initial Closing, the Purchaser shall have delivered to the Companies the Purchase Price for the Unsecured Notes and the Warrant, and with respect to the Final Closing, the Purchaser shall have delivered to the Companies the purchase price for the Term B Notes, and the Subordinated Notes, each required to be paid by Section 2.3, pursuant to wire transfer instructions provided by the Company Parties, less the amounts provided for in Sections 6.1(c), 6.2(c) and 8.5 that are not otherwise paid at the Initial Closing or the Final Closing, as the case may be.   8. TAXES; INDEMNIFICATION; FEES AND EXPENSES.   8.1 Taxes. (a)           Any and all payments by the Company Parties under this Agreement, the Notes, the Warrant or any other Investment Document shall be made free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding taxes that are imposed on Purchaser's overall net income by the United States, taxes that are imposed on its overall net income (and franchise taxes imposed in lieu thereof) by the state or foreign jurisdiction under the   60   -------------------------------------------------------------------------------- laws of which the Purchaser is organized or any political subdivision thereof. If any Company Party shall be required by law to deduct any such non-excluded Taxes from any sum payable by such Company Party, (i) the amount payable shall be increased as may be necessary so that after such Company Party and the Purchaser have made all required deductions (including deductions applicable to additional sums payable under this Section 8.1) the Purchaser receives an amount equal to the sum it would have received had no such deductions been made, (ii) such Company Party shall make all such deductions and (iii) such Company Party shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law (but excluding any tax imposed by any jurisdiction or by any political subdivision or taxing authority thereof or therein measured by or based on the net income or net profits of Lender). The Companies shall indemnify the Purchaser for and hold it harmless against the full amount of such non-excluded Taxes, and for the full amount of taxes of any kind imposed by any jurisdiction on amounts payable under this Section 8.1, imposed on or paid by the Purchaser and any liability (including penalties, additions to tax, interest and expenses) arising therefrom or with respect thereto. This indemnification shall be made within two (2) Business Days from the date the Purchaser makes written demand therefor. (b)           The Companies shall pay all present or future stamp, documentary, excise, property, transfer and other similar Taxes (together in each case with interest and penalties, if any) payable or determined to be payable in connection with the execution and delivery of this Agreement, any payment made hereunder or any Investment Document, or the issuance and sale of the Securities, and shall hold harmless the Purchaser from and against any and all liabilities with respect to or resulting from any delay in paying, or omission to pay, such Taxes.   8.2 Indemnification. (a)            Whether or not the transactions contemplated by this Agreement are consummated, each Company shall indemnify, defend and save and hold harmless the Purchaser, its successors and assigns, and its Affiliates, employees, partners, members, shareholders, managers, officers, directors, representatives, agents, attorneys, successors, assigns and participants (the "Indemnified Parties"), from and against, and shall pay on demand, any and all losses, claims, damages, liabilities, judgments, Indemnified Environmental Costs, expenses and costs, including reasonable attorneys' fees and other fees and expenses incurred in, and the costs of preparing for, investigating or defending any matter (collectively, "Losses"), other than those arising due to such Indemnified Party’s gross negligence or willful misconduct as finally determined by a court of competent jurisdiction, incurred by or asserted or awarded against the Indemnified Parties in connection with, by reason of, or arising from: (i)            Any breach of any warranty or the inaccuracy of any representation made by any Company Party in this Agreement or any other Investment Document; (ii)           The failure of any Company Party to fulfill any of its covenants, agreements or undertakings under this Agreement or any other Investment Document (or any other document or instrument executed herewith or pursuant hereto);   61   -------------------------------------------------------------------------------- (iii)         Any third party actions, suits, proceedings or claims brought against any Indemnified Party in connection with, arising out of or with respect to (i) any other matters arising out of or in connection with the transactions contemplated by this Agreement, the Notes, the Warrant or any other Investment Document or (ii) the business, operations or affairs of the Company Parties (including any litigation in which any Company Party (or any officer, director or employee) is involved); (iv)         Any fee or commission payable or otherwise owing to any investment banker, broker, finder, placement agent or similar intermediary claiming to have been retained or employed by or on behalf of any Company Party; (v)           The actual or alleged presence of Hazardous Materials on any property of any Company Party or any Environmental Condition; or (vi)         The transactions contemplated by the Bank Credit Documents. (b)           The Company Parties shall either pay directly all Losses which they are required to pay hereunder or reimburse any Indemnified Party within ten (10) days after any written request for such payment. The obligations of any Company to the Indemnified Parties under this Section 8 shall be separate obligations to each Indemnified Party, and the liability of such Company to such Indemnified Parties hereunder shall not be extinguished solely because any other Indemnified Party is not entitled to indemnity hereunder. (c)            In addition, notwithstanding anything in this Agreement or any other Investment Document to the contrary, in the event of a breach of the representation and warranty set forth in Section 3.7 (including, without limitation, Schedule 3.7) with respect to the number of shares of Common Stock outstanding on a Fully Diluted Basis, to the extent that the number of Warrant Shares evidenced by the Warrant immediately after the Initial Closing represent, as calculated therein, a percentage of the outstanding shares of Common Stock on a Fully Diluted Basis that is less than 6.25%, as such number may be adjusted pursuant to the terms of the Warrant, then the Parent shall immediately issue to the Purchaser, at no cost to the Purchaser, an additional warrant or warrants, in form and substance satisfactory to the Purchaser, representing an additional number of Warrant Shares such that, if such additional Warrant Shares had been included in such Warrant immediately after the Initial Closing, such representation and warranty would have been true and accurate in all respects when made. (d)           The obligations of any Company to the Indemnified Parties under this Section 8 shall survive (i) the repayment of the Notes (whether at maturity, by prepayment or acceleration or otherwise), (ii) any transfer of any Note or any interest therein, (iii) the termination of this Agreement or any other Investment Document and (iv) the issuance, exercise, assignment and/or sale of the Warrant (or any interest therein) and the sale of the Warrant Shares. 8.3           Indemnification Procedures. Any Person entitled to indemnification under this Section 8 shall (a) give prompt written notice to the Parent of any claim with respect to which it is entitled to seek indemnification and (b) permit the Companies to assume the defense   62   -------------------------------------------------------------------------------- of such claim with counsel selected by the Companies and reasonably acceptable to such Person; provided, however, that any Person entitled to indemnification hereunder shall have the right to employ separate counsel and to participate in the defense of such claim and the fees and expenses of such counsel shall be at the expense of such Person unless (i) the Companies have agreed to pay such fees or expenses; (ii) the Companies have failed to notify such Person in writing within ten (10) Business Days of their receipt of such written notice to the Companies that they will assume the defense of such claim and employ counsel reasonably acceptable to such Person; or (iii) in the reasonable judgment of any such Person a conflict of interest exists between such Person, on the one hand, and any Company Party or Affiliate thereof, on the other hand, with respect to such claims (in which case, if the Person notifies the Companies in writing that such Person elects to employ separate counsel at the expense of the Companies, the Companies shall not have the right to assume the defense of such claim on behalf of such Person). Neither the Companies nor any Indemnified Party will be subject to any liability for any settlement made without their consent (but such consent may not be unreasonably withheld). No Indemnified Party may, without the consent of the Companies (which consent will not be unreasonably withheld), consent to the entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to the Company Parties of a release from all liability in respect of such claim or litigation. Further, the Companies may not, without the consent of the applicable Indemnified Parties (which consent will not be unreasonably withheld), consent to the entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Parties of a release from all liability in respect of such claim or litigation. 8.4           Contribution. If the indemnification provided for in this Section 8 is unavailable to the Purchaser or any other Indemnified Party in respect of any Losses, then the Company Parties, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by the Indemnified Party as a result of such Losses, in such proportion as is appropriate to reflect the relative fault of the Company Parties, on the one hand, and such Indemnified Party, on the other hand, in connection with the actions, statements or omissions which resulted in such Losses, as well as any other relevant equitable considerations. The relative fault of the Company Parties, on the one hand, and such Indemnified Party, on the other hand, shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact, has been taken by, or relates to information supplied by, either any Company Party or such Indemnified Party, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent any such action, statement or omission. The parties agree that it would not be just and equitable if contribution pursuant to this Section 8.4 were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to above. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. 8.5           Reimbursement of Deal-Related Costs and Expenses. Notwithstanding anything to the contrary contained herein or otherwise, whether or not the transactions contemplated by this Agreement are consummated or this Agreement is terminated for any reason, and in addition to all other amounts due or owing to the Purchaser hereunder, under any   63   -------------------------------------------------------------------------------- other Investment Document or otherwise, the Company Parties shall be jointly and severally responsible, and jointly and severally agree to promptly reimburse the Purchaser, for all fees, costs and expenses of every type and nature (including all reasonable fees and expenses of counsel, accountants, solvency firms and other deal-related costs and expenses) incurred by or on behalf of the Purchaser in connection with the Purchaser's due diligence investigation of the Company Parties and their respective Affiliates, the Bank Credit Documents and the transactions contemplated thereby, the preparation, negotiation, execution, delivery and enforcement of this Agreement, the Notes, the Warrant and the other Investment Documents and the consummation of the transactions contemplated hereby (which fees, costs and expenses may be withheld by the Purchaser from the proceeds to be delivered by the Purchaser at the Initial Closing or the Final Closing, as the case may be, pursuant to Sections 6.1(c) and 6.2(c)). The Company Parties jointly and severally agree to pay to the Purchaser, or reimburse the Purchaser for, all fees, costs and expenses at the Initial Closing or the Final Closing, as the case may be. At the Purchaser's request and direction, the Company Parties shall, jointly and severally, reimburse third party providers of the Purchaser directly for all of such fees, costs and expenses. 8.6           Costs of Collection. The Company Parties jointly and severally agree to pay to the Purchaser on demand all fees, costs and expenses of every type and nature (including all fees and expenses of attorneys, accountants and other experts and all due diligence, collateral review, appraisal, search, filing and recording fees and expenses) which are expended or incurred by or on behalf of the Purchaser in connection with (a) the administration of the Investment Documents or the collection and enforcement of the Obligations, whether or not any action, suit or other proceeding is commenced; (b) any actions for declaratory relief in any way related to the Obligations; (c) the protection or preservation of any rights, powers or remedies of the Purchaser under this Agreement or any other Investment Document; (d) any actions taken by the Purchaser in negotiating any amendment, waiver, consent or release of or under this Agreement, the Notes or any other Investment Document; (e) any actions taken in reviewing the Company Parties' financial affairs, which actions shall include (i) inspecting the facilities of any Company Party or conducting audits or appraisals of the financial condition of any Company Party; (ii) having an accounting or other firm selected by the Purchaser review the books and records of any Company Party and perform a thorough and complete examination thereof; (iii) interviewing the Company Parties' employees, attorneys, accountants, customers and any other Persons related to the Company Parties which the Purchaser believes may have relevant information concerning the business, condition (financial or otherwise), results of operations or prospects of any of the Company Parties; and (iv) undertaking any other action which the Purchaser believe is necessary to assess accurately the financial condition and prospects of the Company Parties; (f) any refinancing, restructuring (whether in the nature of a "work out" or otherwise), bankruptcy or insolvency proceeding involving any Company Party or Affiliates, including any refinancing or restructuring of this Agreement, the Notes or any other Investment Documents; (g) any actions taken to verify, maintain, perfect and protect any Lien granted to the Purchaser by any Company Party or any other Person under the Investment Documents; (h) any effort by the Purchaser to protect, audit, assemble, complete, collect, sell, liquidate or otherwise dispose of any collateral, including in connection with any case under Bankruptcy Laws; or (i) having counsel advise the Purchaser as to its rights and responsibilities, the perfection, protection or preservation of rights or interests under the Investment Documents, with respect to negotiations with any Company Party or its Affiliates or with other creditors of any Company Party or with respect to any   64   -------------------------------------------------------------------------------- proceeding under any Bankruptcy Law. The Company Parties hereby consent to the taking of the foregoing actions by the Purchaser without conditions or restrictions. 9.             AFFIRMATIVE COVENANTS. The Company Parties covenant and agree that, so long as any Obligations remain outstanding the Company Parties shall, except as provided in Section 9.21, perform, comply with and observe each of the covenants set forth in this Section 9. 9.1           Payment of Notes and Other Obligations. The Companies shall fully and timely pay all Obligations owing pursuant to the terms of this Agreement, the Notes (including all principal thereof, premium, if any, and interest thereon), the Warrant and the other Investment Documents to which it is a party, in each case on the dates and in the manner provided for herein and therein. 9.2           Performance of Investment Documents. The Companies shall, and shall cause each other Company Party to, perform, comply with and observe all of its obligations under this Agreement, the Notes, the Warrant and each other Investment Document in accordance with the respective terms thereof. 9.3           Information Reporting Requirements. The Companies shall furnish to the Purchaser the following: (a)           As soon as available, and in no event later than ninety (90) days after the end of each Fiscal Year, on a Consolidated and Consolidating basis, balance sheets of the Parent and its Subsidiaries as of the end of such Fiscal Year, and, on a Consolidated and Consolidating basis, related statements of operations, shareholders' equity and cash flows of the Parent and its Subsidiaries for such Fiscal Year, setting forth in comparative form the corresponding figures for the immediately preceding Fiscal Year, all in reasonable detail and prepared in accordance with GAAP, and accompanied by (i) a report and an opinion, prepared in accordance with generally accepted auditing standards, of independent certified public accountants of recognized national standing mutually acceptable to Purchaser and the Companies (which opinion shall (A) provide that such financial statements present fairly, in all material respects, the financial position for the periods indicated in conformity with GAAP (B) not be qualified as to "going concern" or otherwise qualified or limited, in scope or in any other respect and (C) state that such accounting firm has obtained no knowledge that a Default or Event of Default has occurred and is continuing, or if, in the opinion of such accounting firm, a Default or Event of Default has occurred and in continuing, a statement as to the nature thereof), and (ii) a schedule in a form acceptable to the Purchaser of the computations used by such accountants in determining, as of the end of such Fiscal Year, compliance with the covenants contained in Section 10.15; (b)           Not later than thirty (30) days after the last day of each calendar month, a monthly financial package for such month (the "Monthly Reporting Package" ), all in reasonable detail, consisting of at least the following: (i)            an income statement for such month on a Consolidated and Consolidating Basis for the Parent and its Subsidiaries, with comparative information from the   65   -------------------------------------------------------------------------------- Initial Financial Projections and, once provided pursuant to Section 9.3(e), the Annual Financial Projections, and the same month during the immediately preceding Fiscal Year; (ii)           a year-to-date income statement for such month on a Consolidated and Consolidating Basis for the Parent and its Subsidiaries, with comparative information from the Initial Financial Projections and, once provided pursuant to Section 9.3(e), the Annual Financial Projections, and the same year-to-date month during the immediately preceding Fiscal Year; (iii)         a cash flow statement for such month, with comparative information from the Initial Financial Projections and, once provided pursuant to Section 9.3(e), the Annual Financial Projections, and the same month during the immediately preceding Fiscal Year; (iv)         a year-to-date cash flow statement for such month, with comparative information from the Initial Financial Projections and, once provided pursuant to Section 9.3(e), the Annual Financial Projections, and the same year-to-date period during the immediately preceding Fiscal Year; (v)           a balance sheet as at the end of such month on a Consolidated and Consolidating Basis for the Parent and its Subsidiaries, with comparative information from the Initial Financial Projections and, once provided pursuant to Section 9.3(e), the Annual Financial Projections, and as at the end of the same month during the immediately preceding Fiscal Year; (vi)          information, as may be requested by the Purchaser, to monitor mutually agreeable critical success factors of the Company Parties that need to be achieved in order for the Company Parties to meet their financial projections, including, without limitation, the Average Billable Headcount, receivable aging and payables aging; (vii)        a schedule in a form acceptable to the Purchaser of the computations used by the Company Parties in determining compliance with the covenants contained in Section 10.15; (viii)      monthly detail supporting the unbilled accounts receivable balances and the billings in excess of cost; (ix)         a schedule of detailed information regarding new and terminated Material Contracts with customers; (x)           any additional financial information so that the Purchaser may calculate compliance with the covenants contained in Section 10.15; and (xi)         a progress report on the establishment by the Company Parties of an upgraded financial reporting system to account for non-standard contracts and other manual transactions;   66   -------------------------------------------------------------------------------- (c)           As soon as available and in any event within three (3) Business Days after the end of each week (ending on Sunday), a weekly reporting package, as determined by Purchaser, for such week (the “Weekly Report”); (d)           As soon as available (and in any event not later than the date the Weekly Report is due) after the issuance of any Governmental Report, or series of Governmental Reports, a copy (or copies) of such Governmental Report(s) (or written summaries of any substantially similar oral reports(s)); (e)           At least fifteen (15) days prior to the beginning of each Fiscal Year, a copy of the internal financial projections of the Company Parties for such Fiscal Year (the "Annual Financial Projections"), prepared on a monthly basis and in reasonable detail, which shall include the following: (i) a balance sheet, income statement and cash flow statement for each month of such Fiscal Year; (ii) a capital expenditures budget, including internal rate of return analysis and "payback" analysis; (iii) an explanation in reasonable detail of all material changes proposed for the business and its personnel and facilities; (iv) an explanation in reasonable detail of all material assumptions underlying such financial projections, which assumptions shall be believed by the Company Parties to be reasonable; (v) a description of the opportunities to be pursued during such Fiscal Year; and (vi) a description of any incentive compensation expected to be paid to Edward M. Kopko; (f)            At the Final Closing, and simultaneously with the delivery of (i) the financial statements required to be delivered to the Purchaser under clause (a) of this Section 9.3 and (ii) the financial statements required to be delivered to the Purchaser under clause (b) of this Section 9.3 with respect to each month, a Compliance Certificate, in substantially the form attached as Exhibit E (a "Compliance Certificate"), signed on behalf of the Parent and the Company Parties by the Parent’s President and Chief Executive Officer or its Chief Financial Officer, certifying that each of them has reviewed this Agreement and the other Investment Documents and the financial statements (including the financial condition and results of operations) of the Parent and its Subsidiaries for purposes of delivering such Compliance Certificate and further certifying as to the matters set forth in such Compliance Certificate; (g)           Promptly after the same becomes publicly available (but not later than the date the Weekly Report is due), copies of any Company SEC Documents as shall be filed by any Company Party pursuant to the requirements of the Securities Act or the Exchange Act; (h)           Promptly after submission to any Governmental Authority (but not later than the date the Weekly Report is due), all documents and information furnished to such Governmental Authority in connection with any investigation of any Company Party not in the ordinary course of business; (i)            As soon as possible after any Company Party obtains knowledge thereof (but not later than the date the Weekly Report is due), written notice of (i) the occurrence of any event, act, development or condition which constitutes a Default or Event of Default or any "default" or "event of default" under the terms of any Other Debt Documents; (ii) receipt of any notice of default or termination under or related to any Material Contract; or (iii) any other   67   -------------------------------------------------------------------------------- event or development which could have a Material Adverse Effect. Each such notice shall specify in reasonable detail the nature of the event, act, condition, Default, Event of Default, default, event of default, litigation or investigation or other proceeding and what action the Company Party or any other Person is taking or proposes to take to cure the same; (j)            As soon as available and in any event within thirty (30) calendar days after the end of each Fiscal Year, a report summarizing the insurance coverage (specifying type, amount and carrier) in effect for each Company Party and containing such additional information as the Purchaser may reasonably specify; (k)           Promptly upon (and in any event not later than the date the Weekly Report is due): (i) receipt thereof, copies of all reports submitted to the Company Parties by their independent certified public accountants in connection with each annual, interim or special audit examination of any Company Party made by such accountants, including the "management letter" submitted by such accountants to any Company Party in connection with their annual audit and (ii) delivery thereof to the Bank Agent, copies of all notices, reports, compliance certificates and financial information delivered to the Bank Agent by or on behalf of any Company Party; (l)            Promptly upon request (and in any event not later than the date the Weekly Report is due), such other notices and other information (whether or not in the possession of third parties) concerning the business, operations, condition (financial or otherwise), affairs or prospects of any Company Party as the Purchaser may from time to time request, including written notices of any issuances or sales of Capital Stock of any Company Party; (m)          Prior to release, copies of all press releases that mention the Purchaser; (n)           Promptly after any Company Party has knowledge or becomes aware thereof (and in any event not later than the date the Weekly Report is due), written notice of the occurrence of any Event of Loss with respect to the property or assets of any Company Party aggregating $100,000 or more; (o)           Prompt (but in any event not later than the date the Weekly Report is due) written notice, in reasonable detail, of any proposed creation, incorporation or acquisition of a Subsidiary of any Company Party; (p)           Prompt (but in any event not later than the date the Weekly Report is due) written notice of all actions, suits and proceedings before any Governmental Authority or arbitrator pending or threatened against or affecting any Company Party which (A) if adversely determined would involve an aggregate liability of $100,000 (or its equivalent in another currency) or more, or (B) could have a Material Adverse Effect;   (q) The reports and notices as required by the Collateral Documents;   68   -------------------------------------------------------------------------------- (r)            Not later than the date the Weekly Report is due, written notice of any material change in accounting policies or financial reporting practices by any Company Party; (s)            Promptly after any Company Party becomes aware thereof (and in any event not later than the date the Weekly Report is due), written notice of any material labor controversy resulting in or threatening to result in any strike, work stoppage, boycott, shutdown or other material labor disruption against or involving any Company Party; (t)            Promptly upon the establishment of new accounts of the type set forth in Section 3.38 (Depository and Other Accounts) (and in any event not later than the date on which the next Weekly Report is to be delivered to the Purchaser), written notice thereof, including the account number, location and other relevant details (u)           Prompt written notice of any other condition or event which has resulted, or that would reasonably be expected to result, in a Material Adverse Effect; (v)           After the date on which the Weekly Report is no longer required to be delivered pursuant to the terms of this Agreement, any of the foregoing notices, reports or documents that are to be delivered to the Purchaser not later than the date on which the next such Weekly Report is to be delivered shall instead be delivered to the Purchaser not later than five (5) Business Days after the occurrence of the event giving rise to such delivery requirement; (w)          Concurrently with the delivery of the Borrowing Base Certificate (as defined in the Bank Credit Documents) to the Bank Agent pursuant to the terms of Section 8.14 of the Bank Credit Documents, a copy of such Borrower Base Certificate; and (x)           Prior to the Final Closing, weekly and in any event no later than Monday of the immediately following week (ending on Sunday), a detailed cash flow forecast of the Company Parties and their Subsidiaries covering the immediately following four (4) weekly periods, together with a comparison of the actual cash flow and the forecasted cash flow for the immediately preceding period, each in form and substance satisfactory to the Purchaser. 9.4           Compliance with Laws; Consents. The Company Parties shall comply at all times with all Applicable Laws in respect of the conduct of its or their businesses and the ownership of its or their properties in the states or other jurisdictions in which it or they conduct their respective businesses, including compliance with the requirements of the New Jersey Department of Environmental Protection with respect to the following Sites operated by the Companies: (i) former leasehold interest of Butler Aviation-Newark, Inc., Hangar 14, Newark International Airport, Newark , New Jersey Lot1, Block 5094, Case Number 89798, (ii) former leasehold of Butler Aviation-Atlantic City, Inc., Atlantic City International Airport (f/k/a Atlantic City Municipal Airport), Pomona, New Jersey, Lots 1A & 3 Block 300A, Case Number 89796, and (iii) former leasehold interest of Butler Aviation-Atlantic City, Inc., Bader Field Division, Bader Field, Atlantic City, New Jersey, Lot 1 Block CH110, Case Number 89797. The Company Parties shall obtain and maintain all Consents necessary in connection with the execution, delivery and performance of the Investment Documents, the consummation of the   69   -------------------------------------------------------------------------------- transactions therein contemplated and all material Consents necessary in connection with the conduct of their business and the ownership of their properties. 9.5           Legal Existence. The Company Parties shall at all times do or cause to be done all things necessary to (a) maintain and preserve their existence and their material rights and privileges, (b) become or remain duly qualified and in good standing in each jurisdiction in which the character of the properties owned or leased by it or in which the transaction of its business makes such qualification necessary and (c) preserve, renew and keep in full force and effect all of the Operating Licenses. 9.6           Books and Records; Inspections. The Company Parties shall maintain proper books of record and account in which full, true and complete entries in conformity with GAAP and all requirements of Applicable Laws shall be made of all material dealings and transactions in relation to its business and activities. The Company Parties shall permit the designated representatives and/or agents of the Purchaser to visit and inspect any of the properties of the Company Parties, and to examine and make copies of, and abstracts from, the books of record and account of the Company Parties without placing any conditions on the same, and to discuss the affairs, finances and accounts of the Company Parties with, and be advised as to the same by, its officers, employees, attorneys and independent accountants, all during normal business hours and at such reasonable times and to such extent as the Purchaser may request (and in any event as soon as practicable, but not later than three (3) Business Days, thereafter). 9.7           Maintenance of Properties. The Company Parties shall maintain and preserve all of its or their properties which are necessary or materially useful in the conduct of their respective businesses in good working order and condition, ordinary wear and tear excepted, and comply in all material respects at all times with the provisions of all material personal property leases to which each of them is a party as lessee or under which each of them occupies property, so as to prevent any loss or forfeiture thereof or thereunder. The Company Parties shall make all payments and otherwise perform all of their material obligations under all leases of Real Property, and all leases of material personal property, to which it is a party, keep such leases in full force and effect and not permit such leases to lapse or be terminated (or any rights to renew such leases to be forfeited or canceled), notify the Purchaser of any default by any party thereto and cooperate with the Purchaser in all respects to cure any such default. Notwithstanding anything to the contrary contained in this Section 9.7, the Companies may determine in good faith that any of their or any Subsidiary's assets or properties, whether owned or leased, is obsolete or has been damaged and the cost of repair makes it inadvisable to repair such asset or property. The Company Parties shall pay and discharge each lawful claim which, if unpaid, would by law become a Lien (other than a Permitted Lien) upon their property.   9.8 Insurance. (a)           The Company Parties shall procure and maintain with financially sound and reputable insurers policies of insurance, coverage amounts and related terms and conditions covering the Company Parties normally maintained by companies engaged in the same or similar business as the Company Parties, or any one of them, against loss, damage and liability and such other policies of insurance and coverage amounts as may be reasonably requested by the Purchaser. Such insurance shall include comprehensive general liability, fire   70   -------------------------------------------------------------------------------- and extended coverage, property damage, workers' compensation, flood insurance (if customarily maintained in locations in which any Company Party is located), business interruption insurance (either for loss of revenues or for additional expenses), professional liability insurance and, as required by the Investor Rights Agreement, directors and officers liability insurance and employment practice liability insurance. So long as the Notes remain outstanding, all insurance covering liability shall name the Purchaser as an additional insured, and all insurance covering property shall name the Purchaser as a loss payee, as its interests may appear, and, with respect to any casualty or loss, provide that the full amount of insurance proceeds shall be payable to the Purchaser as its interest may appear. Such insurance proceeds shall be applied by the Purchaser to reduce the Obligations. (b)           Not later than one hundred twenty (120) days after the Final Closing Date, the Companies shall procure, and shall thereafter maintain so long as the Notes remain outstanding, key man life insurance policies, in form and substance satisfactory to the Purchaser (such policies being the "Key Man Life Insurance"), on the life of Edward M. Kopko in the aggregate coverage amount of not less than $6,000,000 million, in form and substance satisfactory to the Purchaser. The Key Man Life Insurance policies shall be maintained for the sole benefit of the Purchaser, shall name the Purchaser as the sole loss payee, shall be irrevocably collaterally assigned to the Purchaser and shall provide that the full amount of any insurance proceeds paid thereunder shall be payable to the Purchaser. Such insurance proceeds shall be applied by the Purchaser to reduce the Obligations. (c)           Each of the insurance policies required to be maintained under this Section 9.8 shall provide for at least thirty (30) days' prior written notice to the Purchaser of the cancellation or substantial modification thereof. Receipt of such notice shall entitle the Purchaser (but the Purchaser shall not be obligated) to renew any such policies, cause the coverages and amounts thereof to be maintained at levels required pursuant to this Section 9.8 or otherwise to obtain similar insurance in place of such policies, in each case at the expense of the Companies. 9.9           Taxes. The Company Parties shall pay and discharge promptly when due (and in any event within two (2) Business Days of such due date) all Taxes imposed upon it or its properties, business, income or property before any penalty shall be incurred with respect to such Taxes; provided, however, that no Company Party need pay or discharge any such Tax so long as (a) the validity or amount thereof is being contested in good faith and by appropriate proceedings, (b) the Companies’ outside Tax counsel or accountants shall have advised the Companies in writing that it has a reasonable legal basis for contesting the validity or amount of such Tax and (c) reserves as may be required by GAAP shall have been made therefor.   9.10 ERISA Matters. (a)           The Company Parties shall cause each Benefit Plan to be operated in compliance with the terms of such Benefit Plan and Applicable Law and shall pay and discharge promptly any liability imposed upon it or them pursuant to the provisions of such Benefit Plan and Applicable Law; provided, however , that neither the Parent nor any Subsidiary shall be required to pay any such liability if (i) the amount, applicability, or validity thereof shall be diligently contested in good faith by appropriate proceedings and (ii) such Person shall have   71   -------------------------------------------------------------------------------- set aside on its books reserves which, in the good faith judgment of the Board of Directors of such Person, are adequate with respect thereto. (b)           The Companies shall deliver to the Purchaser promptly, but in no event more than three (3) Business Days after any officer of any Company Party obtains knowledge of (i) the Internal Revenue Service's (A) revocation of the tax-qualified status of any Benefit Plan that is a tax-qualified retirement plan, (B) imposition of an excise tax upon the occurrence of a "prohibited transaction" as such term is defined in Section 4975 of the Code, or (C) disallowance of a deduction (in whole or in part) for a contribution to a Benefit Plan, (ii) the institution of a lawsuit against a Benefit Plan (or a Fiduciary of such plan), or (iii) the United States Department of Labor's imposition of a penalty under Section 502 of ERISA relating to a Benefit Plan, a written notice specifying the nature of such action, what action has been taken, is being taken, or is proposed to be taken with respect thereto, and a copy of any correspondence or other documentation relating to the matter. 9.11         Communication with Accountants. The Company Parties authorize the Purchaser to communicate directly with the independent certified public accountants of the Company Parties, and authorize such accountants to disclose to the Purchaser any and all financial statements and other supporting financial documents, workpapers and schedules as the Purchaser may request, without any restrictions being placed on such communications. 9.12         Compliance with Material Contracts. The Company Parties shall (a) perform, comply with and observe all material terms and provisions of each Material Contract to be performed, complied with or observed by it and (b) maintain each Material Contract in full force and effect and enforce each Material Contract in accordance with its terms. After the occurrence and during the continuation of an Event of Default, the Company Parties shall promptly make such demands or requests for information from each other party to any Material Contract, and take action against each other party to any Material Contract, as the Purchaser may request (and in any event within five (5) Business Days of the date of such request) and, in connection with the enforcement of any rights or remedies of any Company Party under any Agreement with Officers or other employment agreement, non-competition, non-solicitation and/or confidentiality agreement or similar agreement to which it is a party, in the event the Purchaser request that such Company Party file any action, suit or other proceeding seeking injunctive or other equitable relief against such other party, such Company Party shall do so within three (3) Business Days of its receipt of such request.   9.13 Environmental Matters. (a)           The Company Parties shall and shall use their best efforts to cause all tenants and other Persons who may come upon any Real Property to comply with all Environmental Laws, including those requiring disclosures to prospective and actual buyers or tenants of all or any portion of the Real Property. The Company Parties will not install or allow to be installed any underground storage tanks on any Real Property. The Company Parties shall comply with the recommendations of any qualified environmental engineer or other expert engaged by the Company Parties with respect to any Real Property.   72   -------------------------------------------------------------------------------- (b)           The Company Parties shall each promptly (and in any event within five (5) Business Days) notify the Purchaser in writing (i) if it knows, suspects or believes there may be any Hazardous Materials in or around any part of the Real Property, any improvements constructed on the Real Property, or the soil, groundwater or soil vapor on or under the Real Property, or knows that any Company Party or the Real Property may be subject to any threatened or pending investigation by any Governmental Authority under any Applicable Laws pertaining to any Hazardous Materials, and (ii) of any claim made or, if it knows, threatened by any Person arising out of or resulting from any Hazardous Materials being present or released in, on or around any part of the Real Property, any improvements constructed on the Real Property or the soil, groundwater or soil vapor on or under the Real Property in which the amount involved is $50,000 or more and not covered by insurance or in which injunctive or similar relief is sought (any of the matters described in clauses (i) and (ii) above being referred to as a "Hazardous Materials Claim" ). (c)           The Companies shall promptly undertake any and all remedial work in response to Hazardous Materials Claims ("Remedial Work") to the extent required by any Governmental Authority involved or as recommended by prudent business practices, if such standard requires a higher degree of remediation, and in all events to minimize any impairment to the Real Property. All Remedial Work must be conducted (i) in a diligent and timely fashion by licensed contractors acting under the supervision of a consulting environmental engineer; (ii) pursuant to a detailed written plan for the Remedial Work approved by all public or private agencies or persons with a legal or contractual right to such approval; (iii) with insurance coverage pertaining to liabilities arising out of the Remedial Work as is then customarily maintained with respect to such activities; and (iv) only following receipt of any required permits, licenses or approvals. The selection of the Remedial Work contractors and consulting environmental engineers, the contracts entered into with such Persons, any disclosures to or agreements with any public or private agencies or other Persons relating to Remedial Work and the written plan for the Remedial Work (and any changes thereto) shall, at the Purchaser's option, be subject to the prior written approval of the Purchaser if a Default or Event of Default has occurred and is continuing. (d)           The Purchaser shall have the right, during normal business hours, to enter and visit any Real Property for the purposes of observing the Real Property, taking and removing soil or groundwater samples and conducting tests on any part of the Real Property, if the Purchaser has reason to believe that Hazardous Materials may be present on the Real Property, all at the cost and expense of the Company Parties; provided, however, that the Purchaser shall not have any duty to visit or observe the Real Property or to conduct tests, and no site visit, observation or testing by the Purchaser shall impose any liability on the Purchaser. The Company Parties shall use their best efforts to obtain all Consents necessary, if any, for the Purchaser to do any of the same. In no event will any site visit, observation or testing by the Purchaser be a representation that Hazardous Materials are or are not present in, on or under the Real Property, or that there has been or will be compliance with any Environmental Law. Neither the Company Parties nor any other Person shall be entitled to rely on any site visit, observation or testing by the Purchaser. The Purchaser shall, if requested by the Companies, share with the Parent the written results, if any, from any such site visit, observation or testing. The Purchaser owes no duty of care to protect the Company Parties or any other Person against or to inform the Company Parties or any other Person of the presence of any Hazardous   73   -------------------------------------------------------------------------------- Materials or any other adverse condition affecting the Real Property, except that the Purchaser shall repair any damage to Real Property caused by or on behalf of the Purchaser in connection with any inspection by the Purchaser of such Real Property. The Purchaser shall avoid interfering with the existing use of the Real Property by the Company Parties in exercising any rights provided in this Section 9.13. (e)           At the request of the Purchaser from time to time, each of the Company Parties shall provide to the Purchaser within 30 calendar days after such request, at the expense of the Company Parties, an environmental site assessment report for any of their properties described in such request, prepared by an environmental consulting firm acceptable to the Purchaser, indicating the presence or absence of Hazardous Materials and the estimated cost of any compliance, removal or remedial action in connection with any Hazardous Materials on such properties. Without limiting the generality of the foregoing, if the Purchaser determines at any time that a material risk exists that any such report will not be provided within the time referred to above, the Purchaser may retain an environmental consulting firm to prepare such report at the expense of the Company Parties, and the Company Parties hereby grant and agree to cause any Subsidiary that owns any property described in such request to grant at the time of such request to the Purchaser, such firm and any agents or representatives thereof an irrevocable non-exclusive license, subject to the rights of tenants, to enter onto their respective properties to undertake such assessment. (f)            Notwithstanding the foregoing clause (e), so long as no Default or Event of Default then exists and the Company Parties have delivered to Purchaser no less than once per year an environmental site assessment report with respect to a Site, Purchaser shall not be entitled to request additional site assessment reports unless such report provided by the Company Parties is reasonably unsatisfactory to Purchaser.   9.14 Additional Subsidiaries; Released Liens. (a)           The Company Parties shall cause any direct or indirect Subsidiary formed, created or acquired at any time after the Initial Closing to execute and deliver to the Purchaser contemporaneously with such formation, creation or acquisition: (i) a joinder to the Guaranty, in form and substance satisfactory to the Purchaser, pursuant to which such Subsidiary would become a Guarantor, (ii) a joinder to the Security Agreement, in form and substance satisfactory to the Purchaser, pursuant to which such Subsidiary would grant a security interest in all of its assets, (iii) an Intellectual Property Security Agreement or a joinder to an existing Intellectual Property Security Agreement, in form and substance satisfactory to the Purchaser, pursuant to which such Subsidiary would grant a security interest in all of its Intellectual Property, (iv) a pledge agreement, or a joinder to the Security Agreement and if such Subsidiary has any Subsidiaries, (A) to the extent not delivered to the Bank Agent pursuant to the Bank Credit Documents, certificates representing all of the Capital Stock of such Subsidiaries with undated stock powers executed in blank and (B) such opinions of counsel and such approving certificates of such Subsidiaries as the Purchaser may reasonably request in respect of complying with any legend on any such certificate or any other matter relating to such shares; (v) such other agreements, instruments, approvals or other documents as may be requested by the Purchaser in order to create, perfect, establish, and maintain the first priority status (subject only to the Liens of the Bank Agent and the Permitted Liens) of any Lien in favor of the Purchaser to effect the   74   -------------------------------------------------------------------------------- intent that such Subsidiary shall become bound by all of the terms, covenants and agreements contained in the Collateral Documents and that all property and assets of such Subsidiary shall become Collateral securing the Obligations, and (vi) such additional agreements, instruments, approvals and documents, and legal opinions, as the Purchaser may request to effect the intent that such Subsidiary shall become bound by all of the terms, covenants and agreements contained in this Agreement and the other Investment Documents. In addition, within three (3) Business Days after such formation, creation or acquisition of a Subsidiary, the Companies shall take whatever action (including the recording of mortgages, the filing of Uniform Commercial Code financing statements, the giving of notices and the endorsement of notices on title documents) may be necessary or advisable in the reasonable opinion of the Purchaser to vest in the Purchaser valid and subsisting Liens on and security interests in all property and assets of such Subsidiary, enforceable against all third parties in accordance with their terms. (b)           In the event the Bank Credit Documents are terminated or any Lien granted to the Purchaser the perfection of which is dependant on the perfection of any Lien granted to the Bank Agent is released or otherwise ceases to be perfected, the Company Parties shall promptly execute and deliver to the Purchaser (and in any event within two (2) Business Days of the date of such termination) such documents, agreements, instruments and legal opinions and take such other actions as the Purchaser may reasonably request to create, perfect, establish the priority of and/or maintain the perfection or priority of such Liens in favor of the Purchaser. In the event any additional Liens on the assets of any Company Party are granted to or perfected by the Bank Agent, the Company Parties shall promptly execute and deliver to the Purchaser (and in any event within two (2) Business Days of the date of such grant) such documents, agreements, instruments and legal opinions and take such other actions as the Purchaser may request to create, perfect, establish the priority of and/or maintain the perfection or priority of Liens on such assets in favor of the Purchaser as well. 9.15        Future Information. All data, certificates, reports, statements, documents and other information furnished to the Purchaser by or on behalf of the Company Parties, any of their Affiliates or any of their respective representatives or agents in connection with this Agreement, the other Investment Documents or the transactions contemplated hereby and thereby, at the time the information is so furnished, shall not contain any untrue statement of a material fact, shall be complete and correct in all material respects to the extent necessary to give the Purchaser sufficient and accurate knowledge of the subject matter thereof, and shall not omit to state a material fact necessary in order to make the statements contained therein not misleading in light of the circumstances under which such information is furnished. 9.16         Ownership. At all times after the Initial Closing, the Parent shall own, beneficially and of record, 100.0% of the outstanding Capital Stock of any Subsidiary formed, created or acquired after the Initial Closing. 9.17        Company SEC Documents. So long as the Parent has securities registered pursuant to Section 12 of the Exchange Act or is subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, the Parent shall timely file with the Commission, and provide to the Purchaser concurrently therewith, all Company SEC Documents as are specified in the Exchange Act as being required to be filed by U.S. corporations that are subject to reporting requirements of the Exchange Act. In addition, the Parent shall use its best efforts to timely file   75   -------------------------------------------------------------------------------- with the Nasdaq, and provide to the Purchaser concurrently therewith, all Company SEC Documents required to be filed therewith. Each Company SEC Document to be filed by the Parent, when filed with the Commission or the Nasdaq, as the case may be, will comply with all applicable requirements of the Securities Act, the Exchange Act or the Nasdaq rules, as the case may be, and will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The financial statements to be included in each Company SEC Document to be filed by the Parent will comply as to form, as of the date of its filing with the Commission, with applicable accounting requirements and the published rules and regulations of the Commission with respect thereto, will be prepared in accordance with GAAP (except, in the case of unaudited statements, as permitted by the Commission) and will fairly present in all material respects the consolidated financial position of the Company Parties as of the dates thereof and the consolidated results of their operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments consistent with past practices and consistently applied). Except as otherwise permitted under the Investor Rights Agreement, the Companies hereby agree to cause the Common Stock of the Parent to be publicly traded and listed or admitted for trading on an Acceptable Exchange within eighteen (18) months after the Initial Closing Date.   9.18 [Intentionally Omitted] 9.19        Further Assurances. Promptly after request by the Purchaser (and in any event within five (5) Business Days of the date of such request), from time to time after the date hereof, the Company Parties shall use their best efforts to cause any other Persons who are required to give their Consent to, execute and deliver such instruments, certificates and documents, and will take all such actions, for the purposes of implementing or effectuating the provisions of this Agreement, the Notes, the Warrant and the other Investment Documents. Upon exercise by the Purchaser of any power, right, privilege or remedy pursuant to this Agreement, or any other Investment Document which requires any Consent, the Company Parties shall use reasonable commercial efforts to cause any other Persons to, execute and deliver all applications, certifications, instruments and other documents and papers that may be required to be obtained for such Consent. Promptly, but in no event more than ten (10) Business Days' after the Purchaser's request, the Company Parties shall correct any material defect or error that may exist or be discovered in this Agreement, the Notes, the Warrant or any other Investment Document or in the execution, acknowledgment, filing or recordation thereof. Promptly upon request by the Purchaser (and in any event within two (2) Business Days of the date of such request), the Company Parties shall do, execute, acknowledge, deliver, record, re-record, file, re-file, register and re-register any and all such further acts, deeds, conveyances, pledge agreements, mortgages, deeds of trust, trust deeds, notices of assignment, transfers, certificates, assurances and other instruments as the Purchaser may require from time to time in order to (A) carry out more effectively the purposes of the Investment Documents, (B) to the fullest extent permitted by applicable law, subject each Company Parties' properties, assets, rights or interest to the Liens now or hereafter intended to be covered by any of the Collateral Documents, (C) perfect and maintain the validity, effectiveness and priority of any of the Collateral Documents and any of the Liens intended to be created thereunder and (D) assure, convey, grant, assign, transfer, preserve, protect and confirm more effectively unto the rights granted or now or hereafter intended to be granted to the Purchaser under any Investment Document or under any other   76   -------------------------------------------------------------------------------- instrument executed in connection with any Investment Document to which any Company Party is to be a party. Each Company Party hereby constitutes and appoints the Purchaser as its attorney in fact, with full power of substitution and resubstitution, for the purpose of carrying out the provisions of this Agreement and taking any action and executing any instrument which the Purchaser may deem necessary or advisable to accomplish the purposes hereof, which appointment is irrevocable and coupled with an interest. 9.20        Deposit Accounts and Deposit Account Control Agreements. Within 2 Business Days after the establishment by any Company Party of any deposit or securities account, such Company Party will provide written notice thereof, an updated Schedule 3.38 to Purchaser and, if requested by Purchaser, provide a Deposit Account Control Agreement with respect thereto within ten (10) days after such establishment. Within ten (10) days after the Final Closing, the Company Parties shall to deliver to the Purchaser (a) a Deposit Account Control Agreement for each deposit or securities account maintained by each Company Party and (b) a Deposit Account Control Agreement with respect to each deposit or securities account maintained by each Company Party as a "trust account" over which the Purchaser is permitted to obtain "control" (within the meaning of Section 9104 of the UCC) but has not obtained such "control" as of the Final Closing. 9.21         Survival of Certain Affirmative Covenants. From and after the date that the Obligations under the Notes have been indefeasibly paid and performed in full, the Companies shall no longer be obligated to perform, comply with and observe the covenants set forth in Section 9; provided, however , that until such time as the Purchaser owns or holds, or has the right to acquire, directly or indirectly, at least 499,802 shares of the Adjusted Capital Stock of the Parent, the following covenants and obligations shall survive: Section 9.4 (Compliance with Laws; Consents), and Section 9.17 (Company SEC Documents).   9.22 Post Closing Requirements. (a)            On or before September 30, 2006, the Companies shall have entered into an agreement to upgraded their financial reporting system to account for non-standard contracts and other manual transactions in a manner reasonably acceptable to the Purchaser. (b)           Immediately after the Final Closing and in any event within one (1) hour of the Final Closing, the Companies shall have filed the Late SEC Documents and the Restated SEC Documents. 10.           NEGATIVE AND FINANCIAL COVENANTS. The Company Parties covenant and agree that so long as any Obligations remain outstanding, the Company Parties shall perform, comply with and observe each of the covenants set forth in this Section 10, as applicable.   10.1 Limitations on Indebtedness. (a)           The Company Parties shall not directly or indirectly, create, incur, assume, guarantee, suffer to exist or become or remain liable with respect to any Indebtedness, except for:   77   --------------------------------------------------------------------------------   (i) The Obligations; (ii)           The Indebtedness under the Bank Credit Documents to the extent not exceeding $60,000,000 in the aggregate principal amount at any one time outstanding; (iii)         The Indebtedness under the GMAC Credit Documents to the extent not exceeding $7,000,000 in the aggregate principal amount at any one time outstanding; (iv)          Surety bonds and similar instruments incurred by any Company Party in the ordinary course of business in an aggregate amount of no more than $100,000; (v)           Subordinated unsecured Indebtedness so long as (w) after giving pro forma effect to the incurrence of such Indebtedness, no Default or Event of Default shall have occurred and be continuing, (x) such Indebtedness is subordinated to the Obligations on terms that are satisfactory to the Purchaser, and (y) immediately thereafter, but in any event within two (2) Business Days of the date such Indebtedness was incurred, the applicable Company Party shall provide final copies of such instruments evidencing such Indebtedness to the Purchaser, and (z) the amount of such Indebtedness does not exceed $5,000,000 in the aggregate; (vi)          guaranties by the Parent of its Subsidiaries’ lease obligations with respect to occupancy leases to the extent entered into in the ordinary course of business and consistent with the past practice of the Company Parties; (vii)        unsecured Indebtedness which does not exceed $100,000 in the aggregate; (viii)      Up until the Final Closing, the Indebtedness under the GECC Credit Documents to the extent not exceeding $85,000,000 in the aggregate principal amount at any one time outstanding. (b)           Without limiting the foregoing, no Company Party shall, directly or indirectly, create, incur, assume, guarantee, suffer to exist or become or remain liable with respect to (i) any Indebtedness which is senior in right of payment to the Obligations and which by its terms is subordinate or junior in right of payment to any Indebtedness under the Bank Credit Documents, (ii) any Indebtedness convertible into equity securities of any Company Party unless such Indebtedness by its terms is also subordinate in right of payment to the Obligations, (iii) any Indebtedness which by its terms is subordinate or junior in right of payment to the Obligations or which constitutes mandatorily redeemable preferred stock and which has a maturity or redemption date or any installment, sinking fund, serial maturity or other required payment of principal prior the scheduled maturity of the Notes, and (iv) any Indebtedness (other than Indebtedness under the Bank Credit Documents and Capitalized Lease Obligations) which is structurally senior in right of payment to the Obligations. 10.2       Limitations on Liens. The Company Parties shall not, directly or indirectly, create, incur, assume or suffer to exist, or enter into any agreement to grant, any Lien   78   -------------------------------------------------------------------------------- on or with respect to any of its properties (whether tangible or intangible, now owned or hereafter acquired, including accounts), except:   (a) Liens in favor of the Purchaser; (b)           Liens arising under the Bank Credit Documents securing the Indebtedness thereunder permitted pursuant to Section 10.1(a)(ii); (c)           Liens arising under the GMAC Credit Documents securing the Indebtedness thereunder permitted pursuant to Section 10.1(a)(iii);   (d) Liens set forth on Schedule 3.11(a) ;   (e) Permitted Liens; (f)            Liens incurred in connection with the financing of insurance premiums to the extent such Liens are restricted to the proceeds of such insurance policy; (g)           Liens with respect to assets of AAC Corp., a Delaware corporation, Sylvan Insurance Co., Ltd., a company organized under the laws of Bermuda, and/or Data Performance, Inc., a New Jersey corporation, which do not secure amounts in excess of $100,000 in the aggregate; and (h)           Up until the Final Closing, Liens arising under the GECC Credit Documents securing the Indebtedness thereunder permitted pursuant to Section 10.1(a)(viii). 10.3       Limitations on Investments. The Company Parties shall not, directly or indirectly, purchase, make or own any Investment, except:   (a) Permitted Investments; (b)           trade credit extended in the ordinary course of any Company Party's business; and   (c) Investments set forth on Schedule 3.11(a) . 10.4       Limitations on Restricted Payments. The Company Parties shall not, directly or indirectly, make any Restricted Payment other than: (a)            any dividend or other distribution on account of any Capital Stock of the Parent now or hereafter outstanding which is payable solely in shares of the same class of Capital Stock; provided, that, if elected by a holder, other than a Designated Shareholder, of Parent’s Series B 7% Cumulative Preferred Stock, Parent may pay dividends with respect to such preferred stock in cash in an amount not to exceed the amount provided for pursuant to Parent’s Organizational Documents establishing such preferred stock as in effect on the date hereof, so long as no Default or Event of Default shall have occurred and be continuing before and after giving effect to such payment.   79   -------------------------------------------------------------------------------- (b)           the issuance by the Parent of shares of Capital Stock of the Parent issuable upon exercise of the Warrant; (c)            distributions to any Company; provided that any distribution to the Parent shall not exceed the amount necessary to enable the Parent to (i) pay taxes when due and owing by the Parent in the ordinary course of its business as a holding company, and (ii) pay its reasonable general administrative costs and expenses including in respect of taxes and other fees required to maintain its existence and administrative, legal and accounting services provided by third parties; (d)           repurchases or redemptions of the Capital Stock of Parent held by its employees, officers or directors pursuant to any employee stock ownership plan thereof which are made upon the termination, retirement or death of any such employee, officer or director (as applicable) in accordance with the provisions of such plan so long as the aggregate amount paid in connection with such repurchases or redemptions does not exceed $100,000 in any fiscal year of Parent; (e)            so long as no Default or Event of Default shall have occurred and be continuing, payments to Butler International Charitable Foundation Corp., a New Jersey corporation, in an amount not to exceed $50,000 in the aggregate in any fiscal year of Parent; or (f)            payments to Edward M. Kopko made in the amount of, and to enable Edward M. Kopko to pay, income taxes assessed on awards of Capital Stock of Parent made to Edward M. Kopko in lieu of cash compensation payable to Edward M. Kopko pursuant to the Kopko Employment Agreement; provided, that, the aggregate amount so paid to Edward M. Kopko shall not exceed the aggregate compensation amount that would have been paid to Edward M. Kopko pursuant to the Kopko Employment Agreement if the entirety of such compensation amount had been paid in cash. 10.5       Limitations on Payment Restrictions Affecting Subsidiaries. Except as provided in this Agreement, any other Investment Documents or the Bank Credit Documents, the Company Parties shall not, and shall not permit any of their respective Subsidiaries to, enter into or permit to exist any agreement, arrangement, instrument or other document which, directly or indirectly, prohibits or restricts in any manner, or would have the effect of prohibiting or restricting in any manner, the ability of any Company Party to (a) pay dividends or make distributions in respect of its Capital Stock, (b) pay or repay any Indebtedness owed to any Company Party, (c) make loans or advances to any other Company Party or (d) transfer any of its properties or assets to any Company Party.   10.6 Limitations on Transactions With Affiliates. (a)           The Company Parties shall not enter into at any time any contract, transaction or other arrangement involving any Company Party, on the one hand, and any of its Affiliates, officers, directors or employees, on the other hand, unless such contract, transaction or arrangement (i) has been approved in writing in advance by a majority of the disinterested directors of the Board of Directors of the Parent and the Company Parties, to the extent applicable, or otherwise in accordance with Rule 4350(h) of the Corporate Governance Rules   80   -------------------------------------------------------------------------------- promulgated by Nasdaq, (ii) will be on terms and conditions that are no less favorable to the Company Party than those that would be obtained from any Person who is not an Affiliate of (or otherwise related to) the Company Party in a similar transaction and (iii) has been approved in writing in advance by the Purchaser if such contract, transaction or arrangement involves either (A) any Person who then holds or is to acquire, directly or indirectly, 5% or more of the Capital Stock of any Company Party or (B) a member of the Immediate Family of any officer or director of any Company Party or Person owned or controlled by any member of the Immediate Family of any officer or director of any Company Party; provided, that, the foregoing clause (iii) shall not be deemed to prohibit the performance by the Company Parties of any contract, transaction or arrangement in effect on the date hereof and disclosed to the Purchaser. The Company Parties shall not enter into any material amendment or modification of any contract, transaction or arrangement existing on the date hereof unless approved in writing in advance by the Purchaser if such contract, transaction or arrangement involves either (A) any Person who then holds or is to acquire, directly or indirectly, 5% or more of the Capital Stock of any Company Party or (B) a member of the Immediate Family of any officer or director of any Company Party or Person owned or controlled by any member of the Immediate Family of any officer or director of any Company Party. (b)           The Companies shall not, and shall not permit any other Company Party to, engage any member of the Immediate Family of any officer or director of any Company Party to be a Designated Officer of any Company Party. (c)           The provisions of this Section 10.6 shall not be deemed to prohibit the purchase by any Company Party of (i) all the Securities transacted on terms agreed to by Purchaser or (ii) Indebtedness permitted under Section 10.1(a)(v). 10.7         Change in Business. The Parent shall not engage in any business other than the holding the Capital Stock of its Subsidiaries and activities reasonably incidental thereto, and the Subsidiaries shall not engage in any business other than the business described in recital A and activities reasonably incidental thereto. 10.8         Sales of Receivables. The Company Parties shall not sell, assign, discount, transfer, or otherwise dispose of any accounts receivable, chattel paper, promissory notes, drafts or trade acceptances or other rights to receive payment held by it, with or without recourse, except for the purpose of collection or settlement in the ordinary course of business. 10.9         Fundamental Changes. Except for Permitted Business Combinations, no Company Party shall: (a)           make any change in its business objectives, purposes, structure or operations that is not in the ordinary course of its business, as the same exists on the date hereof; (b)           amend, modify or alter its charter, bylaws or other Organizational Documents in any manner which is either (i) materially adverse to the interests of the Purchaser or (ii) adversely affects the ability of any Company Party to repay the Obligations or the Guarantied Obligations, as the case may be, or otherwise perform its obligations hereunder or under any other Investment Document;   81   --------------------------------------------------------------------------------   (c) merge, consolidate, amalgamate, reorganize or recapitalize;   (d) form, create or acquire any additional Subsidiaries; (e)           sell, lease, transfer or otherwise dispose of, in any transaction or series of transactions, any assets (whether now owned or hereafter acquired), including shares of the Capital Stock of any Subsidiary, other than: (i) inventory or equipment sold or leased in the ordinary course of business; (ii) dispositions of assets in the ordinary course of business not to exceed $100,000 in the aggregate in any Fiscal Year; and (iii) Permitted Asset Sales; (f)            wind up, liquidate or dissolve itself (or permit or suffer any thereof); (g)           become a general partner or member in any limited partnership, limited liability company or joint venture; (h)           take any action to change the organizational, tax or ownership structure of any Company Party or any Subsidiary; or (i)            engage in any transactions involving commodity options or futures contracts or any similar speculative transactions. 10.10     Agreements Affecting Capital Stock and Indebtedness; Amendments to Material Contracts. The Company Parties shall not: (a)           Enter into any voting agreement, voting trust, irrevocable proxy or other agreement affecting the voting rights of the Capital Stock of any Company Party, except for, in the case of the Parent, the Investor Rights Agreement; or (b)           Amend, supplement, modify, refinance, renew, replace or restructure any Other Debt Document (except, with respect to the Bank Credit Documents, as permitted under the Intercreditor Agreement), or waive any term or provision contained therein if the resulting amendment, supplement, modification, refinancing, renewal, replacement, restructure or waiver is materially disadvantageous to the Purchaser, as reasonably determined by Purchaser. 10.11     Conditional Sales . The Company Parties shall not make any sale to any customer on a bill-and-hold, guaranteed sale, sale and return, sale on approval, consignment or any other repurchase or return basis, other than in the ordinary course of business consistent with prior practice. 10.12     Margin Stock . The Companies shall not, and shall not permit any other Company Party to, directly or indirectly, use any of the proceeds from the issuance and sale of the Securities for the purpose, whether immediate, incidental or ultimate, of purchasing or carrying any Margin Stock or maintaining or extending credit to others for such purpose or for any other purpose that violates the Margin Regulations. If requested by the Purchaser, the Companies or the Parent will promptly furnish to the Purchaser (and in any event within two (2)   82   -------------------------------------------------------------------------------- Business Days of the date of such request) a statement in conformity with the requirements of Federal Reserve Form U 1 referred to in the Margin Regulations. 10.13     Accounting Changes . The Companies shall not, and shall not permit any other Company Party to, make any change in its accounting policies or reporting practices, except as required by GAAP, or change its Fiscal Year. No Subsidiary shall have a Fiscal Year different from that of the Parent. 10.14     Negative Pledge . The Company Parties shall not enter into or suffer to exist any agreement prohibiting or conditioning the creating or assumption of any Lien (other than Permitted Liens) upon any of its property or assets except in favor of the Purchaser or pursuant to the Bank Credit Documents.   10.15 Financial Covenants. (a)            Minimum EBITDA. After the Final Closing, for each of the periods listed in the table below, EBITDA shall not be (i) for purposes of Sections 11.1 and 11.2, less than the total amount reflected in Column B or (ii) for purposes of Section 11.3, less than the total amount reflected in Column A, in each case as set forth opposite such period in the table below:             Minimum EBITDA Quarterly Period Column A   Column B   Trailing four consecutive Fiscal Quarters ending September 30, 2006 $11,680,000 $11,013,000 Trailing four consecutive Fiscal Quarters ending December 31, 2006 $13,425,000 $12,658,000 Trailing four consecutive Fiscal Quarters ending March 31, 2007 $14,304,000 $13,487,000 Trailing four consecutive Fiscal Quarter ending June 30, 2007 $15,712,000 $14,814,000 Trailing four consecutive Fiscal Quarter ending September 30, 2007 $14,874,000 $13,999,000 Trailing four consecutive Fiscal Quarter ending December 31, 2007 $14,522,000 $13,668,000 Trailing four consecutive Fiscal Quarter ending March 31, 2008 $15,107,000 $14,218,000 Trailing four consecutive Fiscal Quarter ending June 30, 2008 $15,718,000 $14,793,000 Trailing four consecutive Fiscal Quarter ending September 30, 2008 $15,305,000 $14,348,000 Trailing four consecutive Fiscal Quarter ending December 31, 2008 $15,825,000 $14,836,000     83   --------------------------------------------------------------------------------             Minimum EBITDA Trailing four consecutive Fiscal Quarter ending March 31, 2009 $15,998,000 $14,998,000 Trailing four consecutive Fiscal Quarter ending June 30, 2009 $16,183,000 $15,172,000 Trailing four consecutive Fiscal Quarter ending September 30, 2009 $16,349,000 $15,328,000 Trailing four consecutive Fiscal Quarter ending December 31, 2009 $16,457,000 $15,429,000 Trailing four consecutive Fiscal Quarter ending March 31, 2010 $16,649,000 $15,608,000 Trailing four consecutive Fiscal Quarter ending June 30, 2010 $16,897,000 $15,841,000 Trailing four consecutive Fiscal Quarter ending September 30, 2010 $17,168,000 $16,095,000 Trailing four consecutive Fiscal Quarter ending December 31, 2010 $17,447,000 $16,357,000 Trailing four consecutive Fiscal Quarter ending March 31, 2011 $17,639,000 $16,536,000 Trailing four consecutive Fiscal Quarter ending June 30, 2011 $17,887,000 $16,769,000   (b)           Minimum Fixed Charge Coverage Ratio. After the Final Closing, for each of the periods listed in the table below, the Fixed Charge Coverage Ratio shall not be less than the ratio set forth opposite such period in the table:   Minimum Fixed Charge Coverage Ratio Quarterly Period Column A Column B Trailing one consecutive Fiscal Quarters ending September 30, 2006 1.47 1.39 Trailing two consecutive Fiscal Quarters ending December 31, 2006 1.53 1.44 Trailing three consecutive Fiscal Quarters ending March 31, 2007 1.34 1.26 Trailing four consecutive Fiscal Quarter ending June 30, 2007 1.34 1.26 Trailing four consecutive Fiscal Quarter ending September 30, 2007 1.18 1.12 Trailing four consecutive Fiscal Quarter ending December 31, 2007 1.06 1.00 Trailing four consecutive Fiscal Quarter ending March 31, 2008 1.06 1.00     84   --------------------------------------------------------------------------------   Trailing four consecutive Fiscal Quarter ending June 30, 2008 1.05 1.00 Trailing four consecutive Fiscal Quarter ending September 30, 2008 1.05 1.00 Trailing four consecutive Fiscal Quarter ending December 31, 2008 1.05 1.00 Trailing four consecutive Fiscal Quarter ending March 31, 2009 1.05 1.00 Trailing four consecutive Fiscal Quarter ending June 30, 2009 1.05 1.00 Trailing four consecutive Fiscal Quarter ending September 30, 2009 1.05 1.00 Trailing four consecutive Fiscal Quarter ending December 31, 2009 1.05 1.00 Trailing four consecutive Fiscal Quarter ending March 31, 2010 1.05 1.00 Trailing four consecutive Fiscal Quarter ending June 30, 2010 1.05 1.00 Trailing four consecutive Fiscal Quarter ending September 30, 2010 1.09 1.02 Trailing four consecutive Fiscal Quarter ending December 31, 2010 1.14 1.07 Trailing four consecutive Fiscal Quarter ending March 31, 2011 1.14 1.07 Trailing four consecutive Fiscal Quarter ending June 30, 2011 1.14 1.07     (c)            Maximum Leverage Ratio. After the Final Closing, for each of the periods listed in the table below, the Leverage Ratio shall not be more than the ratio set forth opposite such period in the table:   Maximum Leverage Ratio Quarterly Period Column A Column B Trailing four consecutive Fiscal Quarters ending September 30, 2006 6.37 6.67 Trailing four consecutive Fiscal Quarters ending December 31, 2006 5.37 5.67 Trailing four consecutive Fiscal Quarters ending March 31, 2007 4.53 4.83     85   --------------------------------------------------------------------------------   Trailing four consecutive Fiscal Quarter ending June 30, 2007 4.19 4.49 Trailing four consecutive Fiscal Quarter ending September 30, 2007 4.41 4.71 Trailing four consecutive Fiscal Quarter ending December 31, 2007 4.38 4.68 Trailing four consecutive Fiscal Quarter ending March 31, 2008 4.26 4.56 Trailing four consecutive Fiscal Quarter ending June 30, 2008 4.21 4.51 Trailing four consecutive Fiscal Quarter ending September 30, 2008 4.34 4.64 Trailing four consecutive Fiscal Quarter ending December 31, 2008 4.11 4.41 Trailing four consecutive Fiscal Quarter ending March 31, 2009 3.96 4.26 Trailing four consecutive Fiscal Quarter ending June 30, 2009 4.06 4.36 Trailing four consecutive Fiscal Quarter ending September 30, 2009 4.04 4.34 Trailing four consecutive Fiscal Quarter ending December 31, 2009 3.94 4.24 Trailing four consecutive Fiscal Quarter ending March 31, 2010 3.73 4.03 Trailing four consecutive Fiscal Quarter ending June 30, 2010 3.86 4.16 Trailing four consecutive Fiscal Quarter ending September 30, 2010 3.81 4.11 Trailing four consecutive Fiscal Quarter ending December 31, 2010 3.66 3.96 Trailing four consecutive Fiscal Quarter ending March 31, 2011 3.66 3.96 Trailing four consecutive Fiscal Quarter ending June 30, 2011 3.66 3.96     (d)           Maximum Capital Expenditures. After the Final Closing, during any Fiscal Year, Capital Expenditures shall not exceed $1,500,000 during any Fiscal Quarter and in any case shall not exceed $3,500,000 in the aggregate for such Fiscal Year.   (e)            Minimum Excess Availability. After the Final Closing, the Companies shall not permit Availability (as defined in the Bank Credit Documents), calculated   86   -------------------------------------------------------------------------------- on a monthly basis, to be less than the greater of (i) $2,500,000 or (ii) such amount to be determined in the corresponding financial covenant set forth in the Bank Credit Documents. (f)            Minimum Average Billable Headcount. After the Final Closing, for each of the periods listed in the table below, the Average Billable Headcount of the Companies shall not be less than the amount set forth opposite such period in the table: Period Minimum Average Billable Headcount September 30, 2006 2,700 December 31, 2006 2,700 March 31, 2007 2,500 June 30, 2007 2,900 September 30, 2007 2,900 December 31, 2007 2,900 March 31, 2008 2,700 June 30, 2008 3,100 September 30, 2008 3,200 December 31, 2008 3,200 March 31, 2009 2,800 June 30, 2009 3,200 September 30, 2009 3,300 December 31, 2009 3,300 March 31, 2010 2,900 June 30, 2010 3,300 September 30, 2010 3,400 December 31, 2010 3,400 March 31, 2011 3,300 June 30, 2011 3,200   (g)           Losses of Butler Publishing. After the Initial Closing, as of any date of determination, the amount of losses of Butler Publishing for the trailing twelve month period ending on such date of determination shall not exceed $1,000,000. 10.16     Benefit Plans . The Companies shall not, and shall not permit any other Company Party to, satisfy any matching obligations under any Benefit Plan by the contribution of the Capital Stock of the Parent to any such Benefit Plan in a manner inconsistent with past practices.   11. DEFAULTS AND REMEDIES. 11.1       Events of Default. The occurrence of any one or more of the following events, acts or occurrences shall constitute an event of default (each an "Event of Default"):   87   -------------------------------------------------------------------------------- (a)           The Companies shall fail to pay as and when due (whether at stated maturity, upon acceleration or demand or required prepayment or otherwise) any principal, premium, if any, interest or other amount payable under any Note; or (b)           Any Company Party shall breach or fail to pay any amount (including fees, costs or expenses) payable under this Agreement, any Guaranty or any other Investment Document (other than any Note as provided in Section 11.1(a)) to which it is a party; or (c)           Any Company Party shall breach or fail to perform, comply with or observe any agreement, covenant or obligation required to be performed by it under Section 9.1 (Payment of Notes and Other Obligations), Section 9.2 (Performance of Investment Documents), Section 9.3 (Information Reporting Requirements), Section 9.6 (Books and Records; Inspections), Section 9.8 (Insurance), Section 9.9 (Taxes), Section 9.10 (ERISA Matters), Section 9.11 (Communication with Accountants), Section 9.16 (Ownership), Section 9.17 (Company SEC Documents), Section 9.20 (Deposit Accounts and Deposit Account Control Agreements), Section 9.22 (Post Closing Requirements) Section 10.1 (Limitations on Indebtedness), Section 10.2 (Limitations on Liens), Section 10.3 (Limitations on Investments), Section 10.4 (Limitations on Restricted Payments), Section 10.6 (Limitations on Transactions With Affiliates), Section 10.7 (Change in Business), Section 10.9 (Fundamental Changes), and Section 10.16 (Benefit Plans); or (d)           Any Company Party shall breach or fail to perform, comply with or observe any covenant or obligation required to be performed by it under any Investment Document (other than the covenants and obligations covered by Sections 11.1(a), (b) or (c)) and, and, if such breach or failure may be cured, such breach or failure shall not have been remedied within ten (10) days after such failure or breach is first known to a Designated Officer; or (e)           Any (i) representation or warranty which contains any materiality standard by its terms that is made by any Company Party in this Agreement or any other Investment Document to which it is a party shall be false or misleading or incorrect in any respect when made (or deemed made) or (ii) other representation or warranty made by any Company Party in this Agreement or any other Investment Document to which it is a party shall be false or misleading or incorrect in any material respect when made (or deemed made); or (f)            Any “Default” or “Event of Default” under any of the Bank Credit Documents or the GMAC Credit Documents shall have occurred; or (g)           (i) Any Company Party shall default in the payment (whether at stated maturity, upon acceleration or demand or required prepayment or otherwise), beyond any period of grace provided therefor, of any principal of or interest on any other Indebtedness with a principal amount in excess of $100,000, either individually or in the aggregate; or (ii) any other breach or default (or other event or condition) shall occur under any agreement, indenture or instrument evidencing or governing any such other Indebtedness, if the effect of such breach or default (or such other event or condition) is to cause, or to permit the holder or holders of such other Indebtedness to cause (upon the giving of notice or the passage of time or both), such other Indebtedness to mature or become or be declared due and payable, or required to be prepaid,   88   -------------------------------------------------------------------------------- redeemed, purchased or defeased prior to its stated maturity, unless such breach or default has been waived within ten (10) days following such breach or default by the Person or Persons entitled to give such waiver; or (iii) such other Indebtedness shall be declared to be due and payable or required to be prepaid or redeemed (other than by a regularly scheduled required prepayment or redemption) purchased or defeased, or any offer to prepay, redeem, purchase or defease such Indebtedness shall be required to be made, or is made, in each case prior to the stated maturity thereof; or (h)           Any Investment Document, or any material provision thereof, shall cease to be of full force and effect, valid and enforceable, for any reason other than in accordance with its terms, or any Company Party shall contest or purport to repudiate or disavow any of its obligations under or the validity or enforceability of any Investment Document or any material provision thereof, including by operation of law, or any Collateral Document shall for any reason cease to create a valid and perfected first priority lien (subject only to the Liens of the Bank Agent and the Permitted Liens) and security interest on the Collateral purported to be covered thereby; or (i)            There shall be commenced against any Company Party an involuntary case seeking the liquidation or reorganization of such Person under the Bankruptcy Laws or any similar proceeding under any other Applicable Laws or an involuntary case or proceeding seeking the appointment of a receiver, custodian, trustee or similar official for it, or to take possession of all or a substantial portion of its property or to operate all or a substantial portion of its business, and any of the following events occur: (i) any such Person consents to such involuntary case or proceeding or fails to diligently contest it in good faith; (ii) the petition commencing the involuntary case or proceeding is not timely controverted; (iii) the petition commencing the involuntary case or proceeding remains undismissed and unstayed for a period of thirty (30) days; or (iv) an order for relief shall have been issued or entered therein or a receiver, custodian, trustee or similar official appointed; or (j)            Any Company Party shall institute a voluntary case seeking liquidation or reorganization under the Bankruptcy Laws or any similar proceeding under any other Applicable Laws, or shall consent thereto; or shall consent to the conversion of an involuntary case to a voluntary case; or shall file a petition, answer a complaint or otherwise institute any proceeding seeking, or shall consent or acquiesce to the appointment of, a receiver, custodian, trustee or similar official for it, or to take possession of all or a substantial portion of its property or to operate all or a substantial portion of its business; or shall make a general assignment for the benefit of creditors; or shall generally not pay its debts as they become due or shall admit in writing its inability to pay its debts generally; or the Board of Directors of any such Person (or any committee thereof) adopts any resolution or otherwise authorizes action to approve any of the foregoing; or (k)           Any Company Party shall suffer any money judgment, writ, warrant of attachment or other order that involves an amount or value, individually or in the aggregate, in excess of $250,000 to the extent not covered by insurance as to which the relevant insurance company unconditionally has acknowledged coverage without reservation of rights, discounts or deductibles, and such judgment, writ, warrant or other order shall continue unsatisfied and unstayed for a period of ten (10) days, or any non-monetary judgment, writ,   89   -------------------------------------------------------------------------------- warrant or other order, shall be rendered against any Company Party that could have a Material Adverse Effect and that continues unsatisfied and unstayed for a period of ten (10) days; or   (l) There shall occur any Change in Control; or   (m) There shall occur any Material Adverse Change; or (n)           (i) Any Termination Event shall occur that, when taken together with all other Termination Events that have occurred, could reasonably be expected to result in a liability to any Company Party or any ERISA Affiliate in excess of $250,000; (ii) any Company Party or any ERISA Affiliate shall have committed a failure described in Section 302(f)(1) of ERISA and the amount determined under Section 302(f)(3) of ERISA is at least $250,000; (iii) any failure to make full payment (including all required installments) when due of all amounts that, under the provisions of any Benefit Plan or Applicable Law, any Company Party or any ERISA Affiliate is required to pay as contributions thereto, which would result in a liability to any Company Party or ERISA Affiliate in excess of $250,000; or (iv) any Company Party or any ERISA Affiliate shall have incurred any accumulated funding deficiency in excess of $250,000, whether or not waived, with respect to any Benefit Plan; or (o)           If EBITDA, the Fixed Charge Coverage Ratio and the Leverage Ratio, when measured as of the end of any fiscal quarter, is less than the amounts set forth in Column B of Sections 10.15(a), (b) and (c), respectively, for such fiscal quarter end period. The foregoing Events of Default shall be deemed to have occurred, respectively, and any adjustments in the interest rate under any Note or other remedies available to the Purchaser hereunder or thereunder shall begin to apply, at the following times: (i)            In the case of the clause (a) or (b) above, as of 10:00 a.m. (Los Angeles time) on the day on which such payment is due but has not been paid; (ii)           In the case of clause (c) above, immediately upon the occurrence of any such breach or failure, ; (iii)         In the case of clause (d) above, immediately upon the occurrence of any such breach or failure, unless such breach or failure may be cured, in which case after such ten (10) day period if such breach or failure shall not have been cured; (iv)         In the case of clause (e) above, as of the close of business on the day on which any Company first became aware, or should have become aware, that such representation or warranty was false or misleading or incorrect in any material respect when made; (v)           In the case of (f) above, as of the occurrence of “Default” or “Event of Default” under the applicable Bank Credit Document; (vi)         In the case of clause (g)(i) above, as of the close of business on the day on which such payment of principal or interest is due, or in the case of clause (g)(ii), as of the close of business on the tenth (10th) day following such breach or default if such   90   -------------------------------------------------------------------------------- breach or default has not been waived by the Person or Persons entitled to give such waiver, or in the case of clause (g)(iii) above, immediately upon the occurrence of any event listed therein; (vii)        In the case of clause (h) above, as of the close of business on the day such Investment Document or provision, as the case may be, ceases to be enforceable or is contested, repudiated, revoked or disavowed, or such Collateral Document ceases to create such a valid and perfected first priority Lien (subject only the Lien of Bank Agent); (viii)      In the case of clauses (i) and (j) above, immediately prior to the occurrence of any of the events enumerated therein; (ix)         In the case of clause (k) above, as of the close of business on the last day of such ten (10) day period if such judgment, writ, warrant or order is unsatisfied or unstayed; (x)           In the case of clause (l) above, immediately upon the occurrence of the Change in Control; (xi)         In the case of clause (m) above, immediately upon the occurrence of the Material Adverse Change; (xii)        In the case of clause (n) above, immediately upon the occurrence of any such events; and (xiii)      In the case of clause (o) above, immediately upon the occurrence of any such events. 11.2         Acceleration. If any Event of Default (other than an Event of Default specified in Sections 11.1(i) or 11.1(j)) occurs and is continuing, Holders of a Majority in Interest may, by written notice to the Parent, declare all outstanding principal of, premium, if any, accrued and unpaid interest on, and all other amounts under the Notes, and all other Obligations, to be due and payable. Upon any such declaration of acceleration, such principal, premium, if any, interest and other amounts shall become immediately due and payable. If an Event of Default specified in Sections 11.1(i) or 11.1(j) occurs, all outstanding principal of, premium, if any, accrued and unpaid interest on, and all other amounts under the Notes, and all other Obligations, shall become immediately due and payable without any declaration or other act on the part of the Purchaser. The Companies hereby waives all presentment for payment, demand, protest, notice of protest and notice of dishonor, and all other notices of any kind to which they may be entitled under Applicable Laws or otherwise. 11.3         Interest Rate Event. If EBITDA, the Fixed Charge Coverage Ratio and the Leverage Ratio, when measured as of the end of any fiscal quarter, is less than the amounts set forth in Column A of Sections 10.15(a), (b) and (c), respectively, but equals or exceeds the amounts set forth in Column B of Section 10.15(a), (b) and (c), respectively, for such fiscal quarter end period, then such event shall constitute an “Interest Rate Event”. 11.4        Other Remedies. If any Default or Event of Default shall occur and be continuing, the Purchaser may proceed to protect and enforce their rights and remedies under this   91   -------------------------------------------------------------------------------- Agreement and any other Investment Document by exercising all rights and remedies available under this Agreement, any other Investment Document or Applicable Laws, either by suit in equity or by action at law, or both, whether for the collection of principal of or interest on the Notes, to enforce the specific performance of any covenant or other term contained in this Agreement or any other Investment Document. No remedy conferred in this Agreement upon the Purchaser is intended to be exclusive of any other remedy, and each and every such remedy shall be cumulative and shall be in addition to every other remedy conferred herein or now or hereafter existing at law or in equity or by statute or otherwise. 11.5         Appointment of Receiver. Prior to payment in full of all amounts due under the Notes and all Obligations, in addition to all other rights, powers and remedies that the Purchaser has under this Agreement, any other Investment Document or Applicable Laws, the Purchaser shall, to the extent permitted by Applicable Laws, be entitled to, and the Company Parties hereby consent in advance to, the appointment of a receiver by any court of competent jurisdiction to take control of the Company Parties for the purpose of operating and thereafter selling any Company Party to satisfy obligations to creditors, including the Purchaser. 11.6        Waiver of Past Defaults. The Purchaser may, by written notice to the Parent, waive any specified Default or Event of Default and its consequences with respect to this Agreement, the Notes or any other Investment Document; provided, however, that no such waiver will extend to any subsequent or other Default or Event of Default or impair any rights of the Purchaser which may arise as a result of such other Default or Event of Default.   12. [Intentionally Omitted.]   13. MISCELLANEOUS. 13.1         Survival of Representations and Warranties; Purchaser Investigation. Unless otherwise indicated herein, all representations, warranties, covenants and agreements of the Company Parties (or any of them) contained herein, or made in writing by or on behalf of any of them pursuant hereto or in connection herewith, shall survive the execution and delivery of this Agreement, the issuance, sale and delivery of the Securities, the repayment of the Notes and the exercise of the Warrant and the due diligence or other investigation of the Company Parties and their Affiliates made by and on behalf of the Purchaser. The Company Parties hereby agree that neither the Purchaser's review of the books and records or condition (financial or otherwise), business, assets, properties, operations or prospects of any Person, nor any other due diligence investigation conducted by or on behalf of the Purchaser, shall be deemed to constitute knowledge by the Purchaser of the existence or absence of any facts or any other matters so as to reduce the Purchaser's right to rely on the accuracy of the representations and warranties of the Company Parties contained in this Agreement or any other Investment Document. 13.2        Consent to Amendments. This Agreement and the other Investment Documents may be amended, and the observance of any term hereof or thereof may be waived (either retroactively or prospectively), with (and only with) the written consent of the Parent, on the one hand, and the Purchaser, on the other hand, except as expressly set forth in the Notes and the Warrant, as applicable. The Companies and each other Company Party may take any action   92   -------------------------------------------------------------------------------- herein prohibited, or omit to perform any act herein required to be performed by them, if, and only if, the Parent or such other Company Party shall have obtained the prior written consent of the Purchaser to such action or omission. No course of dealing between the Company Parties, on the one hand, and the Purchaser (or any successor or assignee thereof), on the other hand, nor any delay in exercising any rights hereunder or under the Notes or any other Investment Document shall operate as a waiver of any rights of the Purchaser (or any other Holder). 13.3       Entire Agreement. This Agreement, together with the Exhibits and the Disclosure Schedules which are all incorporated herein by this reference and are an integral part of this Agreement, the Notes, the Warrant and the other Investment Documents constitute the full and entire agreement and understanding between the Purchaser, on the one hand, and the Company Parties, on the other hand, relating to the subject matter hereof and thereof, and supersede all prior oral and written, and all contemporaneous oral, agreements and understandings relating to the subject matter hereof, including the proposal letter dated April 19, 2006, between Levine Leichtman Capital Partners, Inc., on the one hand, and the Parent on the other hand. 13.4         Severability. If any provision of this Agreement is held to be illegal, invalid, or unenforceable under present or future Applicable Laws during the term thereof, such provision shall be fully severable, this Agreement shall be construed and enforced as if such illegal, invalid, or unenforceable provision had never comprised a part thereof, and the remaining provisions thereof shall remain in fill force and effect and shall not be affected by the illegal, invalid, or unenforceable provision or by its severance therefrom. Furthermore, in lieu of such illegal, invalid, or unenforceable provision there shall be added automatically as a part of this Agreement a legal, valid, and enforceable provision as similar in terms to the illegal, invalid, or unenforceable provision as may be possible.   13.5 Successors and Assigns; Assignments; Participations . (a)           This Agreement shall inure to the benefit of, and be binding upon, the parties and their respective successors and permitted assigns. In addition, it is the intent of the parties that the Indemnified Parties that are not a party hereto be third party beneficiaries of Section 8.2 of this Agreement. The Companies may not assign, transfer or delegate any of their rights and obligations hereunder or any interest herein or therein, by operation of law or otherwise, without the prior written consent of the Purchaser. (b)           The Purchaser may without the consent of the Company Parties, sell, assign or delegate (each an "Assignment") to one or more Persons (each an "Assignee") at any time and from time to time all or any part of its right, title and interest in and to this Agreement, the Notes and the other Investment Documents, including all or any part of the Obligations, subject to compliance with applicable federal and state securities laws; provided, however, if no Default or Event of Default has occurred and is continuing, the Purchaser (i) shall not sell, assign or delegate any part of its right, title and interest in and to this Agreement, the Notes and the Investment Documents, including all or any part of the Obligations, to a competitor of the Company Parties set forth in Schedule 13.5, and (ii) shall use its reasonable efforts to advise with the Parent prior to any Assignment (other than with respect to any Assignment to an Affiliate of the Purchaser or of the Assignee) the failure of which will not give   93   -------------------------------------------------------------------------------- rise to or otherwise result in any liability to the Purchaser or any of the Assignees and will have no effect on the validity of such Assignment; provided further however, that the Company Parties may continue to deal solely and directly with the Purchaser in connection with any right, title or interest so sold or assigned until written notice of such sale or assignment, together with payment instructions, addresses and related information with respect to the Assignee, shall have been given to the Parent. If the Purchaser assigns to one or more Assignees a fifty percent (50.0%) or lesser interest in and to the then outstanding aggregate principal amount of the Notes, any decisions that the Purchaser is entitled to make under this Agreement, the Notes and the other Investment Documents shall be made by the Purchaser, and the Company Parties may continue to deal solely and directly with respect to the Purchaser in connection with the interests so assigned to the Assignee(s). If the Purchaser assigns to one or more Assignees more than a fifty percent (50.0%) interest in and to the then outstanding aggregate principal amount of the Notes, any decisions that the Purchaser is entitled to make under this Agreement, the Notes and the other Investment Documents shall be made by the Holders of a Majority in Interest, such decisions to be made in the manner directed by such Holders. (c)           The Purchaser may, without notice to or the consent of the Company Parties, grant or sell to one or more Persons (a "Participant") participations (each a "Participation") in all or any part of its right, title and interest in and to this Agreement, the Notes, the Warrant and the other Investment Documents, including all or any part of the Obligations, subject to compliance with applicable federal and state securities laws. If the Purchaser grants or sells a Participation, (i) the Purchaser will make and receive all payments for the account of the Participant; (ii) the Purchaser will continue to be the sole holder of the Notes, the Warrant and the other Investment Documents; (iii) the Company Parties shall continue to deal solely and directly with the Purchaser in connection with the Purchaser's rights under this Agreement, the Notes, the Warrant and the other Investment Documents; and (iv) the agreement under which the Participation is granted or sold shall not restrict the Purchaser's ability to agree to any amendments of the Investment Documents, or to exercise or refrain from exercising any rights, powers or remedies that the Purchaser may have under or in respect of the Investment Documents or any Collateral. Without limiting clause (iv) above, nothing in this Agreement, the Notes or any other Investment Document or otherwise shall confer upon the Participant any rights with respect to the administration, waiver, amendment, collection and enforcement of, compliance with and consent to the terms and provisions of this Agreement, the Notes or any other Investment Document, and the Purchaser shall retain all such rights. (d)           The Purchaser may at any time furnish to one or more potential Assignees or Participants any information concerning the Company Parties and their respective businesses and operations that has been furnished by or on behalf of the Companies to the Purchaser. The Companies agree to furnish all reasonably requested information, and execute and deliver all such agreements, instruments and other documents and take such further action (including, in the case of an Assignment, the execution and delivery of replacement Notes) as the Purchaser may requested in connection with any Assignment or Participation arrangement. 13.6         Notices. All notices, requests, demands and other communications which are required or may be given under this Agreement shall be in writing and shall be deemed to have been duly given if transmitted by telecopier with receipt acknowledged by the recipient, or upon delivery, if delivered personally or by recognized commercial courier with receipt   94   -------------------------------------------------------------------------------- acknowledged, or upon the expiration of 72 hours after mailing, if mailed by registered or certified mail, return receipt requested, postage prepaid, addressed as follows:   (a) If to the Purchaser (or any one of them), to: Levine Leichtman Capital Partners III, L.P. c/o Levine Leichtman Capital Partners, Inc. 335 North Maple Drive, Suite 240 Beverly Hills, CA 90210 Attention: Arthur E. Levine, President Telephone: (310) 275-5335 Telecopier: (310) 275-1441 with a copy to:   Bingham McCutchen LLP 355 South Grand Avenue, Suite 4400 Los Angeles, CA 90071 Attention: Richard J. Welch, Esq. Telephone: (213) 680-6400 Telecopier: (213) 680-6499   (b) If to any Company Party, to: Butler International, Inc. 110 Summit Avenue Montvale, NJ 07645 Attention: Richard Paras, Vice President - Legal Telephone: (201) 573-8000 Telecopier: (201) 573-9723 with a copy to:   McBreen, McBreen & Kopko 20 North Wacker Drive, Suite 2520 Chicago, IL 60606 Attention: Frederick Kopko, Jr., Esq. Telephone: (312) 332-6405 Telecopier: (312) 332-2657 or at such other address or addresses as the Purchaser or the Parent, as the case may be, may specify by written notice given in accordance with this Section 13.6. 13.7         Counterparts. This Agreement may be executed in two or more counterparts and by facsimile or other similar means of electronic transmission, each of which shall be deemed an original, but all of which together shall constitute one instrument.   95   -------------------------------------------------------------------------------- 13.8        Governing Law. IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF CALIFORNIA APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THAT STATE (WITHOUT REGARD TO THE CHOICE OF LAW OR CONFLICTS OF LAW PROVISIONS THEREOF) AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. 13.9        Consent to Jurisdiction and Venue. THE COMPANY PARTIES AND THE PURCHASER HEREBY IRREVOCABLY AND UNCONDITIONALLY CONSENT AND AGREE THAT ALL ACTIONS, SUITS OR OTHER PROCEEDINGS ARISING UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER INVESTMENT DOCUMENT SHALL BE TRIED AND LITIGATED IN STATE OR FEDERAL COURTS LOCATED IN THE CITY OF LOS ANGELES, COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, WHICH COURTS SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY AND ALL CLAIMS, CONTROVERSIES AND DISPUTES ARISING OUT OF OR RELATED TO THIS AGREEMENT OR ANY OTHER INVESTMENT DOCUMENT. NOTWITHSTANDING THE FOREGOING, NOTHING CONTAINED IN THIS SECTION 13.9 SHALL PRECLUDE THE PURCHASER FROM BRINGING ANY ACTION, SUIT OR OTHER PROCEEDING IN THE COURTS OF ANY OTHER LOCATION WHERE THE COMPANY PARTIES OR ANY ONE OF THEM OR ANY OF ITS OR THEIR ASSETS OR THE COLLATERAL MAY BE FOUND OR LOCATED OR TO ENFORCE ANY JUDGMENT OR OTHER COURT ORDER IN FAVOR OF THE PURCHASER. EACH COMPANY PARTY, FOR ITSELF AND ITS PROPERTY, (A) IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY SUCH COURT AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION, SUIT OR OTHER PROCEEDING COMMENCED IN ANY SUCH COURT, (B) WAIVES ANY RIGHT IT MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR ANY OBJECTION THAT SUCH PERSON MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION OR IMPROPER VENUE AND (C) CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT. THE COMPANY PARTIES AND THE PURCHASER HEREBY WAIVE PERSONAL SERVICE OF THE SUMMONS, COMPLAINT OR OTHER PROCESS ISSUED IN ANY SUCH ACTION, SUIT OR OTHER PROCEEDING AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO SUCH PARTY AT THE ADDRESS SET FORTH IN SECTION 13.6 (NOTICES) AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF SUCH PERSON'S ACTUAL RECEIPT THEREOF OR FIVE DAYS AFTER DEPOSIT IN THE UNITED STATES MAIL, PROPER POSTAGE PREPAID. TO THE EXTENT PERMITTED UNDER THE APPLICABLE LAWS OF ANY SUCH JURISDICTION, EACH COMPANY PARTY HEREBY WAIVES, IN RESPECT OF ANY SUCH ACTION, SUIT OR OTHER PROCEEDING, THE JURISDICTION OF ANY OTHER COURT OR COURTS THAT NOW OR HEREAFTER, BY REASON OF SUCH   96   -------------------------------------------------------------------------------- PERSON'S PRESENT OR FUTURE DOMICILE, OR OTHERWISE, MAY BE AVAILABLE TO IT. 13.10      Limitation of Liability. No claim shall be made by the Company Parties or any of their Affiliates (and the Companies shall cause the other Company Parties and such Affiliates not to make any claim) against the Purchaser, or any Affiliates, partners, directors, officers, employees, agents, representatives, attorneys, accountants or advisors of the Purchaser, for any special, indirect, consequential or punitive damages in respect of any claim for breach of contract or under any other theory of liability arising out of or related to the transactions contemplated by this Agreement or any other Investment Document, or any act, omission or event occurring in connection therewith. Each of the Company Parties, for itself and the other Company Parties and such Affiliates, hereby waives, releases and agrees not to sue upon any claim for such damages, whether or not accrued and whether or not known or suspected to exist in its favor. 13.11     Publicity . The Company Parties and their Affiliates will consult with the Purchaser before issuing, and provide the Purchaser the opportunity to review and comment upon, and use reasonable efforts to agree on the form and substance of, any press release or other public statement with respect to the transactions contemplated by this Agreement, and shall not issue any such press release or make such other public announcement prior to such consultation, except as required under Applicable Laws. The parties agree that the initial press release to be issued with respect to the transactions contemplated by this Agreement shall be in the form heretofore agreed to by the parties. The Company Parties hereby consent to the preparation and publication by the Purchaser of an advertisement "tombstone" publicly disclosing the closing of the transactions contemplated by this Agreement. 13.12      Waiver of Trial by Jury. BECAUSE DISPUTES ARISING IN CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND PARTIES WISH APPLICABLE STATE AND FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, AND UNDERSTANDING THEY ARE WAIVING A CONSTITUTIONAL RIGHT, EACH OF THE COMPANY PARTIES AND THE PURCHASER HEREBY KNOWINGLY, INTENTIONALLY AND VOLUNTARILY, WITH AND UPON THE ADVICE OF COMPETENT COUNSEL, WAIVES, RELINQUISHES AND FOREVER FORGOES THE RIGHT TO A TRIAL BY JURY IN ANY ACTION, SUIT OR OTHER PROCEEDING BASED UPON, ARISING OUT OF OR IN ANY WAY RELATING TO (a) THIS AGREEMENT, THE NOTE, THE WARRANTS, THE COLLATERAL DOCUMENTS OR ANY OTHER INVESTMENT DOCUMENT, INCLUDING ANY PRESENT OR FUTURE AMENDMENT THEREOF, OR ANY OF THE TRANSACTIONS CONTEMPLATED BY OR RELATED TO THIS AGREEMENT OR ANY OTHER INVESTMENT DOCUMENT, OR (b) ANY CONDUCT, ACT OR OMISSION OF THE PARTIES OR THEIR AFFILIATES (OR ANY OF THEM) WITH RESPECT TO THIS AGREEMENT OR ANY OTHER INVESTMENT DOCUMENT, INCLUDING ANY PRESENT OR FUTURE AMENDMENT THEREOF, WHETHER SOUNDING IN   97   -------------------------------------------------------------------------------- CONTRACT, TORT OR OTHERWISE, REGARDLESS OF WHICH PARTY INITIATES SUCH ACTION, SUIT OR OTHER PROCEEDING; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH ACTION, SUIT OR OTHER PROCEEDING SHALL BE DECIDED BY A COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES TO THE WAIVER OF ANY RIGHT THEY MIGHT OTHERWISE HAVE TO TRIAL BY JURY. 13.13     Judicial Referee . IN THE EVENT THE WAIVER PROVIDED IN SECTION 13.12 IS DEEMED INEFFECTIVE, TO GIVE EFFECT TO THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE OR RETIRED JUDGE APPLY THE APPLICABLE LAW, THE PARTIES AGREE TO REFER, FOR A COMPLETE AND FINAL ADJUDICATION, ANY AND ALL ISSUES OF FACT OR LAW INVOLVED IN ANY LITIGATION OR PROCEEDING (INCLUDING, WITHOUT LIMITATION, ALL DISCOVERY AND LAW AND MOTION MATTERS, PRETRIAL MOTIONS, TRIAL MATTERS AND POST-TRIAL MOTIONS (E.G. MOTIONS FOR RECONSIDERATION, NEW TRIAL AND TO TAX COSTS, ATTORNEY FEES AND PREJUDGMENT INTEREST)) UP TO AND INCLUDING FINAL JUDGMENT, BROUGHT TO RESOLVE ANY DISPUTE (WHETHER SOUNDING IN CONTRACT, TORT, UNDER ANY STATUTE OR OTHERWISE) BETWEEN AND AMONG ANY OF THE PARTIES HERETO, TO A JUDICIAL REFEREE WHO SHALL BE APPOINTED UNDER A GENERAL REFERENCE PURSUANT TO CALIFORNIA CODE OF CIVIL PROCEDURE SECTION 638. THE REFEREE’S DECISION WOULD STAND AS THE DECISION OF THE COURT, WITH JUDGMENT TO BE ENTERED ON HIS/HER STATEMENT OF DECISION IN THE SAME MANNER AS IF THE ACTION HAD BEEN TRIED BY THE COURT. THE PARTIES HERETO SHALL SELECT A SINGLE NEUTRAL REFEREE, WHO SHALL BE A RETIRED STATE OR FEDERAL JUDGE WITH AT LEAST FIVE YEARS OF JUDICIAL EXPERIENCE IN CIVIL MATTERS. IN THE EVENT THAT THE PARTIES HERETO CANNOT AGREE UPON A REFEREE, THE REFEREE SHALL BE APPOINTED BY THE COURT. THE PURCHASER AND HOLDERS, ON THE ONE HAND, AND THE COMPANY PARTIES, ON THE OTHER HAND, SHALL EQUALLY BEAR THE FEES AND EXPENSES OF THE REFEREE (50% BY THE PURCHASER AND HOLDERS AND 50% BY THE COMPANY PARTIES) UNLESS THE REFEREE OTHERWISE PROVIDES IN THE STATEMENT OF DECISION. 13.14     Confidentiality . Except as set forth in Sections 13.5 and 13.11, Purchaser agrees that material, non-public information regarding the Company Parties and their respective Subsidiaries, their operations, assets, and existing and contemplated business plans (including the terms of the Investment Documents), shall be treated by Purchaser in a confidential manner, and shall not be disclosed by Purchaser to Persons who are not parties to this Agreement, except: (a) to attorneys for and other advisors, accountants, auditors, and consultants of the Purchaser or Assignees, (b) to Subsidiaries and Affiliates of the Purchaser or an Assignee, provided that any such Subsidiary or Affiliate shall have agreed to receive such information hereunder subject to the terms of this Section 13.15, (c) as may be required by statute, decision, or judicial or administrative order, rule, or regulation, (d) as may be agreed to in advance by such Person or as requested or required by any Governmental Authority pursuant to any subpoena or other legal process, (e) as to any such information that is or becomes generally available to the public (other   98   -------------------------------------------------------------------------------- than as a result of prohibited disclosure by the Purchaser or Assignee), (f) in connection with any assignment, prospective assignment, sale, prospective sale, participation or prospective participations, or pledge or prospective pledge of the Purchaser’s or any Assignee’s interest under this Agreement, provided that any such assignee, prospective assignee, purchaser, prospective purchaser, participant, prospective participant, pledgee, or prospective pledgee shall have agreed in writing to receive such information hereunder subject to the terms of this Section, and (g) in connection with any litigation or other adversary proceeding involving parties hereto which such litigation or adversary proceeding involves claims related to the rights or duties of such parties under this Agreement or the other Investment Documents. 13.15     Butler Realty . As of the Final Closing Date, the Company Parties hereby certify that Butler Realty is prohibited from incurring the Obligations pursuant to the GMAC Credit Documents. Immediately upon the occurrence of any of the following (but no later than two (2) Business Days thereafter): (a) GMAC consents to Butler Realty incurring the Obligations or (b) the Indebtedness owed to GMAC by Butler Realty pursuant to the GMAC Credit Documents is paid in full, the Company Parties shall cause Butler Realty to execute and deliver to the Purchaser (i) a joinder to the Guaranty, in form and substance satisfactory to the Purchaser, pursuant to which Butler Realty would become a Guarantor, (ii) a joinder to the Security Agreement, in form and substance satisfactory to the Purchaser, pursuant to which Butler Realty would grant a security interest in all of its assets, (iii) an Intellectual Property Security Agreement or a joinder to an existing Intellectual Property Security Agreement, in form and substance satisfactory to the Purchaser, pursuant to which Butler Realty would grant a security interest in all of its Intellectual Property, (iv) a pledge agreement, or a joinder to the Security Agreement and if Butler Realty has any Subsidiaries, (A) to the extent not delivered to the Bank Agent pursuant to the Bank Credit Documents, certificates representing all of the Capital Stock of such Subsidiaries with undated stock powers executed in blank and (B) such opinions of counsel and such approving certificates of such Subsidiaries as the Purchaser may reasonably request in respect of complying with any legend on any such certificate or any other matter relating to such shares; (v) such other agreements, instruments, approvals or other documents as may be requested by the Purchaser in order to create, perfect, establish, and maintain the first priority status (subject only to the Liens of the Bank Agent and the Permitted Liens) of any Lien in favor of the Purchaser to effect the intent that Butler Realty shall become bound by all of the terms, covenants and agreements contained in the Collateral Documents and that all property and assets of Butler Realty shall become Collateral securing the Obligations, and (vi) such additional agreements, instruments, approvals and documents, and legal opinions, as the Purchaser may request to effect the intent that Butler Realty shall become bound by all of the terms, covenants and agreements contained in this Agreement and the other Investment Documents. In addition, the Companies shall take whatever action (including the recording of mortgages, the filing of Uniform Commercial Code financing statements, the giving of notices and the endorsement of notices on title documents) may be necessary or advisable in the reasonable opinion of the Purchaser to vest in the Purchaser valid and subsisting Liens on and security interests in all property and assets of Butler Realty, enforceable against all third parties in accordance with their terms. 13.16     Alternative Transaction Fee. If, prior to December 31, 2006, the Companies or any of their respective Subsidiaries, shareholders, directors, officers, employees, attorneys, accountants, investment bankers (including Sheridan Road Capital Advisors),   99   -------------------------------------------------------------------------------- representatives or agents enters into discussions or an understanding or agreement on behalf of any Company with a third party relating to an Alternative Transaction, then, (in addition to any other damages due Purchaser under any Investment Document), the Companies shall, jointly and severally, pay to Purchaser the Obligations in full in cash and the amount of $1,000,000 (the “Alternative Transaction Fee”), which Alternative Transaction Fee shall be due and payable to Purchaser immediately upon the entering into of such discussion, understanding or agreement. For purposes hereof “Alternative Transaction” means any transaction pursuant to which any Company or Companies (x) obtain or issue any equity capital or Indebtedness, including a refinancing, restructuring, renewals, extensions or other restatement of any existing Indebtedness, other than the Indebtedness incurred on the Final Closing Date pursuant to the Bank Credit Documents; or (y) enter into an agreement to be acquired by, sold to, merged into or combined with any other Person or (z) sell all or a substantial part of the assets of any of the Companies or their businesses (other than the sale of the real property owned by Butler Realty located at 110 Summit Avenue, Montvale, New Jersey 07645, as permitted under the Investment Documents).   100   -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered by their duly authorized representatives as of the date first written above.   COMPANIES: BUTLER INTERNATIONAL, INC., a Maryland corporation By:       /s/ Edward M. Kopko ————————————————— Name: Title:     BUTLER SERVICES INTERNATIONAL, INC., a Delaware corporation By:       /s/ Edward M. Kopko ————————————————— Name: Title:     BUTLER PUBLISHING, INC., a Delaware corporation By:       /s/ Edward M. Kopko ————————————————— Name: Title:     BUTLER SERVICE GROUP, INC., a New Jersey corporation By:       /s/ Edward M. Kopko ————————————————— Name: Title:           --------------------------------------------------------------------------------     BUTLER TELECOM, INC., a Delaware corporation By:       /s/ Edward M. Kopko ————————————————— Name: Title:     BUTLER SERVICES, INC., a Delaware corporation By:       /s/ Edward M. Kopko ————————————————— Name: Title:     BUTLER UTILITY SERVICE, INC., a Delaware corporation By:       /s/ Edward M. Kopko ————————————————— Name: Title:     GUARANTORS: AAC CORP., a Delaware corporation By:       /s/ Edward M. Kopko ————————————————— Name: Title:       --------------------------------------------------------------------------------     SYLVAN INSURANCE CO., LTD., a company organized under the laws of Bermuda By:       /s/ Edward M. Kopko ————————————————— Name: Title:         DATA PERFORMANCE, INC., a New Jersey corporation By:       /s/ Edward M. Kopko ————————————————— Name: Title:     PURCHASER: LEVINE LEICHTMAN CAPITAL PARTNERS, INC., a California corporation On behalf of LEVINE LEICHTMAN CAPITAL PARTNERS III, L.P. , a California limited partnership By:       /s/ Steven Hartman —————————————— Name: Steven Hartman Title: Vice President       -------------------------------------------------------------------------------- TABLE OF CONTENTS   Page         1. DEFINITIONS; ACCOUNTING TERMS 2   1.1 Definition 2   1.2 Accounting Terms and Computations 22   1.3 Covenants 22   1.4 Captions; Construction and Interpretation 22   1.5 Determinations 23   1.6 Definition of Knowledge 23 2. PURCHASE AND SALE OF THE SECURITIES 24   2.1 Authorization of Notes 24   2.2 Authorization of Warrant 24   2.3 Purchase of the Securities; Purchase Price 24   2.4 Closing 24   2.5 Use of Proceeds 25 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY 25   3.1 Organization and Qualification 25   3.2 Corporate or Other Power 26   3.3 Authorization; Binding Obligations 26   3.4 Subsidiaries. 26   3.5 Conflict with Other Instruments; Existing Defaults; Ranking 27   3.6 Governmental and Other Third Party Consents 28   3.7 Capitalization 28   3.8 Validity and Issuance of Warrant Shares 29   3.9 Company SEC Documents 29   3.10 Financial Statements 29   3.11 Existing Indebtedness and Liens; Investments 30   3.12 Absence of Certain Changes 31   3.13 Material Contracts 33   3.14 Accounts Receivable 35   3.15 Labor Relations 35   3.16 Employee Benefit Plans; ERISA 36     i       -------------------------------------------------------------------------------- TABLE OF CONTENTS (continued) Page           3.17 Taxes 39   3.18 Litigation 40   3.19 Transactions with Affiliates 40   3.20 Investment Company Act 42   3.21 Governmental Regulation 42   3.22 Compliance with Laws; Operating Licenses 42   3.23 Title to Property; Liens 42   3.24 Real Property 42   3.25 Environmental Matters 43   3.26 Intellectual Property 44   3.27 Nature of Business 45   3.28 Powers of Attorney 46   3.29 Listing of Common Stock 46   3.30 Insurance 46   3.31 Customers 46   3.32 [Intentionally Omitted] 47   3.33 Business Relationships 47   3.34 Personal Property Leases 47   3.35 Employment Agreements 47   3.36 Solvency 48   3.37 Use of Proceeds; Margin Stock 48   3.38 Depository and Other Accounts 48   3.39 Books and Records 48   3.40 Burdensome Obligations; Future Expenditures 48   3.41 Brokers; Certain Expenses 49   3.42 Disclosure 49 4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER 49   4.1 Organization 49   4.2 Authorization 49   4.3 Due Execution and Delivery; Binding Obligations 50     ii       -------------------------------------------------------------------------------- TABLE OF CONTENTS (continued) Page           4.4 No Violation 50   4.5 Governmental and Other Third Party Consents 50   4.6 Investment Intent 50   4.7 Accredited Investor Status 50   4.8 Brokers; Certain Expenses 50 5. [Intentionally Omitted.] 51 6. CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER 51   6.1 Initial Closing 51   6.2 Final Closing 55 7. CONDITIONS TO THE OBLIGATIONS OF THE COMPANY PARTIES 60   7.1 Representations and Warranties 60   7.2 Purchase Permitted By Applicable Laws 60   7.3 Payment for Securities 60 8. TAXES; INDEMNIFICATION; FEES AND EXPENSES 60   8.1 Taxes 60   8.2 Indemnification 61   8.3 Indemnification Procedures 62   8.4 Contribution 63   8.5 Reimbursement of Deal-Related Costs and Expenses 63   8.6 Costs of Collection 64 9. AFFIRMATIVE COVENANTS 65   9.1 Payment of Notes and Other Obligations 65   9.2 Performance of Investment Documents 65   9.3 Information Reporting Requirements 65   9.4 Compliance with Laws; Consents 69   9.5 Legal Existence 70   9.6 Books and Records; Inspections 70   9.7 Maintenance of Properties 70   9.8 Insurance 70   9.9 Taxes 71     iii       -------------------------------------------------------------------------------- TABLE OF CONTENTS (continued) Page           9.10 ERISA Matters 71   9.11 Communication with Accountants 72   9.12 Compliance with Material Contracts 72   9.13 Environmental Matters 72   9.14 Additional Subsidiaries; Released Liens 74   9.15 Future Information 75   9.16 Ownership 75   9.17 Company SEC Documents 75   9.18 [Intentionally Omitted] 76   9.19 Further Assurances 76   9.20 Deposit Accounts and Deposit Account Control Agreements 77   9.21 Survival of Certain Affirmative Covenants 77   9.22 Post Closing Requirements 77 10. NEGATIVE AND FINANCIAL COVENANTS 77   10.1 Limitations on Indebtedness 77   10.2 Limitations on Liens 78   10.3 Limitations on Investments 79   10.4 Limitations on Restricted Payments 79   10.5 Limitations on Payment Restrictions Affecting Subsidiaries 80   10.6 Limitations on Transactions With Affiliates 80   10.7 Change in Business 81   10.8 Sales of Receivables 81   10.9 Fundamental Changes 81   10.10 Agreements Affecting Capital Stock and Indebtedness; Amendments to Material Contracts 82   10.11 Conditional Sales 82   10.12 Margin Stock 82   10.13 Accounting Changes 83   10.14 Negative Pledge 83   10.15 Financial Covenants 83     iv       -------------------------------------------------------------------------------- TABLE OF CONTENTS (continued) Page           10.16 Benefit Plans 87 11. DEFAULTS AND REMEDIES 87   11.1 Events of Default 87   11.2 Acceleration 91   11.3 Interest Rate Event 91   11.4 Other Remedies 91   11.5 Appointment of Receiver 92   11.6 Waiver of Past Defaults 92 12. [Intentionally Omitted.] 92 13. MISCELLANEOUS 92   13.1 Survival of Representations and Warranties; Purchaser Investigation 92   13.2 Consent to Amendments 92   13.3 Entire Agreement 93   13.4 Severability 93   13.5 Successors and Assigns; Assignments; Participations 93   13.6 Notices 94   13.7 Counterparts 95   13.8 Governing Law 96   13.9 Consent to Jurisdiction and Venue 96   13.10 Limitation of Liability 97   13.11 Publicity 97   13.12 Waiver of Trial by Jury 97   13.13 Judicial Referee 98   13.14 Confidentiality 98   13.15 Butler Realty 99   13.16 Alternative Transaction Fee 99       v       -------------------------------------------------------------------------------- TABLE OF CONTENTS (continued) Page         EXHIBITS Exhibit A — Form of Unsecured Note Exhibit B — Form of Term B Note Exhibit C — Form of Subordinated Note Exhibit D — Form of Warrant Exhibit E — Form of Compliance Certificate DISCLOSURE SCHEDULES Schedule 3.4 — Subsidiaries Schedule 3.7 — Capitalization Schedule 3.9 — Company SEC Documents Schedule 3.10(c) — Pro Forma Closing Balance Sheet Schedule 3.11(a) — Existing Indebtedness and Liens; Investments Schedule 3.11(c) — Indebtedness at Closing Schedule 3.12(r) — Payment to Affiliates Schedule 3.12(s) - — Offer, Issuance or Sale of Capital Stock or Equity Rights Schedule 3.13(a) — Material Contracts Schedule 3.13(b) — Material Contracts Exceptions Schedule 3.15 — Labor Unions Schedule 3.16 — Employee Benefit Plans; ERISA Schedule 3.17 — Nonqualified Deferred Compensation Plans Schedule 3.18 — Litigation Schedule 3.19 — Transactions with Affiliates Schedule 3.19 — Transactions with Immediate Family Schedule 3.22 — Compliance with Laws; Operating Licenses Schedule 3.24 — Real Property Schedule 3.25 — Environmental Matters Schedule 3.26 — Intellectual Property Schedule 3.30 — Insurance Schedule 3.31 — Customers Schedule 3.34 — Personal Property Leases Schedule 3.35 — Employment Agreements Schedule 3.38 — Depository and Other Accounts Schedule 13.5 — List of Competitors             vi        

EXHIBIT 10.1 Protocol Moscow-Kiev, April 5, 2006 Parties herein - Terra Insight Corp. (Terra), on one part, and Kiev Investment Group (KIG), on the other part, if mentioned simultaneously, hereafter referred to as Parties, have made this Protocol for the following: Within development of the existing agreements and realization of the joint projects for commercial application of STeP technology, the Parties undertake the obligations as follows: 1. KIG: 1.1 - on or before April 7, 2006, KIG to purchase the next tranche of Convertible Debenture of USD 1,000,000 from Terra to be used by Terra for: USD 500,000.- for TNEP to finance drilling of the Sage # 1 well in Nevada; USD 500,000 - for Terra's expenses. The Convertible Debenture is to be issued by CompuPrint, Inc. 1.2 - on or before April 12, 2006, KIG to transfer to TNEP the amount of USD 1,000,000.- to finance drilling of the Sage # 1 well in Nevada - on or before May 15, 2006 to purchase the final tranche of Convertible Debenture of USD 1,000,000 from Terra to be used by Terra for: USD 500,000.- for TNEP operating expenses and to finance drilling of the wells in Nevada; USD 500,000 - for Terra's expenses. The Convertible Debenture is to be issued by CompuPrint, Inc. Additionally, as per TNEP agreement which will return into effect in this regard, KIG will provide further financing in the amount of USD 2,000,000 to finance the drilling of wells # 2 and # 3 in Nevada, of which at least a further $600,000 will be paid in by June 15, 2006 and the balance on or before July 5, 2006 . 1.3 - on or before June 15, 2006 - Enficon and KIG shall convert USD 5M Convertible Debentures into shares of Terra, as provided for in said Debentures issued by CompuPrint, Inc. 1.4 - on or before June 29, 2006 - KIG shall purchase 5,000,000 shares of Terra at USD 1.05 per share. 1.5 - on or before June 29, 2006, KIG to sign an option agreement with CompuPrint, Inc. for purchase, on an all or none basis, on or before October 1, 2006, of a number of shares which, together with the 10 million shares provided for in 1.3 and 1.4 above, shall equal a total of 25% of the outstanding number of shares of CPPT, being a total of 25,000,000 shares when purchased by KIG, with the option exercisable at a fixed price of USD 1.20 per share. On or before April 15, 2006 KIG will nominate one of its companies to participate as the assignee of KIG in the Convertible Debenture, the purchase of 5 million shares and in the option transactions. Failure by KIG to convert USD 5 million Convertible Debenture and to purchase 5 million shares of Terra will result in loss of Board of Directors seat. 2. TERRA: 2.1.- within 2 months from the date of this Protocol -Terra to write, with KIG's participation, a concept of the business plan for 2006-2007 (projects in USA and other) and strategic development plan for the next 3-5 years (North America, South America, Europe, Africa, Middle East, etc.) 2.2. - to use the funds only as is consistent with the TIC business plan to be developed by Terra in accord with 2.1 above, and as approved by majority vote of the Board of Directors of Terra. 2.3. - to grant KIG one seat on the Board of Directors (BoD) upon fulfillment by KIG of the provisions of p.1. Candidate will be proposed by KIG and must be a person at all times acceptable to Terra. If KIG fails to exercise the option in 1.5 above, it will lose its seat on the BoD; except that, if thereafter, on or before December 31, 2006, KIG exercises at least half of the said option between October 1 and December 31, 2006 at the greater of $1.50 per share or 60% of the average trading price for the 20 days preceeding such exercise, but such exercise price not to exceed $1.75 per share, then KIG shall not lose the right to the BoD seat thereby. 2.4 - to carry out the human resources policy in correspondence with strategic business interests. The Director appointed by KIG would have access to all information, which the Director could have an assistant, who is not an employee of Terra, and is not situated on Terra premises, process, as necessary. The Director can request and receive all information reasonably needed for review in accord with KIG's interests. Within the scope of BoD's activities, to consider candidates, including the ones proposed by KIG, for management positions with Terra and project companies. Candidates proposed by KIG can not be employed by KIG or any affiliate. All candidates for positions with Terra and project companies will be considered and approved solely as determined by majority vote of the BoD. 2.5 - from the date KIG fulfills the provisions of p.1, KIG will have the right and obligation to fund, as indicated in p.3.1, all projects approved by majority vote of the BoD of Terra for all projects which are the subject of agreements as per this Protocol, which right will be lost if the option provided for in 1.5 is not exercised in whole as provided in 1.5 above,or at least as to half, as provided for in 2.3 above. If KIG loses the right to have a member of the Terra Board of Directors because of failure to fulfill exercise of option provided for in 1.5, and in 2.3, KIG would then instead have the right to designate a candidate reasonably acceptable to Terra for Terra's Advisory Board, and, as to information regarding all projects, that Advisory Director would have the same access to all relevant information as would a member of the Board of Directors. KIG nominated member of Terra BoD will have full access to all information on all projects and will participate in their evaluation and approval, which approval shall be by majority vote of the BoD, including financing options. If, after project evaluation and approval by majority vote of the BoD, Terra is able to obtain a commitment in documentary form, to have financing for the project in the amount of 90% or more of the total required amount, and provided that it is on better terms than those upon which KIG has agreed to provide financing, then Terra is free to pursue the other financing without KIG. If that other financing is not then obtained within the time provided in the written commitment, unless extended, then KIG has the right, but not the obligation, to fund that project within 30 days of notice that it has not been funded by a third party. Terra's total participation (working interest, royalty, fees, etc.) in such projects shall not be less than 10%, unless otherwise approved by majority vote of the BoD. 2.6 - Terra shall give KIG the opportunity to finance Bellows # 3 and Bellows # 4 wells in Texas in the financing proportion to be paid in of 80% by KIG and 20% by Terra, with distribution of the remaining profits in Bellows #3 and Bellows #4 to be in the proportion of 65% to KIG and 35% to Terra; with the same provisions as in 3.1 a) and b) below as to 5% overriding royalty to Terra and reimbursement of expenses and investment to the Parties, with the Bellows wells not being subject to provisions of 2.5 and elsewhere herein as to alternative financing of Bellows #3 and #4, and this financing arrangement of Bellows wells is subject to the providing of full funding by KIG of KIG's share of financing of the dry hole costs of Bellows #3, estimated at $960,000, to be received by Texterra Exploration Partners on or before five days from written notification of KIG by Terra (email is acceptable for notice) that a rig is available for Bellows #3. KIG will, thereafter, fund its share of the dry hole costs of Bellows #4 promptly upon the call for such funds by Terra in accordance with a similar schedule as for Bellows #3, and such call as to Bellows #4 shall be subsequent to the drilling of Bellows #3. 3. PARTIES: 3.1 Pursuant to, and subject to the provisions of 2.5 and elsewhere herein, for a period of five years, to finance joint projects out of their own funds, as follows: KIG-75%, Terra-25% and, for a period of five years from the date hereof, to share all profits, including profits from the sale of projects in the following order and manner : a/ 5% of all revenues (overriding royalty) shall be paid to Terra off the top; followed by reimbursement as per b/ b/ reimburse all investment according to percentages of financing, where Terra and KIG project-related expenses, verified and approved by the Parties, which approval of expenses shall not be unreasonably withheld by the Parties, will be considered as part of investment. c/ after reimbursement as per b/, to distribute the remaining part of profits for the projects: first year after reimbursement - KIG 70%, Terra 30%; second year after reimbursement - KIG 60%, Terra 40%; third year and thereafter until five years from the date hereof - KIG 50%, Terra 50%. - to finance joint projects approved by majority vote of the Board of Directors of TIC by attracting credit against mortgage or any material guarantee of the mutually owned assets - participation in such assets by the Parties will be determining for the sharing of profits. 4. Additional provisions: 4.1 Within 2 months from the date of this Protocol, subject to the reasonable schedule of Terra management, KIG, by its own staff and at its own expense will make the (internal) legal, informational and financial audit of Terra for the purposes of its further understanding of the organization, business, reporting, including financial, and responsibility. Terra will grant KIG's auditors reasonable access to the required information. Audit and its results shall not have any effect on fulfillment of obligations of the Parties under this Protocol. 4.2 US Securities laws are to be looked to for the source of legal protection of KIG as a minority shareholder of Terra from any actions with regard to Terra's shares which would materially worsen the status of KIG as Terra's largest minority shareholder. 4.3 It is the specific understanding of the parties that all provisions of this 'frame' protocol, which are not part of existing contracts between Enficon and Terra, are intended to be put in contracts to be signed by the Parties within 14 business days from the date of this Protocol. All disputes to be resolved in courts in County, City and State of New York. The Parties both drafted this Protocol. KIG has read all CPPT SEC filings through the date of the signing of this Protocol. KIG agrees to sign confidentiality agreement promptly. forTerra: KIG: Enficon Establishment and for CompuPrint, Inc. /s/ Dan Brecher /s/ Alexander Fediaev /s/ Alexander Fediaev ----------------- --------------------- --------------------- Dan Brecher Alexander Fediaev Alexander Fediaev Managing Director Partner 04/06/06 Beneficial Owner

  -------------------------------------------------------------------------------- Exhibit 10.192   MAGUIRE PROPERTIES, INC.   INDEMNIFICATION AGREEMENT   This INDEMNIFICATION AGREEMENT (the “Agreement”) made and entered into this 8th day of December 2005, by and between Maguire Properties, Inc., a Maryland corporation (the “Company”), and Lewis N. Wolff (the “Indemnitee”).   WHEREAS, it is essential that the Company be able to retain and attract as directors and officers the most capable persons available;   WHEREAS, the Company’s Bylaws permit it to enter into indemnification arrangements and agreements;   WHEREAS, the Company desires to provide the Indemnitee with specific contractual assurances of the Indemnitee’s rights to full indemnification against litigation risks and expenses (regardless, among other things, of any amendment to or revocation of the Company’s Bylaws or any change in the ownership of the Company or the composition of its Board of Directors) and, to the extent insurance is available, the coverage of the Indemnitee under the Company’s directors and officers liability insurance policies; and   WHEREAS, the Indemnitee is relying upon the rights afforded under this Agreement in accepting Indemnitee’s position as a director or officer of the Company.   NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein, the Company and Indemnitee do hereby covenant and agree as follows:   1. Definitions.   (a) “Corporate Status” describes the status of a person who is serving or has served (i) as a director, officer or employee of the Company, (ii) in any capacity with respect to any employee benefit plan of the Company, or (iii) as a director, partner, member, trustee, officer, employee, or agent of any other Entity at the request of the Company.   (b) “Entity” shall mean any corporation, partnership, limited liability company, joint venture, trust, foundation, association, organization or other legal entity and any group or division of the Company or any of its subsidiaries.   (c) “Expenses” shall mean all reasonable fees, costs and expenses actually and reasonably incurred by the Indemnitee in connection with any Proceeding (as defined below), including, without limitation, attorneys’ fees, disbursements and retainers (including, without limitation, any such fees, disbursements and retainers incurred by Indemnitee pursuant to Section 12 of this Agreement), fees and disbursements of expert witnesses, private investigators and professional advisors (including, without limitation, accountants), court costs, transcript costs, fees of experts, travel expenses, duplicating, printing and binding costs, telephone and fax transmission charges, postage, delivery services, secretarial services, and other disbursements and expenses.   (d) “Indemnifiable Expenses,” “Indemnifiable Liabilities” and “Indemnifiable Amounts” shall have the meanings ascribed to those terms in Section 4 below.     1 --------------------------------------------------------------------------------   (e) “Liabilities” shall mean judgments, damages, liabilities, losses, penalties, excise taxes, fines and amounts paid in settlement.   (f) “Proceeding” shall mean any threatened, pending or completed claim, action, suit, arbitration, alternate dispute resolution process, investigation, administrative hearing, appeal, or any other proceeding, whether civil, criminal, administrative or investigative, whether formal or informal, including a proceeding initiated by Indemnitee pursuant to Section 12 of this Agreement to enforce Indemnitee’s rights hereunder.   2. Services of Indemnitee. In consideration of the Company’s covenants and commitments hereunder, Indemnitee agrees to serve as a director or officer of the Company. However, this Agreement shall not impose any obligation on Indemnitee or the Company to continue Indemnitee’s service to the Company beyond any period otherwise required by law or by other agreements or commitments of the parties, if any.   3. Agreement to Indemnify   The Company shall indemnify Indemnitee, and advance Indemnifiable Expenses to, Indemnitee (a) as specifically provided in this Agreement and (b) otherwise to the fullest extent permitted by Maryland law in effect on the date hereof and as amended from time to time; provided, however, that no change in Maryland law shall have the effect of reducing the benefits available to Indemnitee hereunder based on Maryland law as in effect on the date hereof. The rights of Indemnitee provided in this Section shall include, but shall not be limited to, the rights set forth in the other Sections of this Agreement, including any additional indemnification permitted by Section 2-418(g) of the Maryland General Corporation Law (the “MGCL”).   4. Proceedings Other Than Proceedings by or in the Right of the Company. Indemnitee shall be entitled to the rights of indemnification provided in this Section 4 if, by reason of his Corporate Status, he is, or is threatened to be, made a party to any threatened, pending, or completed Proceeding, other than a Proceeding by or in the right of the Company. Pursuant to this Section 4, Indemnitee shall be indemnified by the Company against all Expenses and Liabilities actually and reasonably incurred by him or on his behalf in connection with a Proceeding by reason of his Corporate Status (referred to herein as “Indemnifiable Expenses” and “Indemnifiable Liabilities,” respectively, and collectively as “Indemnifiable Amounts”) unless it is established that (i) the act or omission of the Indemnitee was material to the matter giving rise to the Proceeding and (a) was committed in bad faith or (b) was the result of active and deliberate dishonesty, (ii) the Indemnitee actually received an improper personal benefit in money, property or services, or (iii) in the case of any criminal Proceeding, the Indemnitee had reasonable cause to believe that his conduct was unlawful.   5. Proceedings by or in the Right of the Company. Indemnitee shall be entitled to the rights of indemnification provided in this Section 5 if, by reason of his Corporate Status, he is made a party to any threatened, pending or completed Proceeding brought by or in the right of the Company to procure a judgment in its favor. Pursuant to this Section 5, Indemnitee shall be indemnified against all amounts paid in settlement and all Indemnifiable Expenses actually and reasonably incurred by him or on his behalf in connection with such Proceeding unless it is established that (i) the act or omission of the Indemnitee was material to the matter giving rise to such a Proceeding and (a) was committed in bad faith or (b) was the result of active and deliberate dishonesty or (ii) the Indemnitee actually received an improper personal benefit in   2 --------------------------------------------------------------------------------   money, property or services; provided, however, that no indemnification against such Indemnifiable Expenses shall be made in respect of any Proceeding in which Indemnitee shall have been adjudged to be liable to the Company.   6. Court-Ordered Indemnification. A court of appropriate jurisdiction, upon application of a director or officer and such notice as the court shall require, may order indemnification in the following circumstances:   (a) if it determines a director or officer is entitled to Indemnifiable Amounts under Section 2-418(d)(1) of the MGCL, the court shall order indemnification, in which case the director or officer shall be entitled to recover the expenses of securing such Indemnifiable Amounts; or   (b) if it determines that the director or officer is fairly and reasonably entitled to indemnification in view of all the relevant circumstances, whether or not the director or officer (i) has met the standards of conduct set forth in Section 2-418(b) of the MGCL or (ii) has been adjudged liable for receipt of an improper personal benefit under Section 2-148(c) of the MGCL, the court may order such indemnification as the court shall deem proper. However, indemnification with respect to any Proceeding by or in the right of the Company or in which liability shall have been adjudged in the circumstances described in Section 2-418(c) of the MGCL shall be limited to Indemnifiable Expenses.   7. Procedure for Payment of Indemnifiable Amounts. Indemnitee shall submit to the Company a written request specifying the applicable Indemnifiable Amounts for which Indemnitee seeks payment under this Agreement and the basis for the claim. Subject to the exceptions set forth in Sections 4 and 5, the Company shall pay such applicable Indemnifiable Amounts to Indemnitee within twenty (20) calendar days of receipt of the request. At the request of the Company, Indemnitee shall furnish such documentation and information as are reasonably available to Indemnitee and necessary to establish that Indemnitee is entitled to indemnification hereunder.   8. Indemnification for Expenses of a Party Who is Wholly or Partly Successful. Notwithstanding any other provision of this Agreement, and without limiting any such provision to the extent that Indemnitee is, by reason of Indemnitee’s Corporate Status, a party to and is successful, on the merits or otherwise, in any Proceeding, Indemnitee shall be indemnified for all Indemnifiable Expenses reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection therewith. Without limiting any other rights of Indemnitee in this Agreement, if Indemnitee is not wholly successful in such Proceeding but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such Proceeding, the Company shall indemnify Indemnitee for all Indemnifiable Expenses reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection with each successfully resolved claim, issue or matter. For purposes of this Agreement, the termination of any claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter.   9. Effect of Certain Resolutions. Neither the settlement nor termination of any Proceeding nor the failure of the Company to award indemnification or to determine that indemnification is payable shall create an adverse presumption that Indemnitee is not entitled to indemnification hereunder. In addition, the termination of any Proceeding by judgment, order or   3 --------------------------------------------------------------------------------   settlement shall not create a presumption that the act or omission of the Indemnitee was material to the matter giving rise to the Proceeding and was committed in bad faith or was the result of active and deliberate dishonesty or the Indemnitee actually received an improper personal benefit in money, property or services or with respect to any criminal action or proceeding, had reasonable cause to believe that Indemnitee’s action was unlawful. The termination of any Proceeding by conviction, or upon a plea of nolo contendere or its equivalent, or an entry of an order of probation prior to judgment, does not create a rebuttable presumption that the Indemnitee did not meet the requisite standard of conduct.  In addition, the termination of or resignation by Indemnitee shall not create an adverse presumption that Indemnitee is not entitled to indemnification hereunder.   10. Agreement to Advance Interim Expenses. The Company shall pay to Indemnitee all Indemnifiable Expenses incurred by Indemnitee in connection with any Proceeding, including a Proceeding by or in the right of the Company, in advance of the final disposition of such Proceeding, if Indemnitee furnishes the Company with a written affirmation by the Indemnitee of the Indemnitee’s good faith belief that the standard of conduct necessary for indemnification by the Company has been met and a written undertaking by or on behalf of the Indemnitee to repay the amount of such Indemnifiable Expenses advanced to Indemnitee if it is finally determined by a court of competent jurisdiction that Indemnitee is not entitled under this Agreement to indemnification with respect to such Indemnifiable Expenses. The terms and conditions of such undertaking shall be determined by a quorum of the disinterested members of the Board of Directors, if any, acting in good faith and as required by the proper exercise of their duties or, if not available, then by the written opinion of independent legal counsel or by the Company’s stockholders.   11. Procedure for Payment of Interim Expenses. Indemnitee shall submit to the Company a written request specifying the Indemnifiable Expenses for which Indemnitee seeks an advancement under Section 10 of this Agreement, together with documentation evidencing that Indemnitee has incurred such Indemnifiable Expenses. Payment of Indenmifiable Expenses under Section 10 shall be made no later than twenty (20) calendar days after the Company’s receipt of such request and the affirmation and undertaking required by Section 10.   12. Remedies of Indemnitee.   (a) Right to Petition Court. In the event that Indemnitee makes a request for payment of Indemnifiable Amounts under Sections 3, 4 and 5 above or a request for an advancement of Indemnifiable Expenses under Sections 10 and 11 above and the Company fails to make such payment or advancement in a timely manner pursuant to the terms of this Agreement, Indemnitee may petition the appropriate judicial authority to enforce the Company’s obligations under this Agreement.   (b) Burden of Proof. In any judicial proceeding brought under Section 12(a) above, the Company shall have the burden of proving that Indemnitee is not entitled to payment of Indemnifiable Amounts hereunder.   (c) Expenses. The Company agrees to reimburse Indemnitee in full for any Expenses incurred by Indemnitee in connection with investigating, preparing for, litigating, defending or settling any action brought by Indemnitee under Section 12(a) above, or in connection with any claim or counterclaim brought by the Company in connection therewith.     4 --------------------------------------------------------------------------------   (d) Validity of Agreement. The Company shall be precluded from asserting in any Proceeding, including, without limitation, an action under Section 12(a) above, that the provisions of this Agreement are not valid, binding and enforceable or that there is insufficient consideration for this Agreement and shall stipulate in court that the Company is bound by all the provisions of this Agreement.   (e) Failure to Act Not a Defense. The failure of the Company (including its Board of Directors or any committee thereof, independent legal counsel, or stockholders) to make a determination concerning the permissibility of the payment of Indemnifiable Amounts or the advancement of Indemnifiable Expenses under this Agreement shall not be a defense in any action brought under Section 12(a) above, and shall not create a presumption that such payment or advancement is not permissible.   13. Representations and Warranties of the Company. The Company hereby represents and warrants to Indemnitee as follows:   (a) Authority . The Company has all necessary corporate power and authority to enter into, and be bound by the terms of, this Agreement, and the execution, delivery and performance of the undertakings contemplated by this Agreement have been duly authorized by the Company.   (b) Enforceability. This Agreement, when executed and delivered by the Company in accordance with the provisions hereof, shall be a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, moratorium, reorganization or similar laws affecting the enforcement of creditors’ rights generally or general equitable principles, and to the extent limited by applicable federal or state securities laws.   14. Insurance. The Company will use commercially reasonable efforts to obtain and maintain a policy or policies of insurance with reputable insurance companies providing the members of the Board of Directors with coverage for losses from wrongful acts, and to ensure the Company’s performance of its indemnification obligations under this Agreement. In all policies of director and officer liability insurance, Indemnitee shall be named as an insured in such a manner as to provide Indemnitee at least the same rights and benefits as are accorded to the most favorably insured of the Company’s officers and directors. Notwithstanding the foregoing, if the Company, after employing commercially reasonable efforts as provided in this Section, determines in good faith that such insurance is not reasonably available, if the premium costs for such insurance are disproportionate to the amount of coverage provided, or if the coverage provided by such insurance is limited by exclusions so as to provide an insufficient benefit, the Company shall use its commercially reasonable efforts to obtain and maintain a policy or policies of insurance with coverage having features as similar as practicable to those described above.   15. Fees and Expenses. During the term of the Indemnitee’s service as a director or officer, the Company shall promptly reimburse the Indemnitee for all expenses incurred by him in connection with his service as a director or officer or member of any board committee or otherwise in connection with the Company’s business.     5 --------------------------------------------------------------------------------   16. Contract Rights Not Exclusive. The rights to payment of Indemnifiable Amounts and advancement of Indemnifiable Expenses provided by this Agreement shall be in addition to, but not exclusive of, any other rights which Indemnitee may have at any time under applicable law, the Company’s Bylaws, as amended, Charter, as amended, or any other agreement, vote of stockholders or directors, or otherwise, both as to action in Indemnitee’s official capacity and as to action in any other capacity as a result of Indemnitees’s serving as a director or officer of the Company.   17. Successors. This Agreement shall be (a) binding upon all successors and assigns of the Company (including any transferee of all or a substantial portion of the business, stock and/or assets of the Company and any direct or indirect successor by merger or consolidation or otherwise by operation of law) and (b) binding on and shall inure to the benefit of the heirs, personal representatives, executors and administrators of Indemnitee. This Agreement shall continue for the benefit of Indemnitee and such heirs, personal representatives, executors and administrators after Indemnitee has ceased to have Corporate Status.   18. Subrogation. In the event of any payment of Indemnifiable Amounts under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of contribution or recovery of Indemnitee against other persons, and Indemnitee shall take, at the request of the Company, all reasonable action necessary to secure such rights, including the execution of such documents as are necessary to enable the Company to bring suit to enforce such rights.   19. Change in Law. To the extent that a change in applicable law (whether by statute or judicial decision) shall permit broader indemnification than is provided under the terms of the Charter, as amended, or Bylaws of the Company, as amended, and this Agreement, Indemnitee shall be entitled to such broader indemnification and this Agreement shall be deemed to be amended to such extent.   20. Severability. Whenever possible, each provision of this Agreement shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provision of this Agreement, or any clause thereof, shall be determined by a court of competent jurisdiction to be illegal, invalid or unenforceable, in whole or in part, such provision or clause shall be limited or modified in its application to the minimum extent necessary to make such provision or clause valid, legal and enforceable, and the remaining provisions and clauses of this Agreement shall remain fully enforceable and binding on the parties.   21. Indemnitee as Plaintiff. Except as provided in Section 12 of this Agreement and in the next sentence, Indemnitee shall not be entitled to payment of Indemnifiable Amounts or advancement of Indemnifiable Expenses with respect to any Proceeding brought by Indemnitee against the Company, any Entity which it controls, any director or officer thereof, or any third party, unless (a) the Proceeding is brought to enforce indemnification under this Agreement or otherwise or (b) the Company’s Bylaws, as amended, the Charter, as amended, a resolution of the Board of Directors or an agreement approved by the Board of Directors to which the Company is party expressly provide otherwise. This Section shall not apply to affirmative defenses asserted by Indemnitee in an action brought against Indemnitee.   22. Modifications and Waiver. Except as provided in Section 19 above with respect to changes in applicable law which broaden the right of Indemnitee to be indemnified by the   6 --------------------------------------------------------------------------------   Company, no supplement, modification or amendment of this Agreement shall be binding unless executed in writing by each of the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions of this Agreement (whether or not similar), nor shall such waiver constitute a continuing waiver.   23. General Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given (a) when delivered by hand, (b) when transmitted by facsimile and receipt is acknowledged, or (c) if mailed by certified or registered mail with postage prepaid, on the third business day after the date on which it is so mailed:   (i) If to Indemnitee, to:       Lewis N. Wolff c/o Wolff-DiNapoli LLC 11828 La Grange Avenue Suite 200 Los Angeles, CA 90025 Phone: (310) 477-3593 Facsimile: (310) 477-3593   (ii) If to the Company, to:     Maguire Properties, Inc. 333 South Grand Ave, Suite 400 Los Angeles, CA 90071 Phone: (213) 626-3300 Facsimile: (213) 687-4758 Attn: Robert F. Maguire III and Mark T. Lammas   or to such other address as may have been furnished in the same manner by any party to the others.   24. Governing Law. This Agreement shall be governed by and construed and enforced under the laws of Maryland without giving effect to the provisions thereof relating to conflicts of law.   25. Agreement Governs. This Agreement is to be deemed consistent wherever possible with relevant provisions of the Company’s Bylaws, as amended, and Charter, as amended; however, in the event of a conflict between this Agreement and such provisions, the provisions of this Agreement shall control.   26. Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Each party shall become bound by this Agreement immediately upon affixing its signature hereto.   [Signature Page Follows]     7 --------------------------------------------------------------------------------   IN WITNESS WHEREOF, the parties hereto have executed this Indemnification Agreement as of the day and year first above written.   COMPANY:       MAGUIRE PROPERTIES, INC.         By: /s/ Robert F. Maguire III     Name: Robert F. Maguire III     Title: Chairman and Co-CEO   INDEMNITEE:         By: /s/ Lewis N. Wolff     Lewis N. Wolff  

  EXHIBIT 10.15 JEFFERIES & COMPANY, INC. DEFERRED COMPENSATION AGREEMENT As Amended and Restated as of December 29, 2005      WHEREAS, Richard B. Handler (“Executive”) previously has entered into agreements with Jefferies & Company, Inc. (the “Company”) under which he deferred certain cash compensation, which deferred compensation has been notionally invested in a variety of investment vehicles at the direction of Executive (the “Deferral Agreement”); and      WHEREAS, Executive and the Company desire to amend and restate the terms of the Deferral Agreement governing such deferred compensation in order to cause such deferred compensation to be subject to Section 409A of the Internal Revenue Code (the “Code”), to conform the terms of the deferred compensation to the requirements of Section 409A, to specify distribution dates for such deferred compensation as permitted under Proposed Treasury Regulation (“PTR”) § 1.409A, Preamble § XI.C. and IRS Notice 2005-1, Q/A 19(c), and to amend certain other terms of the Deferral Agreement as permitted under Section 409A, PTR § 1.409A and IRS Notice 2005-1, and with the intention to confirm the other terms of the Deferral Agreement.      NOW, THEREFORE, for good and valuable consideration the receipt and adequacy of which the parties hereby acknowledge, and intending to be legally bound, Executive and the Company hereby agree as follows (the “Agreement”):      1. Scope of Agreement. This Agreement amends and restates the Deferral Agreement of the parties with respect to the deferral of cash amounts payable by the Company to Executive, as referenced in Section 1 of the “Election to Defer Receipt of Incentive Compensation” currently in effect. The parties hereto agree that the deferred amounts subject to this Agreement as of September 30, 2005, and the notional investments of such deferred amounts at that date, are reflected in the “Statement of Account” dated as of September 30, 2005, and that the Agreement does not apply to any other deferral accounts or deferred amounts. This Agreement makes no change in the amounts originally deferred and credited to Executive’s Deferral Account maintained hereunder (the “Deferral Account”), in the notional investments by which the value of Executive’s Deferral Account currently is measured or in the amounts previously credited or debited to such Deferral Account in connection with those notional investments. This Agreement does not apply to deferrals under the Jefferies Group, Inc. Deferred Compensation Plan and deferrals governed by the Jefferies Group, Inc. Stock Option Gain and Stock Award Deferral Program.      2. Notional Investments.      (a) Notional Investment Vehicles. The Company has previously and will hereafter make available a reasonable variety of investment vehicles in which the balance of Executive’s Deferral Account may be deemed invested on a notional basis, for the purpose of determining gains and losses in the Deferral Account. Executive is permitted to request specific investment vehicles, which the Company will make available on a notional basis if the Company reasonably determines that (i) the Company can adequately hedge its notional deferred compensation obligation to Executive, (ii) the Executive has and will have a cash or cash equivalent balance in his Deferral Account available and sufficient to provide for the notional investment, including   --------------------------------------------------------------------------------   any future commitments or capital calls that are mandatory terms of the investment, and (iii) the Company otherwise has no legal or practical impediment to the Company making such notional investment available and to the Company itself making the identical actual investment (if it should choose to do so). The Company’s determination regarding whether any particular notional investment vehicles shall be available or remain available is based on considerations as to the Company’s financial and business interests and legal compliance, and does not constitute a judgment as to the suitability of the notional investment for the Executive.      (b) Reallocation of Deferral Account Balances. Executive will be permitted to reallocate funds from an existing notional investment to another available notional investment if the existing notional investment is one that, if an actual investment had been made therein, such investment could be liquidated for an ascertainable amount in an active market or through a right of redemption, unless the Company determines not to permit reallocation because of a legal or practical impediment affecting the Company. The foregoing notwithstanding, many of the notional investments that have been and may hereafter be made available are illiquid in nature, and therefore no election may be made by Executive to reallocate any Deferral Account balance out of such an illiquid notional investment in the absence of an independent event that would result in liquidity for the related actual investment.      (c) Deferral Account Statements. The Company will periodically furnish a “Statement of Account” showing the notional investment vehicles in which cash balances in the Deferral Account are then deemed invested, a current value for each notional investment (to the extent then reasonably available), aggregate Deferral Account value, and other relevant information.      (d) Interest on Cash Balances. Interest on cash balances in the Deferral Account shall be calculated and credited, from and after December 1, 2005, as though such balances were invested in the Money Market Fund that is available in the same period for notional investments of cash in the Jefferies Group, Inc. Deferred Compensation Plan.      3. Risks to Executive. Executive acknowledges and agrees that, as a result of his deferrals of compensation hereunder, Executive is subject to risks and limitations on his rights relating to such deferrals, including the following:      (a) Risk as Unsecured Creditor of Company. Executive is an unsecured creditor of Company, with the rights as such enforceable against the Company. No assets of the Company or its parent or subsidiaries or affiliates secure the Company’s obligations to Executive hereunder, and Executive has no claim against any specific assets. Thus, even if the Company acquires or holds assets that match Executive’s notional investments, Executive will have no claims or rights with respect to those particular assets. Other creditors of the Company or its subsidiaries may have or in the future be granted rights senior to those of Executive.      (b) Undiversified Risk. To the extent that Executive holds other investments in the Company or its parent (Jefferies Group, Inc.) or subsidiaries or affiliates or depends on the Company or its parent or subsidiaries or affiliates for payment of other compensation (including other deferred compensation, health, welfare retirement and other benefits, and equity-based compensation), the risks of deferral hereunder may be more significant to Executive because they represent an undiversified risk.      (c) Investment Risk of Notional Investments. The amount distributable from the Deferral Account will equal the value of the Deferral Account (or distributable portion thereof) at 2 --------------------------------------------------------------------------------   the time of distribution. Over time, the Deferral Account value will vary based on the changes in value and investment returns of the notional investments in which the Deferral Account balance is deemed invested. The Company and its parent and subsidiaries and affiliates have made no guarantee as to the value of the Deferral Account. The amount distributable from the Deferral Account may be less than the amounts originally deferred. Executive has been and will be permitted to freely choose the amount and timing of the deemed investment of his Deferral Account balance in the notional investments vehicles made available hereunder, subject to Section 2 above. The Company, its parent, subsidiaries and affiliates, and its and their directors, officers, shareholders, employees and agents, have not provided to Executive any financial, investment or other advice, and will not provide such advice to Executive, with respect to the deferral of compensation hereunder or any decision to make any particular notional investment. Executive bears the full risk that any or all such investments may decline in value or fail to appreciate at a rate deemed satisfactory by Executive. Executive is solely responsible for determining the suitability of such investments. The Company recommends that Executive consult with his own investment advisors regarding financial or investment decisions relating to the Deferral Account.      (d) Other Risks. The Company, its parent, subsidiaries and affiliates, and its and their directors, officers, shareholders, employees and agents, have not provided to Executive any financial planning, estate-planning, tax, legal or other advice, and will not provide such advice to Executive, with respect to the deferral of compensation hereunder. Executive bears these risks fully with respect to deferrals of compensation hereunder.      4. Distributions. The Deferral Account will be distributed in accordance with this Section 4, subject to Executive’s right to file a different distribution election under Section 4(e) on or before December 31, 2006. References to the balance in the Deferral Account refer to the balance at the time of a given distribution:      (a) Distributions Elected by Executive. As of the effective date of this amended and restated Agreement, Executive has elected, and the Company agrees to distribute, the Deferral Account as follows, subject to earlier distribution as provided in Section 4(b), (c) and (d) below:   (i)   100% of the Deferral Account balance will be distributed at the date six months after termination of Executive’s employment with the Company and its parent and subsidiaries for any reason other than death in a transaction constituting a “separation from service” within the meaning of PTR § 1.409A-1(h) (or a successor regulation thereto) (“Termination”); and     (ii)   0% of the Deferral Account balance will be distributed in ___[up to ten] installments, such installments to be paid on the first business day of each January following Termination except that the first installment will be on the later of the first business day of January following Termination or the date six months after Termination.      (b) Change in Control. In the event of a Change in Control, as defined below, the Company may determine to terminate this Agreement (and the deferral plan governed by this Agreement) and to make a distribution in full of the Deferral Account. Such determination may be made only by the Board of Directors of Jefferies Group, Inc. in accordance with PTR § 1.409A-3(h)(2)(viii)(B) (and any successor regulation thereto) and prior to the consummation of the transaction that constitutes a Change in Control. The distribution shall be made within the time specified in PTR § 1.409A-3(h)(2)(viii)(B) (and any successor regulation thereto). For 3 --------------------------------------------------------------------------------   purposes of this Agreement, a “Change in Control” shall mean a change in the ownership or effective control of Jefferies Group, Inc. (or its successor corporation), or in the ownership of a substantial portion of the assets of Jefferies Group, Inc. (or its successor corporation), within the meaning of Code Section 409A(a)(2)(A)(v) and regulations thereunder (including PTR § 1.409A-3(a)(5) & § 1.409A-3(g)(5) and any successor regulation thereto).      (c) Death. In the event of the death of Executive, the Company will pay the balance of the Deferral Account to the beneficiary or beneficiaries designated by Executive or, if Executive has made no such designation or no beneficiary survives, to Executive’s estate. In either case, such payment will be made in a single sum at the date three months following the date of Executive’s death but only if, and not earlier than, such time as (i) the Company shall have received documentation reasonably satisfactory to the Company establishing the right of the payee to receive the distribution hereunder, and (ii), if an installment distribution was due within the period between death and such payment, such distribution shall be duly made at the specified date. Any designation of a beneficiary other than Executive’s spouse must be consented to by the spouse.      (d) Withdrawal Upon Unforeseeable Emergency. Executive and, after Executive’s death, any beneficiary shall have the right to withdraw the balance in the Deferral Account in the event of an unforeseeable emergency, but only if all of the conditions of Code Section 409A(a)(2)(B) are satisfied. A withdrawal is deemed a distribution for purposes of this Agreement.      (e) Change in Distribution Date Elected in 2005. Executive may, prior to December 31, 2006, elect distribution dates different from those specified in this Section 4 by delivering to the Company a written and signed document setting forth a new election of distribution dates, provided that (i) any change in distribution dates will be permitted only to the extent permitted under, and in accordance with, PTR § 1.409A, Preamble § XI.C & Notice 2005-1, Q/A 19(c); (ii) any such election must elect distribution dates that in all cases comply with Code Section 409A and regulations thereunder; and (iii) no distribution may be elected for a distribution date prior to Termination except if and to the extent that the distribution will not result in a loss of tax deductibility for the distributed amount under Code Section 162(m), in the reasonable opinion of the Company, so that all distributed amounts hereunder remain fully tax deductible by the Company and its parent.      (f) Redeferral of Deferral Account. After 2006, at least 12 months prior to the earliest distribution under Section 4(a), Executive, while still an employee of the Company or its parent or a subsidiary, may elect to defer the amounts credited to the Deferral Account for an additional period of at least five years, but only if all of the conditions of Code Section 409A(a)(4)(C) are satisfied. An election to extend the Deferral Period shall be made in the manner prescribed by the Company.      (g) Form of Payment. The Company will pay any distribution in cash, except that the Company may elect to distribute assets that match a notional investment of Executive to settle the portion of Executive’s Deferral Account deemed invested in such notional investment vehicle at the date of distribution.      5. Indemnification. Executive agrees to indemnify, defend and hold harmless, to the fullest extent permitted by law, the Company, its parent, subsidiaries and affiliates, and its and their respective directors, officers, shareholders, employees and agents from and against any and all claims, liability, damages, costs (including, but not limited to, attorneys’ fees), and other 4 --------------------------------------------------------------------------------   causes of action arising from Executive’s deferral of compensation governed by this Agreement, any negative consequence to Executive (including unsatisfactory performance or returns from investments), any breach by Executive of this Agreement, or any action or failure to act by Executive relating to the Deferral Account.      6. Other Provisions.      (a) Deferred Compensation Provisions Applicable. The following provisions of the Jefferies Group, Inc. Deferred Compensation Plan, as in effect at the date of this Agreement, shall apply to this Agreement:   •   Section 8.1 (Unsecured Claims)     •   Section 8.2 (Anti-alienation and Assignment)     •   Section 8.3 (No Rights to Continued Employment)     •   Section 8.4 (Administration)     •   Section 8.6 (Governing Law) For purposes of this Agreement, references in the Deferred Compensation Plan to the “Plan” shall be deemed to mean this Agreement, and defined terms used in the Deferred Compensation Plan provisions incorporated in this Agreement have meanings as defined elsewhere in the Deferred Compensation Plan.      (b) Tax Withholding. The Company and its parent and subsidiaries will have the right to withhold from any amount payable hereunder and any other right to payment to Executive any withholding taxes resulting from or attributable to a distribution from the Deferral Account, and any other taxes relating to the Deferral Account.      (c) Changes in Deferral Account Value and Distributions Not Compensation for Purposes of Other Plans. Amounts credited to Executive’s Deferral Account as investment returns and amounts distributed in settlement of such Deferral Account shall not be deemed to be compensation to Executive for purposes of calculating the amount of Executive’s benefits or contributions under a pension plan or retirement plan (qualified under Section 401(a) of the Internal Revenue Code) or any non-qualified supplemental retirement plan, the amount of life insurance payable under any life insurance plan, the amount of any disability benefit payments payable under any disability plan, or the amount of any severance payment or other payment or benefit under an employment agreement or compensation program or arrangement except to the extent specifically provided in such plan, employment agreement, program or arrangement (expressly referring to deferred compensation under this Agreement).      (d) Compliance with Code Section 409A. All terms of this Agreement, the deferrals governed by this Agreement, and the Deferral Account are subject to Code Section 409A. Therefore, the elections and terms set forth or incorporated in this Agreement notwithstanding, if, under Code Section 409A or any other provision of the Code or regulations thereunder, as presently in effect or hereafter amended or promulgated (including Proposed Treasury Regulations), any elections or rights of Executive with respect to the Deferral Account or the deferrals hereunder would result in Executive’s constructive receipt of income (for income tax purposes) relating to the Deferral Account or a tax penalty prior to the actual distribution of the Deferral Account by the Company, such elections or rights shall be automatically modified and limited to the extent necessary such that Executive will not be deemed to be in constructive receipt of such income or subject to a tax penalty prior to the actual distribution. The Company 5 --------------------------------------------------------------------------------   shall have no authority to accelerate any distribution hereunder except to the extent permitted under Code Section 409A and regulations thereunder. Dated this 29th day of December, 2005.             JEFFERIES & COMPANY, INC.       By:   /s/ Joseph A. Schenk         Title: Executive Vice President                Executive’s Signature:       /s/ Richard B. Handler       Richard B. Handler            6

Exhibit 10.1 ASSET PURCHASE AGREEMENT This ASSET PURCHASE AGREEMENT (this “Agreement”) dated as of the 20th day of December, 2006, by and among (i) Forefront Devant Inc., a corporation organized and existing under the laws of the State of Florida (the “Buyer”), (ii) Devant Ltd., a corporation organized and existing under the laws of the State of North Carolina (the “Seller”), (iii) James M. Sheppard, Jr., Mary Ann Sheppard Chambers, Rebecca Sheppard Roberts and Deborah Ann Sheppard (each of such persons and Seller are collectively referred to herein as the “Seller Responsible Parties”), (iv) ForeFront Group, Inc., a Florida corporation (“ForeFront Group”) with respect to Sections 1.10(c)(vi) and (c)(x) and Articles 3 and 8 hereof, and (v) ForeFront Holdings, Inc., a Florida corporation (“ForeFront Holdings”) with respect to Sections 1.10(c)(vii) and (c)(x) and Articles 3, 3A and 8 hereof. W I T N E S S E T H : WHEREAS, the Seller is engaged in the business of manufacturing, marketing, distributing and selling high quality golf towels and other towels and related accessories (the “Business”); WHEREAS, the Buyer desires to acquire from the Seller and the Seller desires to sell to the Buyer substantially all of the assets utilized in and associated with the operation of the Business (as presently conducted) upon the terms and subject to the conditions set forth in this Agreement (the “Sale”); WHEREAS, the respective Board of Directors of the Seller and the Buyer have each approved the Sale, the terms of this Agreement and the transactions contemplated hereby. NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein, the parties, intending legally to be bound, agree as follows: AGREEMENT [A list of defined terms is provided in Article 9 hereof] Article 1. Purchase and Sale 1.1 General. On the terms and subject to the conditions set forth in this Agreement, at the Closing, Buyer shall purchase from Seller, and Seller shall sell, transfer, assign, convey and deliver to Buyer, all of Seller’s right, title and interest in and to the Business, including, without limitation, in and to all of the assets, properties, rights, goodwill, contracts and claims of the Business, other than the Excluded Assets, wherever located, whether tangible or intangible, real or personal, known or unknown, actual or contingent, as the same shall exist as of the Closing (such rights, title and interest in and to all such assets, properties, rights, contracts and claims, being collectively referred to herein as, the “Purchased Assets”). The Purchased Assets shall include, without limitation, the following assets: (a) cash and cash equivalents, including petty cash accounts or cash on hand or in bank accounts, certificates of deposit, commercial paper and other similar securities related to the Business;   1 -------------------------------------------------------------------------------- (b) all inventory (including work in process, raw materials and finished goods), goods in transit, unbilled revenues and other properties and rights associated with the performance of contracts and the operation of the Business; (c) all equipment and machinery owned by Seller related to the Business, including but not limited to computers and software, office furniture and fixtures, as well as the rights to all communication numbers and addresses (telephone, fax, toll-free, e-mail, web site, domain name), telephone systems, office equipment and the like; (d) all marketing materials, office supplies and letterhead used in connection with the Business; (e) all accounts and notes receivable as well as other claims for money or other obligations due (or which hereafter will become due) to Seller arising out of the Business; (f) all of Seller’s ownership and rights to all, present and future, trade names, trademarks, trade dress, copyright, copy, marketing/advertising designs, and patents in all forms and languages, used in or related to the Business; (g) all goodwill associated with the Business; (h) all of Seller’s past or present business files or records (active or inactive) related to the Purchased Assets including, but not limited to, appropriate correspondence, inquiries, contracts, agreements, letters of intent, customer lists, publications, forms and sales leads, but excluding all files and records relating to Excluded Assets and employees and employee benefits; provided, however, that the Seller shall be entitled to retain copies of all financial and tax related files and records and the Buyer shall be given copies of all employee and employee benefit files and records to the extent permissible by law; (i) all right, title and interest in, to and under all Material Contracts associated with the Business and assumed by the Buyer, subject in each case to the terms of such contracts (the “Assumed Contracts”), a list of such Assumed Contracts is set forth in Schedule 1.1(i) hereto; (j) all Permits which are transferable and which are used in the Business, as presently conducted (other than those related to the Excluded Assets); (k) all rights of the Seller pursuant to any express or implied warranties, representations or guaranties made by suppliers to the Business; (l) all rights under non-disclosure agreements with employees and agents of Seller and under confidentiality agreements with prospective purchasers of the Business or with other third parties to the extent relating to the Business; (m) all deposits, prepaid charges, insurance, sums and fees, offset credit balances in any country, refunds, and causes of action (other than those related to the Excluded Assets); (n) all assets associated with the Sir Christopher Hatton business recently acquired by the Seller; and   2 -------------------------------------------------------------------------------- (o) any other assets of Seller which are used in the Business and which are of a nature not customarily reflected in the books and records of a business, such as assets which have been written off for accounting purposes but which are still used by or of value to the Business. The Purchased Assets will be delivered to Buyer free and clear of any Encumbrances. 1.2 Excluded Assets. Notwithstanding anything herein to the contrary, the Purchased Assets shall not include any of the following assets related to the Business (collectively, the “Excluded Assets”): (a) The fee owned Real Property located at 3011 Walkup Avenue, Monroe, North Carolina 28110 (the “Premises”); (b) All fixtures relating to the operation of the building or improvements located on the Premises (i.e., HVAC, plumbing, elevators, etc.) (but not including any furniture located within such improvements); (c) Life insurance policies that are held for the benefit of Sheppard family members; (d) Any personal items and furniture belonging to the Sheppard family located in their respective offices at the Premises, including without limitation, items contained in the attic above the embroidery department and the flush rear door area (also know as the “boat area”); (e) Jeep, Tahoe and Ford F350 vehicles identified on Schedule 1.2(e); and (f) the items of property described on Schedule 1.2(f). 1.3 Certain Provisions Relating to the Purchased Assets. (a) To the extent that a contract, Permit or other asset which would otherwise be included within the definition of “Purchased Assets,” or any claim, right or benefit arising thereunder or resulting therefrom (each an “Interest” and collectively the “Interests”), is not capable of being sold, assigned, transferred or conveyed without the approval, consent or waiver of the issuer thereof or the other party thereto, or any third person (including a Governmental Authority), and such approval, consent or waiver has not been obtained prior to the Closing, or if such sale, assignment, transfer or conveyance or attempted sale, assignment, transfer or conveyance would constitute a breach thereof or a violation of any law, decree, order, regulation or other governmental edict, this Agreement shall not constitute a sale, assignment, transfer or conveyance thereof, or an attempted sale, assignment, transfer or conveyance thereof. (b) Seller Responsible Parties and Buyer shall use their commercially reasonable best efforts and shall cooperate to obtain all approvals, consents or waivers necessary to convey to Buyer each Interest as of the Closing. The failure to obtain any approval, consent or waiver necessary to convey any Interest to Buyer shall not affect the obligations of the parties to close hereunder. Subsequent to the Closing, the Seller Responsible Parties shall execute and deliver any other instruments and take any actions, which may be reasonably required for the implementation of this Agreement and the transactions contemplated hereby.   3 -------------------------------------------------------------------------------- 1.4 Assumption of Liabilities. On the terms and subject to the conditions set forth in this Agreement, at the Closing, Buyer will assume and become responsible for the following liabilities and obligations of the Seller (the “Assumed Liabilities”): (a) all of the Seller’s accounts payable (which have arisen in the ordinary course of the Business), accrued expenses and the third party liabilities and obligations set forth on Schedule 1.4(a); (b) all liabilities and obligations arising out of the ownership by Buyer of the Purchased Assets or the operation by the Buyer of the Business after the Closing Date (other than any Excluded Liability); and (c) the obligations under the Assumed Contracts being transferred to Buyer hereunder, a list of which is set forth on Schedule 1.1(i) (to the extent that such liabilities and obligations remain unsatisfied or are required to be performed on or after the Closing Date), including the salary and royalty obligations due to Sir Christopher Hatton (the amounts of which are tied to sales volume). 1.5 Excluded Liabilities. Except for the Assumed Liabilities, the Seller Responsible Parties and the Buyer expressly understand and agree that Buyer shall not assume, pay, perform or discharge or otherwise become liable for any obligations, commitments or liabilities of any and every nature whatsoever of the Seller, whether known or unknown, fixed or contingent, relating to the ownership of the Purchased Assets, the operation of the Business or otherwise (the “Excluded Liabilities”), including, without limitation, liabilities and obligations relating to or arising in connection with the following: (a) all liabilities associated with the Real Property including the Premises including, without limitation, the note and mortgage thereon; (b) liabilities resulting from Environmental Claims relating to the operation of the Business prior to the Closing; (c) Seller’s bank debt and other funded debt, including overdrafts, all of which will be paid or discharged in full by Seller at or prior to Closing; (d) any liability or obligation arising out of any claim of or for injury to persons or property by reason of the improper performance or malfunctioning, improper design or manufacture, or failure to adequately package, label or provide warnings as to the hazards of, any product of the Business, where the injury giving rise to such claim occurred on or prior to the Closing Date; (e) any liability of the Seller to any plan, individual or governmental agency arising out of any failure of the Seller to comply with the applicable provisions of any Employee Benefit Plans, ERISA, the Code, or other applicable Laws with respect to its employees, including any obligation or liability of the Seller for any penalty, fine or similar amount due from the Seller on account of any breach of fiduciary duty or failure to comply with applicable laws or regulations; (f) any liability associated with the hiring, employment or termination of any employees of Seller at any time prior to Closing including obligations under any severance,   4 -------------------------------------------------------------------------------- deferred compensation or employment agreements, guaranteed fixed terms of employment or retirement benefits beyond those provided under applicable law, collective bargaining agreements, or any Employee Benefit Plan applicable to employees of the Business generally, which arises out of any acts or omissions of Sellers prior to the Closing Date; (g) any liability associated with the Excluded Assets; and (h) all liabilities of Seller or any Affiliate of Seller for Taxes. 1.6 Purchase Price; Payment. On the terms and subject to the conditions set forth in this Agreement, and subject to adjustment as provided herein, at the Closing the Buyer shall acquire the Purchased Assets from the Seller for an aggregate consideration ranging from approximately Five Million Dollars ($5,000,000) up to Five Million Seven Hundred and Fifty Thousand Dollars ($5,750,000) (the “Purchase Price”), dependent upon the amount paid by the Buyer with respect to the Seller’s loan payable to RBC Centura described in Section 1.6(b), below. In addition, the Purchase Price may be adjusted as provided in Section 1.8 below. The Purchase Price shall be payable as follows: (a) The Closing Cash Payment in cash by wire transfer to the account or accounts designated by the Seller Responsible Parties not later than three Business Days prior to the Closing Date; (b) On the Closing Date, the Buyer shall pay, on behalf of the Seller, the Seller’s loan payable to RBC Centura in the outstanding amount of $1,019,472; (c) On the Closing Date, the Buyer shall deliver to the Seller the executed Promissory Note A in the principal amount of $250,000; (d) On the Closing Date, the Buyer shall deliver to the Seller the executed Promissory Note B in the principal amount of $1,250,000 (or such lesser amount as provided herein); (e) On the Closing Date, the Buyer shall deliver to the Seller the executed Promissory Note C in the principal amount of $150,000; (f) 250,000 shares of the common stock of ForeFront Holdings (the “Common Shares”). 1.7 Closing Balance Sheet and Net Asset Value Statement. At the Closing, the Buyer and the Seller shall jointly cause to be prepared a balance sheet of the Business as it existed immediately prior to the Closing (the “Closing Date Balance Sheet”), prepared in accordance with GAAP. The Closing Date Balance Sheet shall be accompanied by an additional schedule of information (the “Closing Date Schedule of Net Assets”) which shall accurately present the Net Assets purchased by the Buyer as at the Closing Date (the “Closing Date Net Assets”).   5 -------------------------------------------------------------------------------- 1.8 Purchase Price Adjustments; Deemed Satisfaction of Promissory Note B. The Purchase Price may be adjusted in accordance with the following: (a) The principal amount of Promissory Note B may be adjusted as follows: (i) Any amounts in excess of $1,750,000 paid by the Buyer to pay off the Seller’s line of credit with RBC Centura shall be deducted from the original principal amount of Promissory Note B; (ii) Intentionally deleted. (iii) In the event that any other mutually agreeable adjustments are necessary, then the Purchase Price will be further adjusted by increasing or decreasing the principal amount of Promissory Note B. For example, if the Buyer and the Seller disagree as to the value of any Purchased Asset, then the Buyer will pay the Seller the stated book value for the subject Purchased Asset. The Seller will then have a period of 24 months following the Closing to sell such Purchased Asset. If the Seller is unable to sell such Purchased Asset for at least the stated book value, then the Purchase Price shall be reduced dollar for dollar and shall be reflected by a reduction in Promissory Note B. If the Seller is able to sell the subject Purchased Asset for more than the stated book value, then the difference between the stated book value and the sales proceeds for such Purchased Asset shall be divided equally between the Buyer and the Seller and paid to the Seller within 10 days after sale. (b) The principal amount of Promissory Note B may also be adjusted as follows: The Purchase Price is based on the assumption that adjusted EBITDA of the Seller for the 2007 fiscal year will be at least $930,000. In the event that adjusted EBITDA for fiscal year 2007 is less than $930,000, the Purchase Price will be adjusted downward dollar for dollar for each dollar by which adjusted EBITDA is less than $930,000 for such fiscal year. The amount of any such adjustment shall be deducted from the principal amount due under Promissory Note B. In the event that adjusted EBITDA for fiscal year 2007 is greater than $930,000, the Purchase Price will be adjusted upward dollar for dollar for each dollar by which EBITDA exceeds $930,000 for such fiscal year. The amount of any such adjustment shall be added to the principal amount due under Promissory Note B. By way of illustration, (A) if the adjusted EBITDA amount is $630,000 for the 2007 fiscal year, the Purchase Price shall be decreased by $300,000 and the principal amount of Promissory Note B shall be likewise reduced; and (b) if the adjusted EBITDA amount is $1,230,000, the Purchase Price shall be increased by $300,000 and the principal amount of Promissory Note B shall be likewise increased. Such adjustment, if any, shall be determined based on the Devant division’s adjusted EBITDA for the year ended December 31, 2007 as set forth in Forefront Holdings’ Annual Report on Form 10-KSB for the year then ended, and the amount of such adjustment shall be finalized within 10 days of the filing of such Annual Report on Form 10-KSB with the SEC. In determining the EBITDA for the 2007 fiscal year, the Buyer shall prepare an income statement of the Devant division of the Buyer normalized to reflect what the income statement of the Seller for such period would have been had the Purchased Assets not been sold to the Buyer and had such income statement been prepared in the same manner as the Seller’s income statements were prepared prior to Closing (including, without limitation, year-end adjustments to inventory balances, reserves and allowances and year-end accruals consistent with past practices of the Company) (the “Normalized Income Statement”). The following are examples of some of the types of adjustments to the income statement for such period that will be reflected in the Normalized Income Statement: (i) the Normalized Income Statement will not include any   6 -------------------------------------------------------------------------------- expenses or taxes paid, accrued or incurred by the Buyer in connection with the transactions contemplated by this Agreement; (ii) in the event that a facility of the Buyer is closed or merged into or consolidated with the operations of another facility, the Normalized Income Statement will reflect what the consolidated income statement of the Devant division for such period would have been had such closing, merger or consolidation had not occurred; (iii) in the event that the Buyer acquires any other business or product line, the results of such acquisition and all expenses related to the acquisition and operation thereof shall be excluded from the Normalized Income Statement; (iv) in the event of any dispute relating to this Agreement, all expenses of the Buyer related to the resolution of such dispute shall be excluded from the Normalized Income Statement; (v) to the extent that any related party transactions occurring after the Closing Date are reflected on the books of the Buyer on terms other than arms length terms, such transactions will be reflected in the Normalized Income Statement as if they had been made on arms length terms; (vi) to the extent that after the Closing the compensation paid to employees is increased (other than increases of compensation in the ordinary course of business consistent with the Seller’s past practices), the Normalized Income Statement will reflect the level of compensation expense that would have been realized had such increase in compensation not occurred; and (vii) to the extent that after the Closing, the Buyer acquires any new capital equipment for any purpose other than to replace existing equipment, the earnings and expenses related to such new equipment will be excluded from the Normalized Income Statement to the extent that such earnings and equipment are used to process (a) business for a new customer that has not been a customer of Seller during the twelve (12) month period immediately preceding the Closing or (b) business for an existing customer of the Company that is in excess of the average monthly volumes processed for such customer during the preceding twelve-month period. (c) In addition to the foregoing, Promissory Note B may be satisfied with the Common Shares as set forth herein. As of April 15, 2009, the Buyer has a good faith belief that the fair market value of the Common Shares will be at least $5.00 per share (based on the 30 day moving average trading price of Forefront Holdings’ common stock as quoted on the OTC Bulletin Board or other established market (the “30-Day Value”)) and that such Common Shares will be saleable at such price on a national exchange or other established market on April 15, 2009. (i) In the event that on April 15, 2009, the aggregate value of the Common Shares (based on the 30-Day Value) is less than the then outstanding principal amount of Promissory Note B, then (1) the principal balance of Promissory Note B (as such amount may be adjusted as provided herein) shall be reduced by the value of the Common Shares as of such date (based on the 30-Day Value), and (2) the Buyer shall pay the residual balance of Promissory Note B in cash (provided that, any such payment is subject to the subordination agreement entered into between the Seller and the Buyer’s senior lender). (ii) In the event that on April 15, 2009, the aggregate value of such Common Shares (based on the 30-Day Value) is equal to or greater than the then outstanding principal amount of Promissory Note B, then Promissory Note B shall be deemed paid and satisfied in full. In the event that there has been one or more downward adjustments to Promissory Note B in accordance with this Section 1.8 and the aggregate value of the Common Shares (based on the 30-Day Value) is greater than the then outstanding principal amount of Promissory Note B, then the Seller shall immediately pay to the Buyer an amount in cash equal to the lesser of (1) the shortfall amount between   7 -------------------------------------------------------------------------------- the aggregate value of the Common Shares and the then outstanding principal amount of Promissory Note B and (2) the aggregate dollar amount of all downward adjustments to Promissory Note B; provided, however, that the Seller may pay such amount by transferring to the Buyer that amount of Common Shares having a value (based on the 30-Day Value) equal to the difference between the aggregate value of all of the Common Shares and the then outstanding principal amount of Promissory Note B in lieu of paying such amount in cash. If at any time prior April 15, 2009, the Seller shall sell all or a portion of the Common Shares, which sale shall require the prior written consent of the Buyer, then Promissory Note B shall be reduced by an amount equal to the product of $5.00 and the amount of Common Shares sold. 1.9 Pro-rations. All obligations due in respect of periods prior to Closing shall be paid in full or otherwise satisfied by the Seller and all obligations due in respect of periods after Closing shall be paid in full or otherwise satisfied by Buyer. Taxes, customer deposits, prepayments, employee accruals and similar items identified on Schedule 1.9 hereto will be prorated at Closing. 1.10 Closing and Closing Date. (a) The closing (the “Closing”) of the transactions herein contemplated shall occur no later than ten Business Days following the satisfaction of the conditions to Closing set forth herein (such time and date being referred to herein as the “Closing Date”), at such place or places and in such manner as the parties shall reasonably agree. Notwithstanding the foregoing, the Closing shall be held no later than December 19, 2006 (unless otherwise agreed in writing by the parties). (b) At the Closing, the Seller Responsible Parties shall deliver, or caused to be delivered, to the Buyer the following items: (i) a duly executed bill of sale and such other executed assignments, bills of sale or certificates of title, each dated the Closing Date and in form and substance reasonably satisfactory to counsel to Buyer, as are reasonably necessary to transfer to Buyer all of Seller’s right, title and interest in, to and under the Purchased Assets and the Assumed Contracts; (ii) duly executed assignments, sufficient to transfer all of Seller’s right, title and interest in and to the Intellectual Property Rights to Buyer, in a form suitable for recording in the various appropriate national or regional patent, trademark, copyright offices or other governmental offices; (iii) certificate of the secretary of the Seller, dated the Closing Date, (A) as to the incumbency and signatures of the officers or representatives of the Seller executing this Agreement and each of the agreements and any other certificate or other document to be delivered pursuant hereto or thereto, together with evidence of the incumbency of such Secretary, and (B) certifying attached resolutions of the Board of Directors and shareholders of the Seller, which authorize and approve the execution and delivery of this Agreement and each of the agreements to which Seller is a party and the consummation of the transactions contemplated hereby and thereby;   8 -------------------------------------------------------------------------------- (iv) duly executed letters, in the form of Exhibit D attached hereto, whereby the Seller notifies its customers and distributors of the consummation of the Sale and instructs such customers and distributors to remit payment relating to the Purchased Assets directly to the Buyer; (v) duly executed letters, in the form of Exhibit E attached hereto, whereby the Seller notifies its suppliers, vendors and lessors of the consummation of the Sale; (vi) duly executed lease agreement and landlord waiver, in the form of Exhibit F attached hereto, for the Premises; and (vii) duly executed subordination agreement in form and content acceptable to the Seller and principal lender of Buyer and ForeFront Holdings (along with any other documents which such lender may reasonably request). (c) At the Closing, the Buyer shall deliver, or caused to be delivered, to the Seller the following items: (i) the Closing Cash Payment; (ii) the duly executed Promissory Note A in the form of Exhibit A attached hereto; (iii) the duly executed Promissory Note B in the form of Exhibit B attached hereto; (iv) the duly executed Promissory Note C in the form of Exhibit C attached hereto; (v) stock certificate(s) evidencing the Common Shares; (vi) certificate of the secretary of the Buyer, dated the Closing Date, (A) as to the incumbency and signatures of the officers or representatives of Buyer executing this Agreement and each of the agreements and any other certificate or other document to be delivered pursuant hereto or thereto, together with evidence of the incumbency of such Secretary, and (B) certifying attached resolutions of the Board of Directors of the Buyer, which authorize and approve the execution and delivery of this Agreement and each of the agreements to which Buyer is a party and the consummation of the transactions contemplated hereby and thereby; (vii) certificate of the secretary of ForeFront Group, dated the Closing Date, (A) as to the incumbency and signatures of the officers or representatives of ForeFront Group executing this Agreement and each of the agreements and any other certificate or other document to be delivered pursuant hereto or thereto, together with   9 -------------------------------------------------------------------------------- evidence of the incumbency of such Secretary, and (B) certifying attached resolutions of the Board of Directors of ForeFront Group, which authorize and approve the execution and delivery of this Agreement and each of the agreements to which ForeFront Group is a party and the consummation of the transactions contemplated hereby and thereby; (viii) certificate of the secretary of ForeFront Holdings, dated the Closing Date, (A) as to the incumbency and signatures of the officers or representatives of ForeFront Holdings executing this Agreement and each of the agreements and any other certificate or other document to be delivered pursuant hereto or thereto, together with evidence of the incumbency of such Secretary, and (B) certifying attached resolutions of the Board of Directors of ForeFront Holdings, which authorize and approve the execution and delivery of this Agreement and each of the agreements to which ForeFront Holdings is a party and the consummation of the transactions contemplated hereby and thereby; (ix) duly executed employment agreement, in the form of Exhibit G attached hereto, entered into between the Buyer and James M. Sheppard, Jr.; (x) duly executed lease agreement, in the form of Exhibit F attached hereto, for the Premises; and (xi) duly executed Guaranty Agreements executed by ForeFront Group and ForeFront Holdings, each in the form of Exhibit H attached hereto, whereby ForeFront Group and ForeFront Holdings guarantee the obligations of the Buyer under Promissory Note A, Promissory Note B and Promissory Note C which Guaranty Agreements shall be subject to the terms of the subordination agreement executed by Seller and Buyer’s senior lender. (d) At the Closing, each of the parties hereto shall take, or cause to be taken, all such actions and deliver, or cause to be delivered, all such other documents, instruments, certificates and other items as may be required under this Agreement or otherwise, in order to perform or fulfill all covenants and agreements on its part to be performed at or prior to the Closing Date. 1.11 Taking of Necessary Action; Further Action; Cooperation. (a) Each of the parties shall use its respective reasonable best efforts to take all such action as may be necessary or appropriate in order to effectuate the Closing as promptly as possible. If, on or at any time after the Closing Date, any further reasonable action is necessary or desirable to carry out the purposes of this Agreement and to vest the Buyer with full right, title and possession to all assets, property, rights, privileges, powers, and franchises of the Purchased Assets, the Seller Responsible Parties shall take, and shall ensure that the officers of the Seller are fully authorized, in the name of the Seller or otherwise, to take, and shall take, all such lawful and necessary action, all at the expense of the Buyer. (b) The Seller Responsible Parties and the Buyer shall generally cooperate with each other and their respective officers, employees, attorneys, accountants and other agents and do such other acts and things in good faith as may be reasonable, necessary or appropriate to timely effectuate the intent and purposes of this Agreement and the consummation of the Sale. In connection with these efforts, each of the parties hereto shall use its commercially reasonable   10 -------------------------------------------------------------------------------- efforts to (i) take, or cause to be taken, all appropriate action, and do, or cause to be done, all things necessary, proper or advisable under any Law or otherwise to consummate and make effective the transactions contemplated by this Agreement; (ii) obtain any third party consents, licenses, permits, waivers, approvals, authorizations or orders required to be obtained or made in connection with the authorization, execution and delivery of this Agreement and the consummation of the transactions contemplated hereby, including the consents set forth on Schedule 1.10, approvals or waivers in respect of contracts which are being assumed by the Buyer; and (iii) make all filings and give any notice, and thereafter make any other submissions either required or reasonably deemed appropriate by each of the parties, with respect to this Agreement and the transactions contemplated hereby required under any Law, including applicable securities and antitrust Laws. 1.12 Allocation of Consideration. The parties agree that the Purchase Price for the Purchased Assets shall be allocated to and among the Purchased Assets, in a manner consistent with Sections 338 and 1060 of the Code and the regulations thereunder and as set forth in Forefront Holdings’ Current Report on Form 8-K and any amendments thereto to be filed with the SEC in connection with the transactions contemplated hereby. The parties shall file all Tax Returns (including amended returns and claims for refund) and information reports in a manner consistent with such allocation. The parties agree to provide such cooperation and information as may be required by the other for the purpose of preparing such reports. The parties further agree that a portion of the Purchase Price equal to the value of the Closing Date Net Assets shall be allocated to the Purchased Assets based on the book values of such Purchased Assets, and that the remaining portion of the Purchase Price shall be allocated to goodwill. Article 2. Representations and Warranties of the Seller Responsible Parties. In order to induce the Buyer to enter into this Agreement and purchase the Purchased Assets, each of the Seller and James M. Sheppard, Jr., jointly and severally, makes the following representations and warranties to the Buyer, which representations and warranties shall be true and correct as of the date hereof: 2.1 Disclosure Schedules; Due Diligence Information; Access. (a) The Seller Responsible Parties have delivered to the Buyer the Disclosure Schedule, which includes the numbered schedules specifically referred to in this Article 2 (the “Disclosure Schedule”). The information contained in the Disclosure Schedule is complete and accurate, and all documents that are attached to or form a part of the Disclosure Schedule are complete and accurate copies of the genuine original documents they purport to represent. References to Schedules in this Agreement shall be to Schedules included in the Disclosure Schedule. (b) All of the documents, financial statements, reports, compilations, management and statistical reports and other information provided by the Seller to the Buyer in response to Buyer’s due diligence investigation of the Business and the Purchased Assets are true, correct and complete in all material respects. (c) The Seller has given the Buyer and its representatives reasonable access to Seller’s employees (including appropriate experts and other knowledgeable personnel), attorneys, accountants, agents, independent contractors, properties, books and records of the   11 -------------------------------------------------------------------------------- Seller and has furnished the Buyer and its representatives with such information concerning the Seller as the Buyer has reasonably requested, including such access and cooperation as may be necessary to allow the Buyer and its representatives to: (i) identify those contracts and Permits that require third party consent to the transactions contemplated hereby, those that expire or may be terminated prior to or soon after the Closing and those that may require special documentation at the Closing; and (ii) review any arrangements with respect to those assets that will be assigned or transferred to the Buyer at the Closing in accordance with the terms of this Agreement. 2.2 Organization and Standing. The Seller is a corporation duly incorporated, validly existing and in good standing under the laws of the State of North Carolina and has all requisite corporate power and authority to own, lease and operate its properties and assets and to conduct its business as it is now being conducted. The Seller is duly qualified to do business as a foreign corporation and is in good standing under the laws of each state in which the operation of its business or ownership of its assets makes such qualification necessary, except where the failure to so qualify or be in good standing could not reasonably be expected to have a Material Adverse Effect. The copies of the articles of incorporation and bylaws or other organizational documents which have been delivered to the Buyer are true, accurate and complete in all material respects. The Seller does not have any subsidiaries and does not own or have any right to acquire any equity interest in any other Person. The Seller does not presently own or control, directly or indirectly, any interest in any other corporation, association, or other business entity. The Seller is not a participant in any joint venture, partnership or similar arrangement. 2.3 Binding Agreement. The Seller has all requisite corporate power and authority to enter into this Agreement, to execute and deliver this Agreement, to carry out its obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by the Seller and the consummation by the Seller of its obligations hereunder have been duly and validly authorized by all necessary corporate and stockholder action on the part of the Seller. This Agreement has been duly executed and delivered on behalf of the Seller and, assuming the due authorization, execution and delivery by the Buyer, constitutes a legal, valid and binding obligation of the Seller enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency and similar laws affecting creditors’ rights and remedies generally and to general principles of equity. As of the Closing Date, each of the agreements, instruments and other documents to be delivered hereunder to the Buyer at the Closing will have been duly and validly executed and delivered by the Seller and will be enforceable against the Seller in accordance with its terms. 2.4 Absence of Violations; Required Consents. (a) The execution, delivery and performance by the Seller of this Agreement and the consummation of the transactions contemplated hereby do not and will not (a) violate or result in the breach or default of any provision of articles, certificates of incorporation, by-laws or other charter or corporate governance documents of the Seller, (b) violate any Law or Governmental Order applicable to the Seller or any of its properties or assets, (c) except for the Required Consents, require any consent, approval, authorization or other order of, action by,   12 -------------------------------------------------------------------------------- registration or filing with or declaration or notification to any Governmental Authority or any other Person or (d) result in any violation or breach of, constitute a default (or event which with the giving of notice, or lapse of time or both, could reasonably be expected to become a default) under, require any consent under, or give to others any rights of notice, termination, amendment, acceleration, suspension, revocation or cancellation of, or result in the creation of any Encumbrance on the Purchased Assets, or result in the imposition or acceleration of any payment, time of payment, vesting or increase in the amount of compensation or benefit payable, pursuant to, any note, bond, mortgage or indenture, contract, agreement, lease, sublease, license or permit, or franchise to which the Seller is a party or by which its assets are bound. (b) The Seller has obtained all of the Required Consents. The Seller does not need to give any notice to, make any filing with or obtain any authorization, consent or approval of any Governmental Authority in order for the parties to consummate the transactions contemplated by this Agreement. A true and complete list of all third party (including, without limitation, lenders, lessors, licensees, licensors, distributors and vendors) consents, licenses, permits, waivers, approvals, authorizations or orders obtained or made in connection with the authorization, execution and delivery of this Agreement and the consummation of the transactions contemplated hereby and the continuation in force of any rights, licenses, permits, authorizations, agreements, instruments or documents of the Seller is set forth on Schedule 2.4(b) attached hereto. Without limiting the generality of the foregoing, the Seller has obtained the consent and release of liens from RBC Centura. Except as disclosed in Schedule 2.4(b), the Assumed Contracts are assignable by the Seller without any consent of any third parties and the assignment of the Assumed Contracts will not cause any default in the performance of any of the terms, covenants, conditions or agreements under the Assumed Contracts. (c) Neither any statute, rule, regulation, order, stipulation, decree, judgment, or injunction has been enacted, promulgated, entered, or enforced to the purchase nor any other action has been taken by any Government Entity (i) which prohibits the consummation of the transactions contemplated by this Agreement; (ii) which prohibits Buyer’s ownership or operation of all or any material portion of the Business or the Purchased Assets, or which compels the Buyer to dispose of or hold separately all or any portion of the Purchased Assets as a result of the transaction contemplated herein; (iii) which makes the purchase of, or payment for, some or all of the Purchased Assets illegal; (iv) which imposes material limitations on the ability of the Buyer to acquire or hold or to exercise effectively all rights of ownership of the Purchased Assets; or (v) which imposes any limitations on the ability of the Buyer effectively to control in any material respect the Business or operations of the Seller. 2.5 Entire Business. The Seller’s ownership of the Business is evidenced solely by the Purchased Assets and the sale, assignment, conveyance and delivery of the Purchased Assets to the Buyer pursuant to this Agreement will transfer all of the Seller’s and its Affiliates’ ownership interests comprising such Business except for the Excluded Assets. 2.6 Financial Information. Attached hereto as Schedule 2.6 are copies of the Seller’s unaudited balance sheets and statements of income and cash flow as of and for the calendar years ended on December 31 of 2004 through 2005 (the “Interim Financial Statements”). All such financial statements are true, complete and correct in all material respects, were prepared in accordance with accounting practices and procedures historically used by the Seller applied on a consistent basis throughout the periods covered thereby and present fairly the financial condition of the Seller as of such dates and the results of operations and cash flows for the periods then ended.   13 -------------------------------------------------------------------------------- 2.7 Absence of Certain Changes. Except as set forth in Schedule 2.7 and in the unaudited balance sheet of the Seller as at June 30, 2006 (“Interim Balance Sheet”) and the Interim Financial Statements previously delivered to the Buyer, since December 31, 2005 to the date of this Agreement there has not been any change in the financial condition or results of operations or cash flows of the Business or in the condition of the Purchased Assets and the Business has not suffered any damage, destruction or loss, in each case which has had or which could reasonably be expected to have a Material Adverse Effect. 2.8 No Undisclosed Liabilities. Except as set forth on Schedule 2.8, there are no liabilities associated with the Business or the Purchased Assets (whether accrued, absolute, contingent or otherwise), except for (i) liabilities of the Business set forth or reserved against or disclosed in the December 31, 2005 Balance Sheet or the notes thereto, (ii) liabilities disclosed in this Agreement or the Disclosure Schedules hereto or the other agreements contemplated by this Agreement, (iii) liabilities incurred in the ordinary course of business since the date of the December 31, 2005 Balance Sheet and (iv) Excluded Liabilities. 2.9 Business Conduct. Neither the Seller nor any of its officers, directors, employees or agents, nor persons acting under the authority of any of the foregoing (i) have, to the Knowledge of the Seller Responsible Parties, made, or have been charged by any governmental authority with making, directly or indirectly, any domestic or foreign payments for bribes or kickbacks (governmental or commercial) or unlawful political contributions or other questionable or illegal payments with respect to the Business or to secure favorable treatment for the Business or (ii) have maintained or permitted to exist any use of “off the books” bookkeeping, secret accounts, unrecorded bank accounts, “slush” funds, falsified books, or any other device that could have been or could be utilized to distort records or reports of the true operating results and financial condition of the Business. 2.10 Title to Assets; Related Matters. (i) The Seller has good, valid and marketable title (as measured in the context of their current uses) to, or, in the case of leased or subleased assets or other possessory interests, valid and subsisting leasehold or other possessory interests (as measured in the context of their current uses) in all of the Purchased Assets in order to conduct the Business, free and clear of all Encumbrances, (ii) the Purchased Assets constitute all the assets and rights necessary for the operation of the Business as currently conducted, (iii) the Equipment is in good operating condition and repair, normal wear and tear excepted, and maintained in accordance with industry practices taking into account the age thereof, (iv) there are no assets, properties or rights necessary to conduct the Business as the same was conducted immediately prior to the date hereof that are owned by any Person other than the Seller which assets, properties or rights are not to be leased or licensed to Buyer under valid, current lease or license arrangements and (v) there are no contractual or legal restrictions to which the Seller is a party or by which the Equipment is otherwise bound that preclude or restrict the Seller’s ability to use the Equipment for the purposes for which it is currently being used. The Seller enjoys peaceful and undisturbed possession of all Equipment. The Equipment and other tangible assets owned or used by the Seller have no known material defects. None of the Purchased Assets is subject to any commitment or other arrangement for its sale or use by the Seller, its Affiliates or third parties. The assets reflected on the December 31, 2005 Balance Sheet or acquired thereafter shall be valued on the books of the Seller at or below the actual cost less an adequate and proper depreciation charge. The Seller has not depreciated any of the Purchased Assets on an accelerated basis (or in any other manner) inconsistent with applicable requirements of the Code.   14 -------------------------------------------------------------------------------- 2.11 Equipment and Other Tangible Assets. The Equipment and other tangible assets which are included in the Purchased Assets are in all material respects adequate for the purposes for which such Purchased Assets are currently used or are held for use, and are in good repair and operating conditions (subject to normal wear and tear) and, to the Knowledge of the Seller Responsible Parties, there are no facts or conditions affecting the Purchased Assets which could, individually or in the aggregate, interfere with any material respect with the use, occupancy or operation thereof as currently used, occupied or operated, or their adequacy for such use. 2.12 Absence of Certain Changes, Events and Conditions. Since December 31, 2005, except as otherwise provided in or contemplated by this Agreement or as set forth on Schedule 2.12, the Seller has not: (a) other than in the ordinary course of business consistent with past practice, sold, transferred, leased, subleased, licensed, encumbered or otherwise disposed of any Purchased Assets, other than the sale of obsolete Equipment; (b) permitted any of the Purchased Assets to be subjected to any Encumbrance; (c) made any changes, including changes to collection practices, to be made in the operations of the Seller; (d) made any commitments for the Seller to make capital expenditures in excess of $20,000 individually or in the aggregate; (e) made any amendment of the articles of incorporation or bylaws of the Seller; (f) permitted any new agreement, contract, commitment or arrangement, or amendments or modifications to any existing such agreement, contract, commitment or arrangement, to be entered into with any Affiliate of the Seller or any third parties that is material to the Seller or that will continue in effect after the Closing Date and not be terminable by the Seller on not more than 30 days’ written notice without payment of premium or penalty; (g) other than in the ordinary course of business consistent with past practice, entered into any new Material Contract or any amendments or modifications to any existing such Material Contract; (h) borrowed any amount or incurred or become subject to any liabilities, except trade payables incurred in the ordinary course of business and liabilities under contracts entered into in the ordinary course of business (excluding any capital lease obligations); (i) discharged or satisfied any material Encumbrance or paid any material obligation or liability, other than in the ordinary course of business; (j) declared, set aside or made any payment or distribution of cash or other property to its stockholders with respect to its capital stock or other equity securities or   15 -------------------------------------------------------------------------------- purchased or redeemed any shares of its capital stock or other equity securities (including, without limitation, any warrants, options or other rights to acquire its capital stock or other equity securities); (k) sold, assigned or transferred any material Intellectual Property Rights or disclosed any proprietary confidential information to any Person; (l) other than in the ordinary course of business consistent with past practice, granted any increase, or announced any increase, in the wages, salaries, compensation, bonuses, incentives, pension or other benefits payable to any of the officers, employees, independent contractors or agents, including, without limitation, any increase or change pursuant to any Employee Benefit Plan, or established, increased or accelerated the payment or vesting of any benefits under any Employee Benefit Plan with respect to officers or employees; (m) made any material change in any method of accounting or accounting practice or policy, including, without limitation, material changes in assumptions underlying or methods of calculating bad debt, contingency or other reserves, or notes or accounts receivable write-offs, or in corporate allocation methodology, in each case other than changes required by Law or under GAAP; (n) suffered any casualty loss or damage with respect to any assets, whether or not covered by insurance; (o) incurred or guaranteed any indebtedness for borrowed money other than indebtedness repaid at or prior to the Closing or indebtedness that will constitute Excluded Liabilities; (p) other than in the ordinary course of business consistent with past practice, deferred the payment of any accounts payable; (q) made any loans, advances or capital contributions to, or investments in, any other Person, other than in the ordinary course of business; (r) merged or consolidated with, or acquired any equity or all or substantially all of the assets of, any other Person; (s) experienced any material adverse change in the condition, financial or otherwise, business, assets or rights of the Seller; (t) conducted the Business outside of the ordinary and usual course consistent with past practice; (u) compromised, settled, granted any waiver or release relating to, or otherwise adjusted any Action, Indebtedness or any other claims or rights; or (v) entered into any agreement, contract, commitment or arrangement to do any of the foregoing.   16 -------------------------------------------------------------------------------- 2.13 Litigation. (a) Except as set forth on Schedule 2.13, as of the date hereof: (i) there are no Actions against the Seller pending, or, to the Knowledge of the Seller Responsible Parties, threatened to be brought against the Seller or the Business, (ii) the Seller is not subject to any Governmental Order (nor, to the Knowledge of the Seller Responsible Parties, are there any such Governmental Orders threatened to be imposed by any Governmental Authority), in each case with respect to the Seller or the Business; and (iii) there is no Action pending, or, to the Knowledge of the Seller Responsible Parties, threatened to be brought that seeks to question, delay or prevent the consummation of the transactions contemplated hereby. As of the date hereof, no preliminary or permanent injunction or other order issued by any United States federal or state Governmental Authority, nor any Law promulgated or enacted by any United States federal or state Governmental Authority, that restrains, enjoins or otherwise prohibits the transactions contemplated hereby or limits the ability in any respect of the rights of the Seller to hold its assets and conduct its present, planned or prospective business, or imposes civil or criminal penalties on any stockholder, director or officer of the Buyer if such transactions are consummated, is in effect (b) Schedule 2.13 lists the following for the period from January 1, 2003 to the present (and, in the case of clause (z), any other matter referred to therein which is currently in effect): (x) all fines (civil and criminal), penalties imposed by any governmental agency or authority (other than short or long-term disability or medical claims), (y) actions, administrative or arbitration proceedings requiring a payment by the Seller in excess of $10,000 (other than short or long-term disability claims) and (z) any final order, writ, judgment, injunction, decree, determination or other award of any court or any governmental agency which are related to the Business or the Purchased Assets. 2.14 Insurance. The insurance policies of the Seller are listed on Schedule 2.14. The insurance policies to which the Seller is a party or under which the Seller is covered as an additional named insured or otherwise (or replacement policies therefor) are (i) in full force and effect, and the Seller has paid all premiums due and, to the Knowledge of the Seller, the Company is not in default of such policies; and (ii) sufficient for compliance by the Seller with all applicable requirements of Law and all agreements to which the Seller is a party or subject, in each case with respect to the Business. The Seller has not received any notice of cancellation or non-renewal with respect to, or disallowance of any claim under, any such policy. The Seller has not been refused insurance, nor has coverage been previously canceled or materially limited, by an insurer to which the Seller has applied for such insurance, or with which the Seller has held insurance, within the last three years. 2.15 Material Contracts. (a) Schedule 2.15 sets forth all Material Contracts as of the date hereof. (b) Each Material Contract of the Seller that is intended to be binding upon the parties thereto is legal, valid and binding on the Seller and, to the Knowledge of the Seller Responsible Parties, the other parties thereto, and is enforceable against the Seller and, to the Knowledge of the Seller Responsible Parties, the other parties thereto in accordance with the terms thereof.   17 -------------------------------------------------------------------------------- (c) The Seller has performed its obligations under each such Material Contract and the Seller is not in default under any such Material Contract and no condition exists nor event has occurred which with the passage of time or the giving of notice or both could reasonably be expected to result in a material default, material breach or event of material noncompliance by the Seller under any such Material Contract. (d) The Seller does not have any present expectation or intention of not fully performing all its material obligations under each such Material Contract. (e) To the Knowledge of the Seller Responsible Parties, no other party to any of the Material Contracts has breached or is in default thereunder. (f) The Seller has delivered copies, which are true, correct and complete, of each Material Contract and all amendments thereto and documentation or correspondence modifying the terms thereof to the Buyer. (g) Except for the Material Contracts, the Seller is not a party to (or, in the case of clause (v) below, the holder of) any written or oral: (i) commitment, contract, note, loan, evidence of indebtedness, purchase order or letter of credit involving any obligation or liability on the part of the Seller of more than $10,000 (and not more than $50,000 in the aggregate for related instruments) and not cancelable (without further liability) on not more than 30 days’ notice; (ii) lease of real property; (iii) lease of personal property involving any annual expense in excess of $5,000 and not cancelable without further liability within 30 days; (iv) contracts and commitments not otherwise described above which materially affect the Business and which are not entered into in the ordinary course of business; (v) contracts or agreements containing covenants limiting the freedom of the Seller to engage in any line of business or compete with any person; (vi) contracts, commitments, licenses or permits containing any “change in control” or “parachute payment” provision, as those terms are commonly understood, including without limitation those which would be triggered by the execution, delivery or consummation of the transactions contemplated by this Agreement, including without limitation, any right of termination, right of payment or acceleration of any other right under such contracts, commitments, licenses or permits; (vii) contracts, commitments or agreements which impose any duty of confidentiality or nondisclosure (other than customer agreements that contain confidentiality or nondisclosure provisions); (viii) employment or severance contracts, plans or arrangements; or (ix) Tax sharing or similar agreements. (h) No customer which is a party to a Material Contract is entitled to any retroactive pricing, refund, rebate, price adjustment or other financial settlement for charges in excess of $5,000 relating to the sales by the Business. (i) The sale of the Purchased Assets hereunder will not result in a default under or the termination of any Material Contract. (j) Except as set forth on Schedule 2.15, there are no contracts for the sale of goods or services by the Seller as to which at the time of the most recent scheduled contract milestone for any such Contract the work scheduled was more than sixty (60) days late. (k) Except as set forth on Schedule 2.15, there are no contracts, options or bids for the sale of goods or services by the Seller which include a liquidated damages clause for late delivery.   18 -------------------------------------------------------------------------------- 2.16 Accounts Receivable. All of the accounts receivable of the Seller reflected on the Interim Balance Sheet are collectible, actual and bona fide receivables representing obligations for the total dollar amount thereof shown on its books, subject to no defenses or counterclaims; provided, however, that neither the Seller nor the Seller Responsible Parties makes any representation that such accounts receivable or other debts will actually be collected following the Closing. No reserves for bad debt in excess of the amounts thereof on June 30, 2006 are required by GAAP. The allowance for doubtful accounts set forth in the Interim Balance Sheet is adequate in accordance with GAAP. The revenue in respect of the sales that gave rise to such receivables have been properly invoiced to customers and properly recognized in accordance with GAAP. Schedule 2.16 hereto accurately lists as of the date hereof, all receivables arising out of or relating to the Business in excess of $2,500, the amount owing, and the aging of such receivable, the name and last known address of the party from whom such receivable is owing, and any security in favor of the Seller for the repayment of such receivable which the Seller purports to have. Since June 30, 2006, the Seller has collected its receivables and payments under all Contracts in accordance with past business practices and has not negotiated for or accepted advance payments nor accelerated the collection of any such receivables or payments. 2.17 Inventory. All of inventories are of good usable and merchantable quality in all material respects and do not include obsolete or discontinued items. All inventories: (i) are of such quality as to meet the quality controls of the Buyer and any applicable governmental quality control standards; (ii) that are finished goods are saleable as current inventories at the current prices thereof in the ordinary course of business; and (iii) are recorded in the books of the Business at the lower of cost or market value. No write-down in inventory has been made or should have been made in the past two years, except as set forth on Schedule 2.17 hereto. 2.18 Permits and Licenses; Compliance with Law. (a) The Seller currently holds all foreign, federal, state and local permits, licenses, authorizations, certificates, exemptions and approvals of Governmental Authorities or other Persons including, without limitation, Environmental Permits, necessary to conduct the businesses in which they are engaged and to own and use the facilities and properties owned and used by them (collectively, “Permits”). Each such Permit is valid and in good standing with the issuer of the Permit and not subject to any proceedings for suspension, modification or revocation. Without limiting the generality of the foregoing: (i) the Seller has not received any written notice from any Governmental Authority revoking, canceling, rescinding, materially modifying or refusing to renew any Permit and (ii) the Seller is in compliance in all material respects with the requirements of all Permits. All such Permits held by the Seller are assignable to the Buyer, and no governmental approvals are required for such assignment, except in each case as set forth on Schedule 2.18. The sale of the Purchased Assets hereunder will not result in a default under or the termination of any such Permit. (b) (i) The Seller is in compliance with all Laws (including, without limitation, with respect to affiliate transactions) and Governmental Orders applicable to the Business and (ii) the Seller has not been charged at any time with a violation of any Law or any Governmental Order relating to the conduct of the Business. This Section 2.18(b) does not apply to Real Property (for which Section 2.18(c) applies), environmental matters (for which Section 2.19 applies), employee benefit matters (for which Sections 2.20 and 2.29 apply), health and safety conditions (for which Section 2.21 applies), labor relations (for which Section 2.23 applies) and securities laws (for which Section 2.30 applies).   19 -------------------------------------------------------------------------------- (c) The Seller has not received any written notice that the Seller is in violation in any respect of any zoning regulation, building restriction, restrictive covenant, ordinance or other Law relating to any Real Property that the Seller owns including the Premises. The Premises is not the subject of any condemnation action and there is no proposal under consideration by any Governmental Authority or entity to condemn the Premises. 2.19 Environmental Matters. Except as set forth in Schedule 2.19, (i) Hazardous Materials have not been Released on any Real Property except in compliance with applicable Law; (ii) there have been no events related to the Seller or the Real Property that could give rise to liability under any Environmental Law; (iii) the Seller is now, and has for the past three years been, in compliance in all material respects with all applicable Environmental Laws and there are no extant conditions that could reasonably be expected to constitute an impediment to such compliance in the future; (iv) the Seller has disposed of all wastes containing Hazardous Materials in compliance with all applicable Environmental Laws (including the filing of any required reports with respect thereto) and Environmental Permits; (v) there are no pending or, to the Knowledge of the Seller Responsible Parties, threatened Environmental Claims against the Seller relating to the Real Property or the operations of the Business; (vi) there is no environmental remediation or other environmental response occurring on any Real Property (including any easements, rights-of-way or other possessory interests in the real property of others) nor has the Seller issued a request for proposal or otherwise requested an environmental contractor to begin plans for any such environmental remediation or other environmental response; and (vii) the Seller has not received any notice and does not have Knowledge of any circumstances related to liability, under CERCLA or any analogous state law. 2.20 Employee Benefit Matters. The Seller has delivered true, accurate and complete copies of all Employee Benefit Plans applicable to any employee of the Seller. All such Employee Benefit Plans are in compliance with the terms of the applicable plan and the requirements prescribed by applicable law currently in effect with respect thereto, and the Seller has performed in all material respects all obligations required to be performed by it thereunder. The Seller has no Union Employees. The Seller has not incurred and no event, transaction or condition has occurred or exists which could result in the occurrence of, any liability to the Pension Benefit Guaranty Corporation or any “withdrawal liability” within the meaning of Section 4201 of ERISA, or any other liability pursuant to Title I or IV of ERISA or the penalty, excise tax or joint and several liability provisions of the Code relating to employee benefit plans, in any such case relating to any Employee Benefit Plan or any pension plan maintained by any company that would be treated as a single employer with the Seller under Section 4001 of ERISA or Section 414 of the Code (an “ERISA Affiliate”). Except as set forth in Schedule 2.20, the Seller does not have in effect an Employee Benefit Plan intended to be “qualified” within the meaning of Section 401(a) of the Code. The consummation of the transactions contemplated by this Agreement will not (i) entitle any current or former employee or officer of the Seller or any ERISA Affiliate to severance pay, unemployment compensation or other payment, or (ii) accelerate the time of payment or vesting, or increase the amount of compensation due any such employee or officer. There are no pending, or, to the Knowledge of the Seller, threatened or anticipated claims by or on behalf of any Employee Benefit Plan, by any employee or beneficiary covered under any such plan, or otherwise involving any such plan (other than routine claims for benefits). Except as set forth in Schedule 2.20, the Seller does not contribute in any multiemployer plan (within the meaning of Section 3(37) of ERISA) for the benefit of any of its directors, officers, employees, independent contractors or agents. All contributions that are due on or before the Closing Date to any Employee Benefit Plans, including without limitation   20 -------------------------------------------------------------------------------- salary reduction contributions and matching contributions, will have been fully contributed as of the Closing Date (to the extent such accrual is required under GAAP). The Seller does not have any established pension or deferred profit sharing plans. The Seller shall not adopt, amend or modify any Employee Benefit Plans or otherwise increase the salary or benefits of any of the directors, officers, employees, independent contractors or agents of the Seller prior to the Closing Date. 2.21 Health and Safety Conditions. (a) The Seller is in compliance in all material respects with all Laws designed to provide safe and healthful working conditions and to reduce occupational safety and health hazards, and any program, whether governmental or private, designed to provide safe and healthful working conditions including without limitation the Occupational Safety and Health Act of 1970, as amended, as well as any similar state or local Law. (b) Schedule 2.21 lists the following items with respect to the Business: (i) personnel safety statistics and OSHA Form 200s related to the Business since January 1, 2003; (ii) citations, notices of violations, orders, consent orders, administrative or judicial enforcement proceedings from state and federal OSHA agencies or their foreign equivalents concerning the Business since January 1, 2003 or which are currently pending; and (iii) all current health and safety permits and licenses. 2.22 Customers and Suppliers. (a) Schedule 2.22 contains a list of (i) all customers and suppliers of the Business which have contracts (including oral contracts and purchase orders) with the Business involving purchases or sales in an amount in excess of $25,000 per annum and (ii) sole source suppliers to the Business with contracts with the Business. (b) The Seller has not received any written notice (including email) or has any actual knowledge that any customer of the Seller (i) has ceased, or will cease, to use its products or goods, or (ii) has substantially reduced or will substantially reduce, the use of products or goods of the Seller. To the Knowledge of the Seller Responsible Parties, no customer of the Seller described in clause (a) above has otherwise threatened to take any action described in the preceding sentence as a result of the consummation of the transactions contemplated by this Agreement. (c) The Seller has not received any written notice (including email) or has any actual knowledge that there has been any material adverse change in the price of such raw materials, supplies, merchandise or other goods or services, or that any such supplier will not sell raw materials, supplies, merchandise and other goods to the Buyer at any time after the Closing Date on terms and conditions similar to those used in its current sales to the Seller, subject to general and customary price increases. To the Knowledge of the Seller Responsible Parties, no supplier of the Seller described in clause (a) above has otherwise threatened to take any action described in the preceding sentence as a result of the consummation of the transactions contemplated by this Agreement.   21 -------------------------------------------------------------------------------- 2.23 Labor Relations. (a) There are no labor organizations recognized as representing any of the directors, officers, employees, independent contractors or agents of the Seller and (i) the Seller is not party to any collective bargaining agreement or other labor union contract, (ii) there are no strikes, slowdowns, picketing, lockouts or work stoppages pending or threatened between the Seller and any of its employees, and the Seller has not experienced any such strike, slowdown, or work stoppage within the past two years, (iii) there are no unfair labor practice complaints or employee disputes pending against the Seller before the National Labor Relations Board or any other Governmental Authority or any current union representation questions involving employees of the Seller, and (iv) the Seller is in compliance in all material respects with its obligations under all Laws and Governmental Orders governing its employment practices, including, without limitation, provisions relating to wages, hours and equal opportunity. Seller is in compliance with all Laws, and all orders of any court, governmental agency or arbitrator, relating to employment, including all such Laws relating to wages, hours, collective bargaining, discrimination, civil rights, occupational safety and health, affirmative action and the payment of withholding and/or Social Security and similar taxes, except where such non-compliance could not reasonably be expected to have a Material Adverse Effect. (b) Except for the employment agreement contemplated hereby, Seller acknowledges and agrees that Buyer will offer to hire all of the Seller’s salaried and hourly personnel (whether or not such personnel are on layoff or medical, family or other authorized leaves of absence) in comparable positions. The Buyer will be responsible for all employment-related obligations with respect to all employees who accept offers of employment with the Buyer arising or accruing after the Closing Date. Seller further acknowledges that the terms and conditions of any such employment shall be determined by the Buyer in its sole and absolute discretion. 2.24 Intellectual Property Rights. (a) All trademarks, service marks and copyrights held by the Seller are valid and subsisting and provide the Seller with the right to exclude all others from the use thereof and (i) the Seller is not, or as a result of the execution and delivery of this Agreement or the performance by the Seller of their obligations hereunder will be, in violation of any license, sublicense or other agreement applicable to it, or give any party the right to require the Seller to pay any amount or enter into any restrictions in order to continue the use thereof, (ii) the Seller owns all right, title and interest to, or has the right to use pursuant to a valid license, all Intellectual Property Rights used in the Business, (iii) there have been no claims made against the Seller or, to the Knowledge of the Seller Responsible Parties, threatened or, to the Knowledge of the Seller Responsible Parties, likely to be threatened by any Person, asserting the invalidity, misuse or unenforceability of any Intellectual Property Rights referred to in (i) above or challenging the ownership, validity or effectiveness of any of the Intellectual Property Rights. (b) The Seller has not received any notices of any material unauthorized use, infringement or misappropriation by, or conflict with, any present or former employee of the Seller, principal shareholders, strategic partners or any other third party with respect to such Intellectual Property Rights (including, without limitation, any demand or request that the Seller license any such rights from a third party).   22 -------------------------------------------------------------------------------- (c) The conduct of the Seller has not infringed, misappropriated or conflicted with and does not infringe, misappropriate or conflict with any Intellectual Property Rights of other Persons. (d) To the Knowledge of the Seller Responsible Parties, the Intellectual Property Rights owned by or licensed to the Seller have not been infringed, misappropriated or conflicted by other Persons. (e) Except as set forth on Schedule 2.24, no Intellectual Property Right is subject to any Encumbrance and there is no fact that could reasonably be expected to render the Intellectual Property Rights invalid. No Intellectual Property Right is subject to any outstanding order, judgment, decree, stipulation or agreement restricting in any manner the licensing or exploitation thereof by the Seller. The Seller has not entered into any agreement to indemnify any other person against any charge of infringement relating to any Intellectual Property Right. To the Knowledge of the Seller Responsible Parties, no employee of the Seller is in violation of any term of any confidentiality or invention assignment agreement, employment contract (whether written or verbal), patent disclosure agreement or any other contract or agreement relating to the relationship of any such employee with the Seller or any other party (including prior employers) because of the nature of the business conducted or proposed to be conducted by the Seller. (f) The Seller is the sole and exclusive owner of or has the right to use pursuant to a valid license, all Intellectual Property Rights used in the Business. Except as set forth on Schedule 2.24, to the Knowledge of the Seller Responsible Parties, no governmental registration of any of the rights related to the Intellectual Property Rights has lapsed, expired or been canceled, abandoned, opposed or the subject of a reexamination request. (g) Except as listed on Schedule 2.24, as of the date of this Agreement, there are no written claims which have been received since January 1, 2003 and no proceedings are pending, or have been instituted or, to the Knowledge of Seller Responsible Parties are threatened or impending, which challenge the Seller’s ownership rights in respect of any of the Intellectual Property Rights. None of the Intellectual Property Rights is subject to any outstanding order, decree, judgment or stipulation. (h) Neither this Agreement, nor the consummation of the transactions contemplated hereby, will (i) result in the termination, suspension, breach, or violation of any contract between the Seller and any Person relating to Intellectual Property Rights; or (ii) will result in the termination, suspension, breach, or violation of Intellectual Property Rights. All of the Seller’s rights under the Intellectual Property Rights are transferable to Buyer in connection with the transactions contemplated by this Agreement and Buyer will be entitled to continue to use each of the Intellectual Property Rights to the same extent and under the same conditions that it has heretofore been used in the Business, without financial obligations to any other Person. (i) The Intellectual Property Rights constitute all of the intellectual property used in, or necessary to, the operation of the Business as currently conducted.   23 -------------------------------------------------------------------------------- 2.25 Taxes. (a) The Seller has timely filed all Tax Returns required to be filed and all such Tax Returns were correct and complete in all material respects. Seller has timely paid all Taxes that are due, or claimed by any taxing authority to be due, or has provided for all such Taxes on its financial statements in accordance with GAAP. (b) All Taxes shown on such Tax Returns have been timely paid; (c) No audits with respect to the Seller are in process, pending or threatened, no deficiencies or adjustments to Tax Returns exist or have been asserted in writing with respect to Taxes of the Seller, no notice has been received in writing that any Tax Return or Taxes of the Seller required to be filed or paid has not been filed or have not been paid; (d) There are no Tax liens on any of the Purchased Assets; (e) All Taxes that the Seller is required to withhold or collect have been duly withheld or collected and, to the extent required, have been paid to the proper Tax authority; (f) The Seller (i) is not currently or has ever been a member of an affiliated group filing a consolidated federal income tax return or (ii) has no liability for the Taxes of any person under Treasury Regulations Section 1.1502-6 (or any similar provision of state, local or foreign law), or as transferee or successor, by contract or otherwise; (g) The Seller has not ever been a party to any Tax sharing or similar agreements; (h) No consent under Section 341(f) of the Code has been filed with respect to the Seller; and (i) The Seller is not a USRPI as that term is defined in Section 897 of the Code and the Treasury Regulations thereunder. 2.26 Commissions. There is no broker or finder or other Person who has any valid claim against the Seller, any of its Affiliates or any of its assets for a commission, finders’ fee, brokerage fee or other similar fee in connection with this Agreement, or the transactions contemplated hereby, by virtue of any actions taken by on or behalf of the Seller or any of its officers, employees, independent contractors or agents. 2.27 Bank Accounts; Powers of Attorney. Seller has provided to the Buyer a true, correct and complete list of each bank in which the Seller maintains an account or safe deposit box, the corresponding number of each such account or safe deposit box, the names of all persons holding check-signing or withdrawal powers or other authority with respect thereto, the names of any persons holding powers of attorney from the Seller, true, correct and complete copies of any instrument of appointment and a summary statement of the terms thereof. There are and at the Closing will be no restrictions on the Seller to terminate any such powers immediately upon written notice and to withdraw all such funds and close such bank accounts. 2.28 Product Warranties. Set forth on Schedule 2.28 are representative forms of product warranties and guarantees granted or issued by the Seller in connection with the   24 -------------------------------------------------------------------------------- Business. None of the other product warranties or guarantees granted or issued by the Seller in connection with the Business differs in any material respect from such representative forms. Except as described in Schedule 2.28, since January 1, 2002, no product warranty or similar claims have been made against Seller in connection with the Business. The Seller has committed no act, and there has been no omission, which could reasonably be expected to result in, and there has been no occurrence which could reasonably be expected to give rise to, any material product liability or liability for breach of warranty (whether covered by insurance or not) on the part of Seller, with respect to products sold prior to the Closing in the operation of the Business. 2.29 Compliance with WARN Act. The Seller has been exempt from, or has complied with, all applicable provisions of the WARN Act and the regulations thereunder in connection with all past reductions in work force relating to the Business. 2.30 Securities Laws. Each of the Seller Responsible Parties expressly agrees and acknowledges that the Common Shares are not being registered and ForeFront Holdings has no present intention of registering such shares pursuant to the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder (the “1933 Act”) or otherwise, and the issuance of the Common Shares is intended to be exempt from registration under Section 4(2) of the 1933 Act as a “transaction by an issuer not involving any public offering” and that reliance on such exemption is predicated, in part, on the Seller Responsible Parties’ representations and warranties contained herein. The Seller Responsible Parties further acknowledge that the Common Shares are being obtained solely for the Seller’s own account and for investment purposes only, within the meaning of the 1933 Act, and that the Seller has no plan, intention, contract, understanding, agreement or arrangement with any person to sell, assign, pledge, hypothecate or otherwise transfer to any person the Common Shares or any part thereof other than transfers by the Seller to the Seller Responsible Parties and their family members or affiliates, and the Buyer, ForeFront Group and ForeFront Holdings hereby consent to such transfers. Each of the Seller Responsible Parties understands that the Common Shares are characterized as “restricted securities” under the federal securities Laws inasmuch as such Common Shares are being acquired from ForeFront Holdings in a transaction not involving a public offering and that under such Laws and applicable regulations such securities may be resold without registration under the 1933 Act, only in certain limited circumstances. In this connection, the Seller Responsible Parties are familiar with SEC Rule 144, as presently in effect, and understands the resale limitations imposed thereby and by the 1933 Act. 2.31 Disclosure. No representation or warranty by the Seller contained in this Agreement or any document or certificate furnished or to be furnished by or on behalf of the Seller to the Buyer in connection herewith or with the Closing contains or will contain any untrue statement of a material fact, or omits or will omit to state any material fact required to make the statements contained herein or therein not misleading. 2.32 No Knowledge of Seller Default. The Seller acknowledges that it has no actual knowledge of any breach of the representations and warranties made by the Buyer in Article 3 of this Agreement for which the Seller could seek indemnification pursuant to Article 8. Claims and Damages with respect to any such breach of the representations and warranties made by the Buyer in Article 3 of this Agreement of which any of the Seller Responsible Parties have actual knowledge, if not asserted before the Closing, may not be brought after the Closing; provided, however, that such matters shall be permitted to be made the subject of post-Closing Claims and Damages to the extent that the Seller becomes aware of material facts or circumstances with respect to such matters following the Closing.   25 -------------------------------------------------------------------------------- Article 3. Representations and Warranties of the Buyer, ForeFront Group and ForeFront Holdings. In order to induce the Seller Responsible Parties to enter into this Agreement and sell the Purchased Assets, the Buyer, ForeFront Group and ForeFront Holdings make the following representations and warranties to the Seller Responsible Parties, which representations and warranties shall be true and correct as of the date hereof: 3.1 Organization and Standing. Each of the Buyer, ForeFront Group and ForeFront Holdings is a corporation duly incorporated, validly existing, and in good standing under the laws of the State of Florida and has all requisite corporate power and authority to own, lease and operate its properties and assets and to conduct its business as it is now being conducted. 3.2 Binding Agreement. Each of the Buyer, ForeFront Group and ForeFront Holdings has all requisite corporate power and authority to enter into this Agreement, to execute and deliver this Agreement, to carry out its obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by each of the Buyer, ForeFront Group and ForeFront Holdings and the consummation by each of the Buyer, ForeFront Group and ForeFront Holdings of their obligations hereunder have been duly and validly authorized by all necessary corporate and stockholder action on the part of each of the Buyer, ForeFront Group and ForeFront Holdings. This Agreement has been duly executed and delivered on behalf of each of the Buyer, ForeFront Group and ForeFront Holdings and, assuming the due authorization, execution and delivery by the Seller Responsible Parties, constitutes a legal, valid and binding obligation of each of the Buyer, ForeFront Group and ForeFront Holdings enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency and similar laws affecting creditors’ rights and remedies generally and to general principles of equity. As of the Closing Date, each of the agreements, instruments and other documents to be delivered hereunder to the Seller Responsible Parties at the Closing to which the Buyer, ForeFront Group and ForeFront Holdings are parties will have been duly and validly executed and delivered by each of the Buyer, ForeFront Group and ForeFront Holdings and will be enforceable against each of the Buyer, ForeFront Group and ForeFront Holdings in accordance with its terms. 3.3 Absence of Violations or Required Consents. (a) The execution, delivery and performance by the Buyer of this Agreement does not and will not: (a) violate or result in the breach or default of any provision of the articles of incorporation or by-laws of the Buyer; (b) violate any Law or Governmental Order applicable to the Buyer or any of its properties or assets; (c) except for the Required Consents, require any consent, approval, authorization or other order of, action by, registration or filing with or declaration or notification to any Governmental Authority or any other Person; or (d) result in any violation or breach of, constitute a default (or event which with the giving of notice, or lapse of time or both, would become a default) under, require any consent under, or give to others any rights of termination, amendment, acceleration, suspension, revocation or cancellation of, or result in the creation of any Encumbrance on any of the Buyer’s assets, or result in the imposition or acceleration of any payment, time of payment, vesting or increase in the amount of   26 -------------------------------------------------------------------------------- compensation or benefit payable, pursuant to, any note, bond, mortgage or indenture, contract, agreement, lease, sublease, license or permit, or franchise to which the Buyer is a party or by which its assets are bound. (b) Each of the Buyer, ForeFront Group and ForeFront Holdings has obtained all the Required Consents. Neither the Buyer, ForeFront Group nor ForeFront Holdings needs to give any notice to, make any filing with or obtain any authorization, consent or approval of any Governmental Authority in order for the parties to consummate the transactions contemplated by this Agreement. A true and complete list of all third party (including, without limitation, lenders, lessors, licensees, licensors, distributors and vendors) consents, licenses, permits, waivers, approvals, authorizations or orders obtained or made in connection with the authorization, execution and delivery of this Agreement and the consummation of the transactions contemplated hereby and the continuation in force of any rights, licenses, permits, authorizations, agreements, instruments or documents of the Buyer, ForeFront Group and ForeFront Holdings is set forth on Schedule 3.3(b) attached hereto. (c) Neither any statute, rule, regulation, order, stipulation, decree, judgment, or injunction has been enacted, promulgated, entered, or enforced to the purchase nor any other action has been taken by any Government Entity (i) which prohibits the consummation of the transactions contemplated by this Agreement; (ii) which prohibits Buyer’s ownership or operation of all or any material portion of the Business or the Purchased Assets, or which compels the Buyer to dispose of or hold separately all or any portion of the Purchased Assets as a result of the transaction contemplated herein; (iii) which makes the purchase of, or payment for, some or all of the Purchased Assets illegal; (iv) which imposes material limitations on the ability of the Buyer to acquire or hold or to exercise effectively all rights of ownership of the Purchased Assets; or (v) which imposes any limitations on the ability of the Buyer effectively to control in any material respect the Business or operations of the Seller. 3.4 Valid Issuance of the Shares. The Common Shares that are being issued to the Seller hereunder, when issued and delivered in accordance with the terms of this Agreement for the consideration expressed herein, will be duly and validly issued, fully paid, and nonassessable, and will be free of all Encumbrances and restrictions on transfer other than restrictions on transfer under this Agreement and under applicable state and federal securities Laws and free of preemptive rights. 3.5 Litigation. There are no Actions pending or threatened to be brought by or before any Governmental Authority, against the Buyer or any of its Affiliates that (i) seeks to question, delay or prevent the consummation of the transactions contemplated hereby, or (ii) would reasonably be expected to affect adversely the ability of the Buyer to fulfill its obligations hereunder, including without limitation, the Buyer’s obligations under Article 1 hereof. 3.6 Commissions. Except as provided below, there is no broker or finder or other Person who has any valid claim against the Seller, any of their respective Affiliates or any of their respective assets for a commission, finders’ fee, brokerage fee or other similar fee in connection with this Agreement, or the transactions contemplated hereby, by virtue of any actions taken by on or behalf of the Buyer or its officers, employees or agents. The Buyer has agreed to pay at Closing, at its sole expense, an advisory fee to Stanford Financial Group Company in connection with the consummation of the Sale.   27 -------------------------------------------------------------------------------- 3.7 No Knowledge of Seller Default. Each of the Buyer, ForeFront Group and ForeFront Holdings acknowledges that it has no actual knowledge of any breach of the representations and warranties made by the Seller in Article 2 of this Agreement for which the Buyer, ForeFront Group or ForeFront Holdings could seek indemnification pursuant to Article 8. Claims and Damages with respect to any such breach of the representations and warranties made by the Seller in Article 2 of this Agreement of which the Buyer, ForeFront Group or ForeFront Holdings have actual knowledge, if not asserted before the Closing, may not be brought after the Closing; provided, however, that such matters shall be permitted to be made the subject of post-Closing Claims and Damages to the extent that the Buyer, ForeFront Group and ForeFront Holdings becomes aware of material facts or circumstances with respect to such matters following the Closing. Article 3A Representations and Warranties of ForeFront Holdings. In order to induce the Seller Responsible Parties to enter into this Agreement and sell the Purchased Assets, ForeFront Holdings makes the following representations and warranties to the Seller Responsible Parties, which representations and warranties shall be true and correct as of the date hereof: 3A.1 SEC Filings. (a) ForeFront Holdings and its subsidiaries have filed each report and definitive proxy statement (together with all amendments thereof and supplements thereto) required to be filed by ForeFront Holdings or any of its subsidiaries pursuant to the Exchange Act with the SEC since October 15, 2004 (as such documents have since the time of their filing been amended or supplemented, the “Parent SEC Reports”). As of their respective dates, after giving effect to any amendments or supplements thereto filed prior to the date hereof, the Parent SEC Reports (i) complied as to form in all material respects with the requirements of the Exchange Act, and (ii) did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. (b) The audited consolidated financial statements and unaudited interim consolidated financial statements (including, in each case, the notes, if any, thereto) included in the Parent SEC Reports complied as to form in all material respects with the published rules and regulations of the SEC with respect thereto, were prepared in accordance with GAAP applied on a consistent basis during the periods involved (except as may be indicated therein or in the notes thereto and except with respect to unaudited statements as permitted by Form 10-QSB of the SEC) and fairly present (subject, in the case of the unaudited interim financial statements included therein, to normal year-end adjustments and the absence of complete footnotes) in all material respects the consolidated financial position of ForeFront Holdings and its consolidated subsidiaries as of the respective dates thereof and the consolidated results of their operations and cash flows for the respective periods then ended.   28 -------------------------------------------------------------------------------- Article 4. Covenants and Agreements. 4.1 Conduct of Business in the Ordinary Course. During the period following the execution of this Agreement through the Closing, the Seller Responsible Parties shall conduct the Business in the ordinary course consistent with past practice under the supervision of the existing management team. Without limiting the generality of the foregoing, the Seller shall not: (a) sell, lease, license, encumber or subject to any Encumbrance, dispose of, pledge, grant or transfer, or authorize the sale, lease, license, disposition, pledge, grant or transfer of any of the Purchased Assets; (b) grant any increase in the compensation of any employee or independent contractor (whether directly or through an Employee Benefit Plan), except merit, incentive or promotional increases in the ordinary course of business consistent with past practice, or assume sponsorship of any Employee Benefit Plan; (c) enter into any employment agreement or severance agreement with any employee of the Business except in the ordinary course of business consistent with past practice; (d) incur or guaranty any indebtedness for borrowed money other than indebtedness repaid prior to the Closing, draws against the RBC Centura line of credit or indebtedness that will constitute Excluded Liabilities; (e) amend the articles of incorporation, the bylaws or other organizational documents of Seller; (f) defer the payment of any accounts payable; (g) make any loans, advances or capital contributions to, or investments in, any other Person, other than in the ordinary course of business; (h) make any capital expenditures in excess of $10,000 in the aggregate, other than in the ordinary course of business consistent with past practice; (i) merge or consolidate with, or acquire any equity or all or substantially all of the assets of, any other Person (except that the Seller may continue negotiations with respect to the acquisition of one or more prospective target competitors and acquire such target with the prior written consent of the Buyer); (j) declare, set aside or pay any dividend or distribution (other than distributions required to allow the Seller’s shareholders to pay income taxes consistent with past practice); (k) sell, assign or transfer any of the Intellectual Property Rights, or any portion thereof, or disclose any proprietary confidential information relating to the Intellectual Property Rights to any Person; (l) enter into, amend or terminate any Material Contract (except in the ordinary course of business or as required by their terms); or   29 -------------------------------------------------------------------------------- (m) agree, in writing or otherwise, to do any of the foregoing. In addition, the Seller Responsible Parties shall maintain the tangible Purchased Assets in their present condition, ordinary wear and tear excepted, and use its reasonable efforts to preserve its existing relations with its employees, customers, suppliers and others with whom it has a business relationship. Furthermore, prior to the Closing, the Seller Responsible Parties shall supply all information necessary to assist the Buyer in making all applications necessary to obtain the licenses, Permits, approvals and the assignment of any contracts held by Seller for use in connection with or otherwise related to the Business. 4.2 Maintenance of Corporate Books. During the period following the execution of this Agreement and the Closing, the Seller Responsible Parties shall maintain its books, accounts and records in the usual, regular and ordinary manner, in accordance with GAAP, on a basis consistent with prior years, and to accurately maintain in all material respects its records until the Closing. 4.3 Access. During the period following the execution of this Agreement and the Closing, the Seller Responsible Parties shall provide Buyer and its representatives reasonable access during normal business hours and upon reasonable advance notice, to all properties, books and records, contracts, Permits and other documents of or relating to the Purchased Assets or the Business to make such investigation as shall reasonably be deemed desirable, and including access to employees for purposes of enrolling such employees in Buyer’s employee benefit plans, and to the officers and key managers of Seller, to the extent that such access does not materially interfere with the conduct of the Business. Without limiting the generality of the foregoing, the Seller Responsible Parties shall promptly deliver the following financial information to the Buyer: (a) the Audited Financial Statements; and (b) federal and state income tax returns for the three most recently completed tax years of Seller. 4.4 Exclusive Negotiations. From the date of this Agreement and hereafter as provided herein, neither Seller nor any of its officers, directors, representatives or Affiliates shall, directly or indirectly, solicit or initiate the submission of any offer or proposal by, or participate in discussions or negotiations with, or provide any information to or otherwise cooperate with, any Person (other than Buyer or any officer or representative of Buyer) concerning any Third Party Transaction (as defined below). Each of the Seller Responsible Parties agrees that it will immediately cease and cause to be terminated any existing activities, discussions or negotiations with any Persons conducted heretofore with respect to a Third Party Transaction. “Third Party Transaction” shall mean (a) any acquisition of any controlling interest in, or all or a substantial portion of the Seller, (b) the possible disposition of any of the Purchased Assets or the Business, (c) the possible issuance of any capital stock of Seller, or (d) any business combination involving the Seller or the Business, whether by way of merger, consolidation, share exchange or other transaction. 4.5 Conduct of the Business following the Closing. On or prior to the Closing Date, the Seller Responsible Parties shall deliver an executed letter of instruction to all of the Seller’s customers and distributors notifying such parties of the consummation of the transactions contemplated hereby and specifically instructing all customers to remit payment relating to the Purchased Assets directly to the Buyer. In the event the Seller receives payments from any customer with respect to any accounts receivable which are part of the Purchased Assets, the Seller shall hold such funds in trust for the benefit of the Buyer and immediately turnover such receipts to the Buyer.   30 -------------------------------------------------------------------------------- 4.6 Non-Solicitation. Neither the Seller nor its Affiliates shall for the period from the date hereof through the date that is three years following the Closing Date, without the prior written consent of the Buyer, directly or indirectly, solicit to hire or hire (or cause or seek to cause to leave the employ of the Seller) any employee, independent contractor or agent of the Seller. 4.7 Confidentiality. For a period of three years following the Closing Date, each of the parties and any corporation, partnership or trust controlled, directly or indirectly, by any of the parties shall maintain the confidentiality of, and shall not use for the benefit of itself or others, any confidential information concerning the Business or the Purchased Assets (the “Confidential Information”); provided, however, that this paragraph (a) shall not restrict (i) disclosure by either party of any Confidential Information required by applicable statute, rule or regulation or any court of competent jurisdiction, provided that the non-disclosing party is given notice and an adequate opportunity to contest such disclosure, (ii) any disclosure on a confidential basis to the respective attorneys, accountants, lenders and investment bankers of the parties, (iii) any disclosure of information which is available publicly as of the date of this Agreement, which, after the date of this Agreement, becomes available publicly through no fault of the disclosing party, which is disclosed to either party by another Person who acquired it from a third party without an obligation of confidentiality to the Buyer or the Seller or which is independently developed by an employee of either party who had no access to such information, (iv) the respective parties’ use of such information to protect or enforce their rights under this Agreement, in connection with tax or other regulatory filings or their use of such information to protect their rights against any third party, and (v) the parties’ (and their respective Affiliates) use of such information in the conduct of their own businesses if and to the extent not prohibited by this Section. Any and all information disclosed by the Buyer to the Seller Responsible Parties as a result of the negotiations leading to the execution of this Agreement, or in furtherance thereof, which information was not already known to the Seller Responsible Parties shall be deemed Confidential Information. 4.8 Public Announcements. Except as otherwise required by law or the rules of any stock exchange or automated quotation system, the parties shall not issue any report, statement or press release or otherwise make any public announcement with respect to this Agreement and the other transactions contemplated hereby without prior consultation with and approval of the other parties hereto (which approval shall not be unreasonably withheld). Notwithstanding the foregoing, either party may at any time furnish any required information to the SEC regarding this Agreement or the transactions contemplated hereby. 4.9 Non-Compete. (a) Each of the Seller Responsible Parties covenants and agrees on its own behalf and on behalf of each of its Affiliates that from the date hereof and until the third (3rd) anniversary of the Closing Date, neither the Seller not its Affiliates will directly or indirectly, engage in or have any interest in any sole proprietorship, partnership, corporation, limited liability company or business, whether as an employee, partner, agent, security holder, consultant or otherwise, that directly or indirectly (or through any affiliated entity) engages in competition with the Business (based on the business in which the Seller was engaged or was actively planning on being engaged as of the Closing Date and in the geographic areas in which the Seller operated or was actively planning on operating as of the Closing Date).   31 -------------------------------------------------------------------------------- (b) Each of the Seller Responsible Parties acknowledges and agrees that the covenants provided for in this Section are reasonable and necessary in terms of time, area and line of business to protect the Buyer’s legitimate business interests as a Buyer of the Purchased Assets, which includes protecting valuable confidential business information, substantial relationships with customers throughout the Restricted Area and customer goodwill associated with the Seller and the Business. Each of the Seller Responsible Parties expressly authorizes the enforcement of the covenants provided for in this Section by (i) the Buyer, and (ii) any successors to the ownership of the Purchased Assets and/or the Business. To the extent that the covenant provided for in this Section may later be deemed by a court to be too broad to be enforced with respect to its duration or with respect to any particular activity or geographic area, the court making such determination shall have the power to reduce the duration or scope of the provision. The provision as modified shall then be enforced. (c) It is agreed by each of the Seller Responsible Parties on its own behalf and on behalf of its Affiliates that Buyer would be irreparably damaged by reason of any violation of this Section by the Seller or its Affiliates, and that any remedy at law for breach of such provisions would be inadequate. Therefore, the Buyer shall be entitled to seek and obtain injunctive or other equitable relief (including, but not limited to, a temporary restraining order, a temporary injunction or a permanent injunction) against each of the Seller Responsible Parties and their respective Affiliates, for breach or threatened breach of such provisions and without the necessity of proving actual monetary loss. It is expressly understood by each of the Seller Responsible Parties that this injunctive or other equitable relief shall not be the Buyer’s exclusive remedy for any breach of this covenant and the Buyer shall be entitled to seek any other relief or remedy that may be available by contract, statute, law or otherwise for any breach hereof. It is agreed that the Buyer shall also be entitled to recover any and all attorneys’ fees and expenses in the enforcement of the provisions hereof. 4.10 Financial Statements. Within 45 days of the date of this Agreement, Seller shall cause to be prepared and delivered to the Buyer, at the Buyer’s sole expense, an audited balance sheet of the Seller as at September 30, 2006, December 31, 2005 and, if required, December 31, 2004, together with the audited statements of operations, stockholders equity and cash flows for the nine month and years then ended, together with the notes thereto (the “Audited Financial Statements”). The Audited Financial Statements shall be derived from and shall be consistent in all material respects with the books and records regularly maintained by the Seller. Such Audited Financial Statements shall be in proper form and shall satisfy the historical financial statement requirements of Form 8-K promulgated by the SEC and the auditors of the Seller shall have consented to the use of their report in connection with the Buyer’s Form 8-K material acquisition reporting requirement. The actual cost of preparing such Audited Financial Statements will be paid for by the Buyer promptly upon receipt of invoices therefor. In the event that the transactions contemplated hereby are not consummated as a result of the Seller refusing to close the transaction on the terms and conditions set forth herein, the Seller shall reimburse the Buyer an amount of $10,000 per each year’s audit (up to a maximum of $20,000) for such costs.   32 -------------------------------------------------------------------------------- 4.11 Operation of the Business Prior. During the 2007 fiscal year, (a) the current management of the Seller shall have control over day-to-day operating decisions that affect the ability of the Seller to achieve the EBITDA target described herein; (b) the Buyer will continue to operate the Business as a separate division of the Buyer and (c) the Buyer shall provide sufficient capital funding to achieve such target; provided, however, that the current management of the Seller shall require the prior written consent of the President of Forefront Holdings prior to taking any action outside the ordinary course of business (consistent with past business practices) or for any major decisions which are not consistent with the budget and operating plan previously approved by Forefront Holdings’ management. Without limiting the foregoing, the parties agree that the transfer of additional production to the Seller’s North Carolina facility may be made only if the transfer has a positive effect on the Seller’s EBITDA (and any negative impact will be added back to EBITDA for purposes of determining whether the EBITDA target set forth herein has been satisfied). 4.12 Name Change Amendment. The Seller shall have delivered to the Buyer duly executed articles of amendment to be filed with the Secretary of State of the State of North Carolina, immediately following the Closing, evidencing a change in the corporate name of Seller to a name not containing any derivative of “Devant” or any other trade names being acquired hereby. 4.13 Employee Related Matters. Except for the employment agreement contemplated hereby, Buyer agrees to offer to hire all of the Seller’s salaried and hourly personnel (whether or not such personnel are on layoff or medical, family or other authorized leaves of absence) in comparable positions. The Buyer will be responsible for all employment-related obligations with respect to all employees who accept offers of employment with the Buyer arising or accruing after the Closing Date. The terms and conditions of any such employment shall be determined by the Buyer in its sole and absolute discretion. Article 5. Conditions to Obligations of the Buyer. The obligations of the Buyer to consummate the transactions contemplated by this Agreement are, at its option, in its sole discretion, subject to satisfaction of each of the following conditions: 5.1 Representations and Warranties. The representations and warranties of the Seller Responsible Parties contained herein shall be true and correct in all material respects at and as of the Closing Date as though each such representation and warranty were made at and as of such time, other than such representations and warranties as are made as of a specific date. 5.2 Performance by the Seller Responsible Parties. All of the covenants and agreements to be complied with and performed by the Seller Responsible Parties on or before the Closing Date shall have been complied with or performed in all material respects. 5.3 Certificate. The Seller Responsible Parties shall have delivered to the Buyer a certificate, dated as of the Closing Date, executed on behalf of the Seller Responsible Parties by their duly authorized officers to the effect of Sections 5.1 and 5.2. 5.4 Consents; No Objections. All approvals for the Sale and all material consents, waivers, approvals, orders and authorizations from third parties required to be made or obtained for the authorization, execution, delivery and performance of this Agreement, the consummation   33 -------------------------------------------------------------------------------- of the transactions contemplated hereby and the continuation in force of any rights, licenses, permits, authorizations, agreements, instruments or documents of the Seller, shall have been obtained and become final and non-appealable (provided that if any appeal or a petition for reconsideration is filed after any such approval has been obtained, such approval shall be deemed to be final and non-appealable unless the Buyer shall have delivered to the Seller an opinion of counsel rendered in good faith that it is probable that such approval will be reversed and/or vacated upon any such appeal or petition for reconsideration). Neither any statute, rule, regulation, order, stipulation, decree, judgment, or injunction shall be enacted, promulgated, entered, enforced, or deemed application to the purchase nor any other action shall have been taken by any Government Entity (i) which prohibits the consummation of the transactions contemplated by this Agreement; (ii) which prohibits Buyer’s ownership or operation of all or any material portion of the Business or the Purchased Assets, or which compels the Buyer to dispose of or hold separately all or any portion of the Buyer’s or the Seller’s business or the Purchased Assets as a result of the transaction contemplated herein; (iii) which makes the purchase of, or payment for, some or all of the Purchased Assets illegal; (iv) which imposes material limitations on the ability of the Buyer to acquire or hold or to exercise effectively all rights of ownership of the Purchased Assets; or (v) which imposes any limitations on the ability of the Buyer effectively to control in any material respect the Business or operations of the Seller. 5.5 No Proceedings or Litigation. There shall not have been instituted, pending or threatened any action or proceeding (or any investigation or other inquiry that might result in such an action or proceeding) by or before any Government Entity (i) which prohibits the consummation of the transactions contemplated by this Agreement; (ii) which prohibits Buyer’s ownership or operation of all or any of the Business or the Purchased Assets, or which compels the Buyer to dispose of or hold separately all or any portion of the Buyer’s or the Seller’ business or assets as a result of the transaction contemplated herein; (iii) which makes the purchase of, or payment for, some or all of the Purchased Assets illegal; (iv) which imposes limitations on the ability of the Buyer to acquire or hold or to exercise effectively all rights of ownership of the Purchased Assets; or (v) which imposes any limitations on the ability of the Buyer effectively to control in any material respect the Business or operations of the Seller. No preliminary or permanent injunction or other order issued by any United States federal or state Governmental Authority, nor any Law promulgated or enacted by any United States federal or state Governmental Authority, that restrains, enjoins or otherwise prohibits the transactions contemplated hereby or limits the ability in any respect of the rights of the Seller to hold its assets and conduct its present, planned or prospective business, or imposes civil or criminal penalties on any stockholder, director or officer of the Buyer if such transactions are consummated, shall be in effect. 5.6 No Material Adverse Events. Since the date hereof, there shall have been no material adverse change in the assets, revenue, working capital, gross margins, results of operations of the Seller. Since the date hereof there shall have been no casualty loss, condemnation or taking instituted against any asset of the Seller. 5.7 Due Diligence. The Buyer shall have completed a due diligence review, including a legal and financial review of the Seller, the Business and the Purchased Assets, which review shall be satisfactory to the Buyer, in its sole and absolute discretion.   34 -------------------------------------------------------------------------------- 5.8 Subordination Agreement. The Seller shall have entered into a subordination agreement in form and content acceptable to the Seller and the principal lender of Buyer and ForeFront Holdings (along with any other documents which such lender may reasonably request). 5.9 Employment Agreement. The Buyer shall have entered into an employment agreement with James M. Sheppard, Jr. in the form of Exhibit G attached hereto. 5.10 Lease Agreement. The Buyer shall have assumed a four-year lease agreement for the Premises in substantially the form of Exhibit F attached hereto. 5.11 Financial Information. Within 45 days of the date hereof, the Seller shall have obtained, to the extent the Buyer requires audited or reviewed financial statements of the Seller in order to comply with the reporting requirements of the SEC set forth in Regulations S-K and S-X, (or, if Buyer proposes to have its auditors audit any such financial statements, the Seller has provided audited balance sheets as of the end of the fiscal years hereinafter described and income statements and statements of cash flows and changes in equity for such periods, in each case, for the Seller in the form required by Regulations S-K and S-X), the required audited or reviewed financial statements of the Seller covering the year ended December 31, 2005 and, if required, December 31, 2004 and each subsequent fiscal quarter, reasonably sufficient and timely enough to permit the Buyer reasonably to satisfy such obligations, including, without limitation, having provided reasonable access to any auditors engaged by the Buyer for such purpose and delivering one or more representation letters from the Seller to any such auditors as may be reasonably requested by the Buyer to allow such auditors to complete any such audit or review and to issue an opinion on such financial statements acceptable to the SEC. 5.12 Environmental Report. The Buyer shall have obtained a Phase I environmental report concerning the premises subject to the Lease and any other real property utilized in connection with the Business that shall state that there are no violations of Environmental Laws or regulations or conditions which could in the future cause any violations of Environmental Laws or regulations. Article 6. Conditions to Obligations of the Seller Responsible Parties. The obligations of the Seller Responsible Parties to consummate the transactions contemplated by this Agreement are, at its option, in its sole discretion, subject to satisfaction of each of the following conditions: 6.1 Representations and Warranties. The representations and warranties of the Buyer contained herein shall be true and correct in all material respects (other than those representations and warranties that are qualified by Material Adverse Effect, which shall be true and correct in all respects) at and as of the Closing Date as though each such representation and warranty were made at and as of such time, other than such representations and warranties as are made as of a specific date, in each case except for changes that are expressly contemplated by this Agreement, and except for such failures to be true and correct that (without regard to materiality concepts therein once such failure is established) would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the business, results of operations or financial condition of the Buyer, taken as a whole.   35 -------------------------------------------------------------------------------- 6.2 Performance by the Buyer. All of the covenants and agreements to be complied with and performed by the Buyer on or prior to the Closing Date shall have been complied with or performed in all material respects. 6.3 Certificate. The Buyer shall have delivered to the Seller a certificate, dated as of the Closing Date, executed on behalf of the Buyer by its duly authorized officers to the effect of Sections 6.1 and 6.2. 6.4 No Proceedings or Litigation. No preliminary or permanent injunction or other order issued by any United States federal or state Governmental Authority, nor any Law promulgated or enacted by any United States federal or state Governmental Authority, that restrains, enjoins or otherwise prohibits the transactions contemplated hereby. 6.5 Due Diligence. The Seller shall have completed a due diligence review, including a legal and financial review of the Buyer, which review shall be satisfactory to the Seller, in its sole and absolute discretion. 6.6 Employment Agreement. The Buyer shall have entered into an employment agreement with James M. Sheppard, Jr. in the form of Exhibit G attached hereto. Article 7. Tax Matters. 7.1 Liability for Taxes. (a) The Seller Responsible Parties shall be liable for and shall indemnify the Buyer, for (i) all Taxes (as defined below) imposed on the Seller, or for which the Seller may otherwise be liable, for any taxable year or period that ends on or before the Closing Date (“Pre-Closing Tax Periods”) and, with respect to any portion of a taxable year or period beginning before and ending after the Closing Date (“Straddle Period”), the portion of such Straddle Period ending on and including the Closing Date, and (ii) all liabilities imposed on the Seller on or before the Closing Date under Treasury Regulations Section 1.1502-6 (or any similar provision of state, local or foreign law) for Taxes of the Seller or any other corporation which is affiliated with the Seller (other than the Seller). (b) The Buyer shall be liable for, and shall indemnify the Seller and its Affiliates for, all Taxes imposed on the Seller or any of its Affiliates with respect to the Seller for any taxable year or period that begins after the Closing Date and, with respect to a Straddle Period, the portion of such Straddle Period beginning after the Closing Date. (c) For purposes of this Section 7.1, whenever it is necessary to determine the liability for Taxes of the Seller for a portion of a Straddle Period: (i) real, personal and intangible property Taxes (“Property Taxes”) for the Pre-Closing Tax Period shall be equal to the amount of such Property Taxes for the entire Straddle Period multiplied by a fraction, the numerator of which is the number of days during the Straddle Period that are in the Pre-Closing Tax Period and the denominator of which is the number of days in the Straddle Period; and   36 -------------------------------------------------------------------------------- (ii) all other Taxes for the Pre-Closing Tax Period shall be determined by assuming that the Seller had a taxable year or period that ended at the close of the Closing Date. 7.2 Adjustment to Purchase Price. The Buyer and the Seller Responsible Parties agree to report any indemnification payment made by the Seller under Section 7.1 as an adjustment to the Purchase Price, contribution to capital, or other non-taxable amount to the extent that there is substantial authority for such reporting position under applicable law. 7.3 Transfer and Conveyance Taxes. The Seller shall be liable for and shall pay all applicable sales, transfer, recording, deed, stamp and other similar taxes resulting from the consummation of the transactions contemplated by this Agreement; provided, however, that the Buyer shall pay all documentary stamp tax expenses applicable to Promissory Note A, Promissory Note B and Promissory Note C. 7.4 Survival. Claims for indemnification under Section 7.1 shall survive until the expiration of the applicable statute of the limitations (including any extensions or waivers of such statutes). Article 8. Survival; Indemnification. 8.1 Survival of Representations, Warranties, Covenants and Agreements. All representations, warranties, covenants and agreements made by any Party to this Agreement will survive for a period of 27 months following the Closing and any investigation at any time made by or on behalf of the other Party before or after the Closing; provided, however, that (i) there will be no expiration date for any Claims and Damages relating to a Breach of or inaccuracy in the representations and warranties contained in sub-section (i) of the first sentence of Section 2.10 (Title to Assets) and Section 3.4 (Valid Issuance of Shares); (ii) the representations and warranties of the Seller Responsible Parties contained in Sections 2.19 (Environmental Matters), 2.20 (Employee Benefit Matters) and 2.25 (Taxes) shall survive for the duration of any applicable statute of limitations, the duration of any suspension, waiver or extension thereof, and for sixty (60) days thereafter and (iii) the obligations of the Buyer to pay the Purchase Price, including all amounts payable under Promissory Note A, Promissory Note B and Promissory Note C, and the obligations of ForeFront Group and ForeFront Holdings pursuant to the Guaranty Agreements shall survive until all amounts due thereunder have been satisfied. No investigation by or knowledge of Buyer or its representatives will affect in any manner the representations, warranties, covenants or agreements of Sellers set forth in this Agreement (or in any document to be delivered in connection with the consummation of the transactions contemplated by this Agreement) or Buyer’s right to rely thereon, and such representations, warranties and covenants will survive any such investigation. 8.2 Indemnification by the Seller Responsible Parties. Subject in all respects to the provisions of this Article 8, each of the Seller Responsible Parties, on a several basis (with respect to the individual shareholders of the Seller, in accordance with their respective percentage ownership of the Seller as of the Closing Date as set forth in Schedule 8.2 hereto), hereby agrees to indemnify and hold harmless the Buyer and its Affiliates, officers, directors, employees, agents and representatives after the Closing Date from and against any Claims and Damages incurred by them arising out of or resulting from:   37 -------------------------------------------------------------------------------- (a) any breach on the part of the Seller Responsible Parties (or any of them) of (i) any representation or warranty made herein or in any certificate delivered by the Seller Responsible Parties (or any of them) pursuant to this Agreement or (ii) any covenant or agreement made by the Seller Responsible Parties (or any of them) in this Agreement; (b) any Excluded Liability; or (c) any third party claim existing as of the Closing Date, including those in which the Seller is a plaintiff or defendant or any dispute initiated by the Seller prior to the Closing (a “Liability Claim”). 8.3 Indemnification by the Buyer. Subject in all respects to the provisions of this Article 8, each of the Buyer, ForeFront Group and ForeFront Holdings, on a several basis, hereby agree to indemnify and hold harmless the Seller Responsible Parties and their Affiliates, officers, directors, employees, agents and representatives after the Closing Date from and against any Claims and Damages incurred by them arising out of or resulting from any breach on the part of the Buyer of (i) any representation or warranty made by the Buyer in Article 3 hereof or in any certificate delivered pursuant to this Agreement or (ii) any covenant or agreement made by the Buyer in this Agreement. 8.4 Limitations on Indemnification Claims and Liability. Notwithstanding any other provision of this Article 8, the provisions of Article 2 or any other provision of this Agreement, the maximum amount of actual Claims and Damages for which the Seller Responsible Parties shall be obligated to indemnify the Buyer shall be limited to an amount equal to $2,000,000; provided, however, that the foregoing limitation on indemnification shall not apply (and the Seller Responsible Parties’ indemnification obligations shall be unlimited) with respect to any Claims and Damages arising from any breach of the representations and warranties set forth in sub-section (i) of the first sentence of Section 2.10 (Title to Assets; Related Matters), above, or any Claims or Damages arising from or related to the fraud or willful misconduct of any of the Seller Responsible Parties. The respective representations and warranties of the Seller and the Buyer set forth in this Agreement or in any certificate delivered pursuant to this Agreement, and the opportunity to make a claim for indemnification, or otherwise be indemnified or held harmless, under this Article 8 with respect thereto or with respect to (i) any covenant or agreement relating to any action required by this Agreement to be taken prior to or at the Closing or (ii) any Liability Claim shall survive until a final, unappealable order is entered with respect to such Liability Claim and indemnification is made by the Seller Responsible Parties as provided herein. Any and all covenants and agreements relating to any action required by this Agreement to be taken after the Closing shall survive the Closing forever and shall not expire with, and be terminated and extinguished upon, the Closing. 8.5 Computation of Claims and Damages. Whenever an Indemnifying Party is required to indemnify and hold harmless an Indemnified Party from and against and hold the Indemnified Party harmless from, or to reimburse the Indemnified Party for, any item of Claim or Damage under this Agreement, the Indemnifying Party will, subject to the provisions of this Article 8, pay the Indemnified Party the amount of the Claim or Damage reduced by (i) any amounts to which the Indemnified Party actually recovers from third parties in connection with such Claim or Damage (“Reimbursements”), and reduced by (ii) the Net Proceeds of any insurance policy payable to the Indemnified Party with respect to such Claim or Damage. For purposes of this Section 8.5, “Net Proceeds” shall mean the insurance proceeds actually paid,   38 -------------------------------------------------------------------------------- less any deductibles, co-payments, premium increases, retroactive premiums or other payment obligations (including attorneys’ fees and other costs of collection) that relates to or arises from the making of the claim for indemnification. The Indemnified Party shall use reasonable efforts to pursue Reimbursements or Net Proceeds that may reduce or eliminate Claims and Damages and otherwise to mitigate Claims and Damages. If any Indemnified Party receives any Reimbursement or Net Proceeds after an indemnification payment is made which relates thereto, the Indemnified Party shall promptly repay to the Indemnifying Party such amount of the indemnification payment as would not have been paid had the Reimbursement or Net Proceeds reduced the original payment at such time or times as and to the extent that such Reimbursement or Net Proceeds is actually received. The Indemnified Party shall make available to the Indemnifying Party and its agents and representatives all pertinent records, materials and information, and provide reasonable access during normal business hours to the Indemnified Party’s employees, properties, books and records, and shall otherwise cooperate with and assist the Indemnifying Party and its agents and representatives in reviewing the propriety and the amount of any Claims or Damages, including, without limitation, the availability and/or amounts of Reimbursements and Net Proceeds. 8.6 Notice of Claims. Upon obtaining actual knowledge of any Claim or Damage which has given rise to, or could reasonably give rise to, a claim for indemnification hereunder, the party seeking indemnification (the “Indemnified Party”) shall, as promptly as reasonably practicable (but in no event later than 30 days) following the date the Indemnified Party has obtained such knowledge, give written notice (a “Notice of Claim”) of such claim to the party or parties from which indemnification is or will be sought under this Article 8 (the “Indemnifying Party”). The Indemnified Party shall furnish to the Indemnifying Party in good faith and in reasonable detail such information as the Indemnified Party may have with respect to such indemnification claim (including copies of any summons, complaint or other pleading which may have been served on it and any written claim, demand, invoice, billing or other document evidencing or asserting the same). No failure or delay by the Indemnified Party in the performance of the foregoing shall reduce or otherwise affect the obligation of the Indemnifying Party to indemnify and hold the Indemnified Party harmless, except to the extent that such failure or delay shall have materially adversely affected the Indemnifying Party’s ability to defend against, settle or satisfy any liability, damage, loss, claim or demand for which such Indemnified Party is entitled to indemnification hereunder. 8.7 Defense of Third Party Claims. If any claim set forth in the Notice of Claim given by an Indemnified Party pursuant to Section 8.5 hereof is a claim asserted by a third party, the Indemnifying Party shall have 30 days after the date that the Notice of Claim is given or deemed given by the Indemnified Party to notify the Indemnified Party in writing of the Indemnifying Party’s election to defend such third party claim on behalf of the Indemnified Party. If the Indemnifying Party elects to defend such third party claim, the Indemnified Party shall make available to the Indemnifying Party and its agents and representatives all witnesses, pertinent records, materials and information in the Indemnified Party’s possession or under the Indemnified Party’s control as is reasonably required by the Indemnifying Party and shall otherwise cooperate with and assist the Indemnifying Party in the defense of such third party claim. Regardless of which party is defending such third party claim, the Indemnified Party shall not pay, settle or compromise such third party claim without the consent of the Indemnifying Party. If the Indemnifying Party elects to defend such third party claim, the Indemnified Party shall have the right to participate in the defense of such third party claim, at the Indemnified Party’s own expense. In the event, however, that the Indemnified Party reasonably determines   39 -------------------------------------------------------------------------------- that representation by counsel to the Indemnifying Party of both the Indemnifying Party and the Indemnified Party may present such counsel with a conflict of interest, then such Indemnified Party may employ separate counsel to represent or defend it in any such action or proceeding and the Indemnifying Party will, subject to the provisions of this Article 8, pay the reasonable fees and disbursements of such counsel when due under such counsel’s customary billing practices. If the Indemnifying Party does not elect to defend such third party claim or does not defend such third party claim in good faith, the Indemnified Party shall have the right, in addition to any other right or remedy it may have hereunder, at the Indemnifying Party’s expense, to defend such third party claim; provided, however, that such Indemnified Party’s defense of or its participation in the defense of any such third party claim shall not in any way diminish or lessen the indemnification obligations of the Indemnifying Party under this Article 8. If the Indemnifying Party subsequently reasonably determines that the Indemnified Party is not defending such third party claim in good faith, the Indemnifying Party shall have the right, in addition to any other right or remedy it may have hereunder, to elect to assume the defense of such third party claim and, to the extent that the Indemnified Party has not defended such third party claim in good faith, and whether or not the Indemnifying Party shall have subsequently assumed the defense thereof, the indemnification obligations of the Indemnifying Party under this Article 8 shall be reduced or eliminated to the extent that such failure to defend in good faith shall have materially adversely affected the Indemnifying Party’s ability to defend against, settle or satisfy any liability, damage, loss, claim or demand for which such Indemnified Party is otherwise entitled to indemnification hereunder. 8.8 Right of Setoff. Once a claim for indemnification has been made under this Article 8, each Indemnified Party may, as one of its remedies to effect indemnification under this Article 8, withhold or cause to be withheld and setoff any amounts payable (under this Agreement or otherwise) following the Closing to the Indemnifying Party, including any amounts due under Promissory Note B. The right to setoff will be exercisable whether the claim for indemnification is liquidated or unliquidated, whether or not the claim for indemnification has been reduced to judgment, and regardless of any difficulty or uncertainty in determining or computing the ultimate amount of the indemnification claim. The exercise of a right of setoff in good faith, whether or not ultimately deemed to be justified, will not constitute a default of any obligation against which such setoff is made. Any amount withheld by an Indemnified Party in setoff and which is ultimately determined not to be payable by the Indemnifying Party will be promptly paid to the Indemnifying Party. 8.9 Claim Threshold. Notwithstanding any other provision of this Article 8, an Indemnified Party shall not be entitled to make a claim against an Indemnifying Party for indemnity pursuant to this Article 8 except to the extent that the aggregate amount of Claims and Damages incurred by the Indemnified Party exceeds Fifty Thousand Dollars ($50,000). Once such amount is exceeded, the Indemnified Party shall be entitled to indemnification under this Article 8 for all of the Claims and Damages in excess of Fifty Thousand Dollars ($50,000). In addition, the amount of Claims and Damages shall be offset by tax benefits received by the Buyer, insurance proceeds and any third party recoveries. 8.10 Sole Remedy. The parties agree that, notwithstanding any provision of this Agreement to the contrary, the sole remedy of a party after Closing for any breach of any of the representations and warranties contained in this Agreement shall be to exercise the rights under this Article 8; provided, however, that the foregoing limitation shall not limit a party’s rights to bring an action for specific performance or other equitable remedy nor shall it limit a party’s remedies (legal, equitable or otherwise) with respect to any claim for fraud or willful misconduct or a claim with respect to a post-Closing covenant or agreement.   40 -------------------------------------------------------------------------------- Article 9. Definitions. Unless otherwise stated in this Agreement, the following capitalized terms have the following meanings: “Action” means any action, suit, claim, arbitration, or proceeding or investigation commenced by or pending before any Governmental Authority. “Affiliate” means, with respect to any specified Person, any other Person that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with such specified Person. “Agreement” or “this Agreement” means this Asset Purchase Agreement dated as of the date first above written (including the Annexes, Schedules and Exhibits hereto) and all amendments hereto made in accordance with the provisions of Section 10.6 hereof. “Assumed Contracts” has the meaning set forth in Section 1.1(i) hereof. “Audited Financial Statements” has the meaning set forth in Section 4.10 hereof. “Business Day” means any day that is not a Saturday, a Sunday or other day on which banks are required or authorized by law to be closed in the City of Miami, Florida. “Buyer” has the meaning specified in the introductory paragraph to this Agreement. “CERCLA” means the Comprehensive Environmental Response, Compensation, and Liability Act of 1980. “Claims and Damages” means, except as otherwise expressly provided in this Agreement, any and all losses, claims, demands, liabilities, obligations, actions, suits, orders, statutory or regulatory compliance requirements, or proceedings asserted by any Person (including, without limitation, Governmental Authorities), and all damages, costs, expenses, assessments, judgments, recoveries and deficiencies, including, to the extent required pursuant to Article 8, reasonable attorneys’ fees and costs, incurred by or awarded against a party to the extent indemnified in accordance with Article 8 hereof; provided, however, that “Claims and Damages” shall not include any punitive, incidental and consequential damages, damages for lost profits or damages for dimunition in value. “Closing” has the meaning set forth in Section 1.10(a) hereof. “Closing Cash Payment” means the payment of $2,150,000 due and payable to the Seller by the Buyer on the Closing Date. “Closing Date” has the meaning set forth in Section 1.10(a) hereof. “Closing Date Balance Sheet” has the meaning set forth in Section 1.7 hereof.   41 -------------------------------------------------------------------------------- “Closing Date Net Assets” has the meaning set forth in Section 1.7 hereof. “Closing Date Schedule of Net Assets” has the meaning set forth in Section 1.7 hereof. “Code” means the Internal Revenue Code of 1986, as amended. “Common Shares” has the meaning set forth in Section 1.6(e) hereof. “Control” (including the terms “controlled by” and “under common control with”), with respect to the relationship between or among two or more Persons, means the possession, directly or indirectly, of the power to direct or to cause the direction of the affairs or management of a Person, whether through the ownership of voting securities, by contract or otherwise, including, without limitation, the ownership, directly or indirectly, of securities having the power to elect a majority of the board of directors or similar body governing the affairs of such Person. “December 31, 2005 Balance Sheet” means the audited balance sheet of the Seller as of December 31, 2005. “EBITDA” of the Devant division of Buyer (which shall include, among other things, all the Purchased Assets and no other assets without the Seller’s prior written approval and the Assumed Liabilities) for any fiscal year means its earnings before interest, taxes, depreciation and amortization as determined in accordance with GAAP. EBITDA shall be determined by the independent certified public accountants engaged by the Buyer from time to time, whose determination of EBITDA shall be final and binding on the parties. In determining such EBITDA: (i) EBITDA will be computed without regard to “extraordinary items” of gain or loss as that term shall be defined in GAAP; (ii) EBITDA will not include any gains, losses or profits realized from the sale of any assets other than in the ordinary course of business; (iii) EBITDA will reflect any adjustments that have been agreed to by Buyer and Seller in writing and (iv) EBITDA will not include any parent company overhead or management costs or charges. “Employee Benefit Plans” means all “employee benefit plans” within the meaning of Section 3(3) of ERISA, all bonus, stock option, stock purchase, incentive, deferred compensation, retirement, supplemental retirement, profit sharing, severance and other employee benefit plans, programs, policies or arrangements, and all employment, retention, change of control or compensation agreements, in each case for the benefit of, or relating to, any current employee or former employee of the Seller, other than any de minimis, fringe or unwritten benefit plans, programs, policies or arrangements, the costs of which, to the Seller, are not material. “Encumbrance” means any security interest, pledge, mortgage, lien (including, without limitation, tax liens), charge, encumbrance, easement, adverse claim, preferential arrangement, restriction or defect in title other than a Permitted Encumbrance. “Environmental Claims” means any and all actions, suits, demands, demand letters, claims, liens, notices of non-compliance or violation, investigations, proceedings, consent orders or consent agreements relating in any way to any Environmental Law, any Environmental Permit, Hazardous Materials or arising from alleged injury or threat of injury to health, safety or the environment, including, without limitation (a) by Governmental Authorities for enforcement, cleanup, removal, response, remedial or other actions or damages and (b) by any Person for damages, contributions, indemnification, cost recovery, compensation or injunctive relief.   42 -------------------------------------------------------------------------------- “Environmental Law” means any Law relating to the environment, health, safety or Hazardous Materials, in force and effect on the Closing Date (exclusive of any amendments or changes to such Law or any regulations promulgated thereunder or orders, decrees or judgments issued pursuant thereto which are enacted, promulgated or issued after the date hereof, or in the case of such certificate, on or after the Closing Date), including but not limited to, CERCLA; the Resource Conservation and Recovery Act of 1986 and Hazardous and Solid Waste Amendments of 1984, 42 U.S.C. (S)(S)6901 et seq.; the Hazardous Materials Transportation Act, 49 U.S.C. (S)(S)6901 et seq.; the Clean Water Act, 33 U.S.C. (S)(S)1251 et seq.; the Toxic Substances Control Act of 1976, 15 U.S.C. (S)(S)2601 et seq.; the Clean Air Act of 1966, as amended, 42 U.S.C. (S)(S)7401 et seq.; the Safe Drinking Water Act, 42 U.S.C. (S)(S)300f et seq.; the Atomic Energy Act, 42 U.S.C. (S)(S)2011 et seq.; the Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. (S)(S)136 et seq.; and the Emergency Planning and Community Right-to-Know Act of 1986, 42 U.S.C. (S)(S)1101 et seq. “Environmental Permits” means all permits, approvals, identification numbers, licenses and other authorizations required under any applicable Environmental Law. “Equipment” means all of the tangible personal property, machinery, equipment, vehicles, rolling stock, furniture, and fixtures in which the Seller has an interest, by ownership or lease, together with any replacements thereof, or additions thereto made in the ordinary course of business between the date hereof and the Closing Date. “ERISA” means the Employee Retirement Income Security Act of 1974, as amended. “ERISA Affiliate” has the meaning set forth in Section 2.20 hereof. “Exchange Act” means the Securities Exchange Act of 1934, as amended. “ForeFront Holdings” means ForeFront Holdings, Inc., a Florida corporation (f/k/a Datrek Miller International, Inc.). “GAAP” means United States generally accepted accounting principles and practices as in effect from time to time. “Governmental Authority” means any United States federal, state or local government or any foreign government, any governmental, regulatory, legislative, executive or administrative authority, agency or commission or any court, tribunal, or judicial body. “Governmental Order” means any order, writ, judgment, injunction, decree, stipulation, determination or award entered by or with any Governmental Authority. Governmental Orders shall not include Permits. “Hazardous Materials” means petroleum and petroleum products, byproducts or breakdown products, radioactive materials, and any other chemicals, materials, or substances designated, classified or regulated as being “hazardous” or “toxic”, or words of similar import, under any Environmental Law. “HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder.   43 -------------------------------------------------------------------------------- “Indebtedness” means obligations with regard to borrowed money and leases classified or accounted for as capital or financing leases on financial statements, but shall expressly not include either accounts payable or accrued liabilities that are incurred in the ordinary course of business or obligations under operating leases classified or accounted for as such on financial statements. “Indemnified Party” has the meaning set forth in Section 8.6 hereof. “Indemnifying Party” has the meaning set forth in Section 8.6 hereof. “Intellectual Property Rights” means all patents, trademarks, trade names, trade dress, domain names, service marks and copyrights, and applications for any of the foregoing, and other intellectual property, in all forms and languages, whether owned or used by, or licensed to, the Seller and used in or related to the Business. “Interim Balance Sheet” has the meaning set forth in Section 2.7 hereof. “Interim Financial Statements” has the meaning set forth in Section 2.6 hereof. “Knowledge” means (i) with respect to the Seller and the Seller Responsible Parties, the actual knowledge or knowledge a party should have with the exercise of due diligence of James M. Sheppard, Jr. and Michael Waddell and (ii) with respect to the Buyer, ForeFront Group and ForeFront Holdings, the actual knowledge or knowledge a party should have with the exercise of due diligence of Michael S. Hedge, Randall J. Frapart and J. Max Waits. “Law” means any federal, state, local or foreign constitution, statute, law, ordinance, regulation, rule, code, injunction, judgment, order, decree or other requirement, restriction or rule of law. “Liability Claim” has the meaning set forth in Section 8.2(c) hereof. “Material Adverse Effect” means any circumstance, change in, or effect on the Seller that has a material adverse effect on the business, results of operations, condition (financial or otherwise), or prospects of the Seller taken as a whole. “Material Contracts” means the written agreements, contracts, policies, plans, mortgages, understandings, arrangements or commitments to which the Seller is a party or by which any of the Purchased Assets are bound as described below: (i) any agreement or contract providing for payments by the Seller to any Person in excess of $20,000 per year or $50,000 in the aggregate over the five-year period commencing on the date hereof; (ii) any employment agreement or consulting agreement or similar contract; (iii) any retention or severance agreement or contract; (iv) any distribution agreement, royalty or licensing agreement or other contract associated with the Business; (v) any lease of Equipment or Real Property or license with respect to Intellectual Property Rights (other than licenses granted in from another Person providing for payments to another Person in excess of $20,000 in any year; (vi) any joint venture, partnership or similar agreement or contract of the Seller; (vii) any agreement or contract under which the Seller has borrowed or loaned any money in excess of $20,000 or issued or received any note, bond, indenture or other evidence of indebtedness in excess of $20,000 or directly or indirectly guaranteed indebtedness, liabilities or obligations of others in an amount in excess of $20,000; (viii) any covenant not to compete or contract or agreement, understanding, arrangement or any   44 -------------------------------------------------------------------------------- restriction whatsoever limiting in any respect the ability of either of the Seller to compete in any line of business or with any Person or in any area; and (ix) any of the contracts, agreements or arrangements, listed on Schedule 2.15. “Net Assets” means the value of the Purchased Assets as set forth in the Closing Date Balance Sheet, less all Assumed Liabilities. “Notice of Claim” has the meaning set forth in Section 8.6 hereof. “Permitted Encumbrance” means (a) liens for taxes, assessment and other governmental levies, fees or charges which are not due and payable as of the Closing Date, or which are being contested in good faith and for which appropriate reserves have been established in accordance with GAAP; (b) liens of landlords and other similar liens incurred in the ordinary course of business for sums not yet due or, if due, the payment of which is being contested in good faith and for which appropriate reserves have been established in accordance with GAAP; and (c) liens (other than any lien arising under ERISA) incurred or deposits made in the ordinary course of business in connection with worker’s compensation, unemployment insurance and other types of social security. “Permits” has the meaning set forth in Section 2.18(a) hereof. “Person” means any individual, partnership, firm, corporation, limited liability company, association, trust, unincorporated organization or other entity, as well as any syndicate or group that would be deemed to be a person under Section 13(d)(3) of the Exchange Act. “Pre-Closing Tax Periods” has the meaning set forth in Section 7.1(a) hereof. “Premises” has the meaning set forth in Section 1.2(a). “Promissory Note A” means that certain promissory note, in the form of Exhibit A attached hereto, in the principal amount of $250,000 to be executed and delivered by the Buyer on the Closing Date. The principal amount of Promissory Note A shall be payable in five quarterly installments of $50,000 each commencing on March 31, 2007 (the remaining installments shall be due and payable on June 30, 2007, September 30, 2007, December 31, 2007 and March 31, 2008, respectively) and shall not bear any interest. “Promissory Note B” means that certain promissory note, in the form of Exhibit B attached hereto, in the principal amount not in excess of $1,250,000 (subject to adjustment pursuant to Section 1.8) to be executed and delivered by the Buyer on the Closing Date. The principal amount of Promissory Note B (subject to the adjustments described herein) shall be due and payable on April 15, 2009 and shall not bear any interest. “Promissory Note C” means that certain promissory note, in the form of Exhibit C attached hereto, in the principal amount of $150,000 to be executed and delivered by the Buyer on the Closing Date. The principal amount of Promissory Note C shall be payable in three monthly installments of $50,000 each commencing on May 1, 2007 (the remaining installments shall be due and payable on June 1, 2007 and July 1, 2007, respectively) and shall not bear any interest.   45 -------------------------------------------------------------------------------- “Property Taxes” has the meaning set forth in Section 7.1(c)(i) hereof. “Purchased Assets” has the meaning set forth in Section 1.1 hereof. “Purchase Price” has the meaning set forth in Section 1.6 hereof. “Real Property” means the real property and related mineral rights owned by, and all easements, rights-of-way and other possessory interests in real estate of the Seller, together with all buildings and other structures, facilities or improvements currently or hereafter located thereon, all fixtures, systems, equipment and items of personal property of the Seller attached or appurtenant thereto, and all easements, licenses, rights and appurtenances relating to the foregoing. “Reimbursements” has the meaning set forth in Section 8.5 hereof. “Release” means disposing, discharging, injecting, spilling, leaking, leaching, dumping, emitting, escaping, emptying, seeping, placing and the like into or upon any land or water or air or otherwise entering into the environment. “Required Consents” means any consents, approvals, orders, authorizations, registrations, declarations and filings required under or in relation to (a) state securities or “blue sky” laws, (b) the Securities Act of 1933, as amended, and (c) antitrust or other competition Laws of other jurisdictions. “Sale” has the meaning set forth in the recitals hereto. “SEC” means the Securities and Exchange Commission. “Seller” has the meaning set forth in the introductory paragraph to this Agreement. “Seller Responsible Parties” has the meaning set forth in the introductory paragraph of this Agreement. “Straddle Period” has the meaning set forth in Section 7.1(a) hereof. “Subsidiary” of any Person means (i) any corporation more than 50% of whose stock of any class or classes having by the terms thereof ordinary voting power to elect a majority of the directors of such corporation is owned by such Person directly or indirectly through Subsidiaries and (ii) any partnership, limited partnership, limited liability company, associates, joint venture or other entity in which such Person directly or indirectly through Subsidiaries has more than a 50% equity interest. “Tax” or “Taxes” means any and all taxes, fees, withholdings, levies, duties, tariffs, imposts, and other charges of any kind (together with any and all interest, penalties, additions to tax and additional amounts imposed with respect thereto), fees, surcharges, contributions, or other payments including but not limited to administrative or regulatory fees, imposed by any local, state, federal or foreign government or governmental agency or taxing authority, including, without limitation, taxes or other charges on or with respect to income, franchises, windfall or other profits, gross receipts, property, sales, use, capital stock, payroll, employment, social security, workers’ compensation, unemployment compensation, or net worth, taxes or other   46 -------------------------------------------------------------------------------- charges in the nature of excise, withholding, ad valorem, stamp, transfer, value added or gains taxes, license, registration and documentation fees, and customs duties, tariffs and similar charges. “Tax Return” means any report, return, document, declaration or other information or filing required to be supplied to any Tax authority or jurisdiction (foreign or domestic) with respect to Taxes, including, without limitation, information returns, any documents with respect to or accompanying payments of estimated Taxes, or with respect to or accompanying requests for the extension of time in which to file any such report, return, document, declaration or other information. “Union Employee” means an employee of either of the Seller whose terms and conditions of employment are governed by the terms of any collective bargaining agreement. “30-Day Value” has the meaning set forth in Section 1.8(c) hereof. Article 10. Miscellaneous Provisions. 10.1 Expenses. Except as otherwise specifically provided in this Agreement, all out-of-pocket costs and expenses, including, without limitation, fees and disbursements of counsel, financial advisors and accountants, incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such costs and expenses, whether or not the Closing shall have occurred. 10.2 Notices. Any notice, demand, claim, notice of claim, request or communication required or permitted to be given under the provisions of this Agreement shall be in writing and shall be deemed to have been duly given (i) upon delivery if delivered in person, (ii) on the date of mailing if mailed by registered or certified mail, postage prepaid and return receipt requested, (iii) on the date of delivery to a national overnight courier service, or (iv) upon transmission by facsimile (if such transmission is confirmed by the addressee) if delivered through such services to the following addresses, or to such other address as any party may request by notifying in writing all of the other parties to this Agreement in accordance with this Section. If to the Seller Responsible Parties: Devant Ltd. 3011 Walkup Avenue Monroe, NC 28110 Attention: James M. Sheppard, Jr. Telephone: Facsimile: With a copy (which shall not constitute notice) to: Womble, Carlyle, Sandridge & Rice, PLLC 301 South College Street, Suite 3500 Charlotte, NC 28202 Attention: Jeffrey S. Hay, Esq. Telephone: 704-331-4950 Facsimile: 704-334-4859   47 -------------------------------------------------------------------------------- If to the Buyer: Forefront Devant, Inc. 835 Bill Jones Industrial Drive Springfield, Tennessee Attention: Michael S. Hedge Telephone: (615) 384-1230 Facsimile: (615) 384-1290 With a copy (which shall not constitute notice) to: Adorno & Yoss LLP 2525 Ponce de Leon Boulevard Suite 400 Miami, Florida 33134-6012 Attention: Carlos A. Mas, Esq. Telephone: (305) 460-1000 Facsimile: (305) 503-8901 Any such notice shall be deemed to have been received on the date of personal delivery, the date set forth on the Postal Service return receipt, or the date of delivery shown on the records of the overnight courier, as applicable. 10.3 Benefit and Assignment. This Agreement will be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. There shall be no assignment of any interest under this Agreement by any party except that the Buyer may assign its rights hereunder to (a) any wholly owned subsidiary of the Buyer; provided, however, that no such assignment shall relieve the assignor of its obligations under this Agreement; and (b) its senior secured lender as additional collateral for the Buyer’s obligations under its lending agreements with such lender. Nothing herein, express or implied, is intended to or shall confer upon any other Person any legal or equitable right, benefit or remedy of any nature whatsoever under or by reason of this Agreement. 10.4 Waiver. Any party to this Agreement may (a) extend the time for the performance of any of the obligations or other acts of any other party, (b) waive any inaccuracies in the representations and warranties of any other party contained herein or in any document delivered by any other party pursuant hereto or (c) waive compliance with any of the agreements or conditions of any other party contained herein. Any such extension or waiver shall be valid only if set forth in an instrument in writing signed by the party to be bound thereby. Any waiver of any term or condition shall not be construed as a waiver of any subsequent breach or a subsequent waiver of the same term or condition, or a waiver of any other term or condition, of this Agreement. The failure of any party to assert any of its rights hereunder shall not constitute a waiver of any such rights. 10.5 Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any Law or public policy, all other terms and provisions of this   48 -------------------------------------------------------------------------------- Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner in order that the transactions contemplated hereby are consummated as originally contemplated to the greatest extent possible. 10.6 Amendment. This Agreement may not be amended or modified except (a) by an instrument in writing signed by, or on behalf of, the Seller Responsible Parties and the Buyer or (b) by a waiver in accordance with Section 10.4 hereof. 10.7 Effect and Construction of this Agreement. This Agreement embodies the entire agreement and understanding of the parties with respect to the subject matter hereof and supersedes any and all prior agreements, arrangements and understandings, whether written or oral, relating to matters provided for herein. The language used in this Agreement shall be deemed to be the language chosen by the parties hereto to express their mutual agreement, and this Agreement shall not be deemed to have been prepared by any single party hereto. 10.8 Headings. The headings of the sections and subsections of this Agreement are inserted as a matter of convenience and for reference purposes only and in no respect define, limit or describe the scope of this Agreement or the intent of any section or subsection. 10.9 Counterparts. This Agreement may be executed in one or more counterparts and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. 10.10 Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Florida, applicable to contracts executed in and to be performed entirely within that State. 10.11 Entire Agreement. This Agreement, along with the Disclosure Schedules, Exhibits and all other agreements, instruments or documents to be delivered in connection with this Agreement, constitutes the entire agreement between the parties hereto and supersedes all prior agreements, understandings, negotiations and discussions, both written and oral, between the parties hereto with respect to the subject matter hereof. 10.12 Specific Performance. Each of the Seller Responsible Parties acknowledge and agree that in the event of any breach of this Agreement, the Buyer would be irreparably and immediately harmed and could not be made whole by monetary damages. It is accordingly agreed that the parties hereto (i) waive, in any action for specific performance, the defense of adequacy of a remedy at law and (ii) shall be entitled, in addition to any other remedy to which they may be entitled at law or in equity, to compel specific performance of this Agreement. 10.13 Remedies Cumulative. No remedy made available by any of the provisions of this Agreement is intended to be exclusive of any other remedy, and each and every remedy is cumulative and is in addition to every other remedy given hereunder or now or hereafter existing at law or in equity.   49 -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.   BUYER:   Forefront Devant, Inc. By:   /s/ Michael S. Hedge   Michael S. Hedge   President Forefront Group, Inc. By:   /s/ Michael S. Hedge   Michael S. Hedge   President Forefront Holdings, Inc. By:   /s/ Michael S. Hedge   Michael S. Hedge   Chief Executive Officer SELLER RESPONSIBLE PARTIES:   Devant Ltd. By:   /s/ James M. Sheppard, Jr. Name:   James M. Sheppard, Jr. Title:   President /s/ James M. Sheppard, Jr. James M. Sheppard, Jr. /s/ Mary Ann Sheppard Chambers Mary Ann Sheppard Chambers /s/ Rebecca Sheppard Roberts Rebecca Sheppard Roberts /s/ Deborah Ann Sheppard Deborah Ann Sheppard   50

Exhibit 10.1 THIRD AMENDMENT TO LOAN AND SECURITY AGREEMENT This Third Amendment to Loan and Security Agreement (this “Amendment”) is entered into as of November 30, 2006, by and between COMERICA BANK (“Bank”) and COMMODORE RESOURCES (NEVADA), INC., LYRIS TECHNOLOGIES INC., UPTILT INC., MCC NEVADA, INC. and CLICKTRACKS ANALYTICS, INC.  (each a “Borrower” and collectively, “Borrowers”). RECITALS Borrowers and Bank are parties to that certain Loan and Security Agreement dated as of October 4, 2005, as amended from time to time including by that certain First Amendment to Loan and Security Agreement dated as of April 25, 2006 and that certain Second Amendment to Loan and Security Agreement dated as of August 18, 2006 (the “Agreement”).  The parties desire to amend the Agreement in accordance with the terms of this Amendment to change certain of the financial covenants. NOW, THEREFORE, the parties agree as follows: 1.             Section 6.7(b) of the Agreement is hereby amended and restated in its entirety to read as follows: “(b)         EBITDA.  Measured monthly on a rolling three-month basis, an EBITDA of not less than (i) One Million Two Hundred Thousand Dollars ($1,200,000) for the measuring period ending October 31, 2006, (ii) One Million One Hundred Thousand Dollars ($1,100,000) for the measuring period ending November 30, 2006, (iii) One Million Three Hundred Thousand Dollars ($1,300,000) for the measuring period ending December 31, 2006, (iv)  Two Million Dollars ($2,000,000) for the measuring period ending January 31, 2007 through the measuring period ending February 28, 2007, and (v) Two Million Five Hundred Thousand Dollars ($2,500,000) at all times thereafter.” 2.             Exhibit C to the Agreement is hereby replaced with Exhibit C attached hereto. 3.             No course of dealing on the part of Bank or its officers, nor any failure or delay in the exercise of any right by Bank, shall operate as a waiver thereof, and any single or partial exercise of any such right shall not preclude any later exercise of any such right.  Bank’s failure at any time to require strict performance by Borrowers of any provision shall not affect any right of Bank thereafter to demand strict compliance and performance.  Any suspension or waiver of a right must be in writing signed by an officer of Bank. 4.             Unless otherwise defined, all initially capitalized terms in this Amendment shall be as defined in the Agreement.  The Agreement, as amended hereby, shall be and remain in full force and effect in accordance with its respective terms and hereby is ratified and confirmed in all respects.  Except as expressly set forth herein, the execution, delivery, and performance of this Amendment shall not operate as a waiver of, or as an amendment of, any right, power, or remedy of Bank under the Agreement, as in effect prior to the date hereof. 5.             Each Borrower represents and warrants that the Representations and Warranties contained in the Agreement are true and correct in all material respects as of the date of this Amendment, and that no Event of Default has occurred and is continuing. 6.             As a condition to the effectiveness of this Amendment, Bank shall have received, in form and substance satisfactory to Bank, the following: (a)           this Amendment, duly executed by each Borrower; (b)           a Certificate of the Secretary of each Borrower with respect to incumbency and resolutions authorizing the execution and delivery of this Amendment; (c)           all reasonable Bank Expenses incurred through the date of this Amendment, which may be debited from any of Borrowers’ accounts; and 1 -------------------------------------------------------------------------------- (d)           such other documents, and completion of such other matters, as Bank may reasonably deem necessary or appropriate. 7.             This Amendment may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one instrument. 2 -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the first date above written.   COMMODORE RESOURCES (NEVADA), INC.       By: /s/ David R. Burt             Title: Assistant Secretary             LYRIS TECHNOLOGIES INC.       By: /s/ David R. Burt             Title: Secretary             UPTILT RESOURCES INC.       By: /s/ David R. Burt             Title: Secretary             MCC NEVADA, INC.       By: /s/ David R. Burt             Title: Chief Executive Officer             CLICKTRACKS ANALYTICS, INC.       By: /s/ David R. Burt             Title: Secretary                     COMERICA BANK       By: /s/ Philip Koblis             Title: Vice President     [Signature Page to Third Amendment to Loan & Security Agreement --------------------------------------------------------------------------------

Exhibit 10.5   FULTON COUNTY NATIONAL BANK & TRUST COMPANY   MCCONNELLSBURG, PA   SURVIVOR INCOME AGREEMENT   THIS AGREEMENT is made this 4th day of August, 2000 by and between The Fulton County National Bank and Trust Company (the “Company”), and Sharon M. Sowers (the ‘Executive”).   INTRODUCTION   To encourage the Executive to remain an employee of the Company, the Company is willing to provide benefits to the Executive’s beneficiary if the Executive dies prior to terminating employment.  The Company will pay the benefits from its general assets, but only so long as one of its general assets is a life insurance policy on the Executive’s life.   AGREEMENT   The Executive and the Company agree as follows:   Article 1   Entitlement to Benefit   1.1           Pre-Termination Survivor Income Benefit.  If the Executive dies before otherwise terminating employment with the Company, the Company shall pay to the Executive’s designated beneficiary the survivor income benefit described in Article 2.   1.2           Disability Continuation.  If the Executive terminates employment due to disability and then dies before recovering from such disability, the Company shall pay to the Executive’s designated beneficiary the survivor income benefit described in Article 2.  Whether the Executive is disabled or has recovered from a disability shall be determined by the Company in its sole discretion.   1.3           Suicide.  No benefits shall be payable if the Executive commits suicide within twenty-six months after the date of this Agreement.   --------------------------------------------------------------------------------   Article 2   Survivor Income Benefit   2.1           Amount of Benefits.  The survivor income benefit shall be two times base annual salary at the time of death, divided by the Tax Factor. Base annual salary should not exceed $ 117,000 for purposes of this calculation.   2.1.1        Tax Factor.  One minus the Company’s marginal income tax rate for the fiscal year in which the Executive’s death occurs.   2.2           Form of Benefits.  The survivor income benefit shall be paid to the Executive’s beneficiary in a lump sum within sixty (60) days after the Executive’s death.   Article 3   Beneficiaries   3.1           Beneficiary Designations. The Executive shall designate a beneficiary by filing a written designation with the Company. The Executive may revoke or modify the designation at any time by filing a new designation. However, designations will only be effective if signed by the Executive and accepted by the Company during the Executive’s lifetime.  The Executive’s beneficiary designation shall be deemed automatically revoked if the beneficiary predeceases the Executive, or if the Executive names a spouse as beneficiary and the marriage is subsequently dissolved. if the Executive dies without a valid beneficiary designation, all payments shall be made to the Executive’s surviving spouse, if any, and if none, to the Executive’s surviving children and the descendants of any deceased child by right of representation, and if no children or descendants survive, to the Executive’s estate.   3.2           Facility of Payment.  If a benefit is payable to a minor, to a person declared incompetent, or to a person incapable of handling the disposition of his or her property, the Company may pay such benefit to the guardian, legal representative or person having the care or custody of such minor, incompetent person or incapable person. The Company may require proof of incompetency, minority or guardianship as it may deem appropriate prior to distribution of the benefit. Such distribution shall completely discharge the Company from all liability with respect to such benefit.   --------------------------------------------------------------------------------   Article 4   Claims and Review Procedures   4.1           Claims Procedure.  The Company shall notify the Executive’s beneficiary in writing, within ninety (90) days of his or her written application for benefits, of his or her eligibility or noneligibility for benefits under the Agreement.  If the Company determines that the beneficiary is not eligible for benefits or full benefits, the notice shall set forth (I) the specific reasons for such denial, (2) a specific reference to the provisions of the Agreement on which the denial is based, (3) a description of any additional information or material necessary for the claimant to perfect his or her claim, and a description of why it is needed, and (4) an explanation of the Agreement’s claims review procedure and other appropriate information as to the steps to be taken if the beneficiary wishes to have the claim reviewed.  If the Company determines that there are special circumstances requiring additional time to make a decision, the Company shall notify the beneficiary of the special circumstances and the date by which a decision is expected to be made, and may extend the time for up to an additional ninety-day period.   4.2           Review Procedure.  If the beneficiary is determined by the Company not to be eligible for benefits, or if the beneficiary believes that he or she is entitled to greater or different benefits, the beneficiary shall have the opportunity to have such claim reviewed by the Company by filing a petition for review with the Company within sixty (60) days after receipt of the notice issued by the Company.  Said petition shall state the specific reasons which the beneficiary believes entitle him or her to benefits or to greater or different benefits.  Within sixty (60) days after receipt by the Company of the petition, the Company shall afford the beneficiary (and counsel, if any) an opportunity to present his or her position to the Company orally or in writing, and the beneficiary (or counsel) shall have the right to review the pertinent documents.  The Company shall notify the beneficiary of its decision in writing within the sixty-day period, stating specifically the basis of its decision, written in a manner calculated to be understood by the beneficiary and the specific provisions of the Agreement on which the decision is based. If, because of the need for a hearing, the sixty-day period is not sufficient, the decision may be deferred for up to another sixty-day period at the election of the Company, but notice of this deferral shall be given to the beneficiary.   Article 5   Conversion to Split Dollar   If the Executive voluntarily terminates employment after age 59, unless the Executive elects otherwise by written notice to the Company, the Split Dollar Insurance Agreement attached as the Addendum to this Agreement shall automatically take effect as of the Executive’s termination of employment.  The Company shall take all actions necessary to implement the Split Dollar Insurance Agreement.   --------------------------------------------------------------------------------   Article 6   Amendments and Termination   This Agreement may be amended or terminated only by a written agreement signed by the Company and the Executive.   Article 7   Miscellaneous   7.1           Exclusive Agreement/Binding Effect.  This Agreement is the entire agreement between the Company and the Executive, written or oral, related to the Company’s obligation to pay any survivor income benefits to the Executive’s beneficiaries or survivors.  This Agreement supersedes all, prior agreements, understandings and negotiations.  This Agreement shall bind the Executive and the Company, and their beneficiaries, survivors, executors, administrators and transferees.   7.2           No Guaranty of Employment.  This Agreement is not an employment policy or contract.  It does not give the Executive the right to remain an employee of the Company, nor does it interfere with the Company’s right to discharge the Executive.  It also does not require the Executive to remain an employee nor interfere with the Executive’s right to terminate employment at any time.   7.3           Tax Withholding.  The Company shall withhold any taxes that are required to be withheld from the benefits provided under the Agreement.   7.4           Applicable Law.  The Agreement and all rights hereunder shall be governed by the laws of the Commonwealth of Pennsylvania, except to the extent preempted by the laws of the United States of America.   7.5           Unfunded Plan.  The beneficiary is a general unsecured creditor of the Company for the payment of benefits under this Agreement.  The benefits represent the mere promise by the Company to pay such benefits.  The beneficiary’s rights to such benefits are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors.  Any insurance on the Executive’s life is a general asset of the Company to which the Executive and designated beneficiary have no preferred or secured claim.   IN WITNESS WHEREOF, the Executive and a duly authorized Company officer have signed this Agreement.   EXECUTIVE: COMPANY       The Fulton County National Bank and Trust Co.     /S/ Sharon M. Sowers   By: Clyde H. Bookheimer       Sharon M. Sowers Title: President     --------------------------------------------------------------------------------   THE FULTON COUNTY NATIONAL BANK AND TRUST COMPANY   SURVIVOR INCOME AGREEMENT   BENEFICIARY DESIGNATION   I designate the following as beneficiary of any death benefits under The Fulton County National Bank and Trust Company Survivor Income Agreement:   Primary: Ronald J. Sowers     Contingent: Matthew Sowers and Wyatt Sowers   Note:      To name a trust as beneficiary, please provide the name of the trustee(s) and the exact name and date of the trust agreement.   I understand that I may change these beneficiary designations by filing a new written designation with the Company. I further understand that the designations will be automatically revoked if the beneficiary predeceases me, or, if I have named my spouse as beneficiary, in the event of the dissolution of our marriage.   Signature /S/ Sharon M. Sowers     Date 8/4/00     Accepted by the Company this 4th day of August, 2000.   By /S/ Clyde H. Bookheimer       Title President     --------------------------------------------------------------------------------   SPLIT DOLLAR ADDENDUM TO   MILTON COUNTY NATIONAL BARK & TRUST COMPANY   MCCONNELLSBURG, PA   SURVIVOR INCOME AGREEMENT   THIS ADDENDUM is part of the Survivor Income Agreement between Fulton County National Bank & Trust Company (the “Company”), and Sharon Sowers (the “Executive”).   INTRODUCTION   Under the terms of the Survivor Income Agreement between the Executive and the Company, the parties desire divide the death proceeds of a life insurance policy on the Executive’s life.   Article 1   General Definitions   The following terms shall have the meanings specified.   “Policy” means insurance policy number issued by the Insurer.   Article 2   Policy Ownership/Interests   2.1           Company Ownership.  The Company owns the Policy and shall have the right to exercise all incidents of ownership and to receive the Policy values in excess of the Executive’s interest described in Section 2.2.   2.2           Executive’s Interest.  The Executive shall have the right to designate the beneficiary of the death proceeds of the Policy in an amount equal to the lesser of (i) two times the most recent base annual salary or (ii) the excess of the total death proceeds over the cash surrender value of the Policy on the day before the Executive’s death.  The Executive shall also have the right to elect and change settlement options that may be permitted for such beneficiaries.   --------------------------------------------------------------------------------   Article 3   Premiums   3.1           Premium Payment.  The Company shall pay any premiums due on the Policy.   3.2           Imputed Income.  The Company shall then impute income to the Executive in an amount equal to the current term rate for the Executive’s age multiplied by the aggregate death benefit payable to the Executive’s beneficiary.  The “current term rate” is the minimum amount required to be imputed under Revenue Rulings 64-328 and 66-110, or any subsequent applicable authority.   Article 4   Assignment   The Executive may assign without consideration all interests in the Policy and in this Addendum to any person, entity or trust.   Article 5   Insurer   The Insurer shall be bound only by the terms of the Policy. Any payments the Insurer makes or actions it takes in accordance with the Policy shall fully discharge it from all claims, suits and demands of all persons.  The Insurer shall not be bound by or be deemed to have notice of the provisions of this Addendum.   Article 6   Claims Procedure   6.1           Claims Procedure. The Company shall notify the Executive’s beneficiary in writing, within ninety (90) days of his or her written application for benefits, of his or her eligibility or non-eligibility for benefits under the Addendum. If the Company determines that the beneficiary is not eligible for benefits or full benefits, the notice shall set forth (1) the specific reasons for such denial, (2) a specific reference to the provisions of the Addendum on which the denial is based, (3) a description of any additional information or material necessary for the claimant to perfect his or her claim, and a description of why it is needed, and (4) an explanation of the Addendum’s claims review procedure and other appropriate information as to the steps to be taken if the beneficiary wishes to have the claim reviewed.  If the Company determines that there are special circumstances requiring additional time to make a decision, the Company shall notify the beneficiary of the special circumstances and the date by which a decision is   --------------------------------------------------------------------------------   expected to be made, and may extend the time for up to an additional ninety-day period..   6.2           Review Procedure.  If the beneficiary is determined by the Company not to be eligible for benefits, or if the beneficiary believes that he or she is entitled to greater or different benefits, the beneficiary shall have the opportunity to have such claim reviewed by the Company by filing a petition for review with the Company within sixty (60) days after receipt of the notice issued by the Company.  Said petition shall state the specific reasons which the beneficiary believes entitle him or her to benefits or to greater or different benefits.  Within sixty (60) days after receipt by the Company of the petition, the Company shall afford the beneficiary (and counsel, if any) an opportunity to present his or her position to the Company orally or in writing, and the beneficiary (or counsel) shall have the right to review the pertinent documents.  The Company shall notify the beneficiary of its decision in writing within the sixty-day period, stating specifically the basis of its decision, written in a manner calculated to be understood by the beneficiary and the specific provisions of the Addendum on which the decision is based.  If; because of the need for a hearing, the sixty-day period is not sufficient, the decision may be deferred for up to another sixty-day period at the election of the Company, but notice of this deferral shall be given to the beneficiary.   Article 7   Amendments and Termination   The Company may amend this Addendum at any time prior to the Executive’s death by written notice to the Executive. Either party may terminate this Addendum at any time prior to the Executive’s death by written notice to the other party.   Upon termination of this Addendum, the Executive may purchase the Policy from the Company for an amount equal to the Policy’s cash surrender value as of the date of the termination.   Article 8   Miscellaneous   8.1           Binding Effect. This Addendum shall bind the Executive and the Company, their beneficiaries, survivors, executors, administrators and transferee; and any Policy beneficiary.   8.2           No Guaranty of Employment.  This Addendum is not an employment policy or contract.  It does not give the Executive the right to remain an employee of the Company, nor does it interfere with the Company’s right to discharge the Executive. It also does not require the Executive to remain an employee nor interfere with the Executive’s right to terminate employment at any time.   --------------------------------------------------------------------------------   8.3           Applicable Law.  The Addendum and all rights hereunder shall be governed by and construed according to the laws of Pennsylvania, except to the extent preempted by the laws of the United States of America.   The parties’ signatures on the Death Benefit Agreement witness their agreement to the terms of this Addendum.   --------------------------------------------------------------------------------

EXHIBIT 10.4 FORM OF STATEMENT OF CONFIDENTIALITY, NON-DISCLOSURE AND NON-COMPETE AGREEMENT BETWEEN ALCIS-CA AND OUR EMPLOYEES, CONSULTANTS AND OTHER THIRD-PARTY CONTRACTORS ALCiS HEALTH, INC. CONFIDENTIAL INFORMATION AND INVENTIONS AGREEMENT As an employee of ALCiS Health, Inc, its subsidiary or its affiliate (together, the “Company”), and in consideration of the compensation now and hereafter paid to me, I, the undersigned, agree to the following: 1. Maintaining Confidential Information a. Company Information. I agree at all times during the term of my employment and thereafter to hold in strictest confidence, and not to use, except for the benefit of the Company, or to disclose to any person, firm or corporation without written authorization of the Board of Directors of the Company, any trade secrets, confidential knowledge, data or other proprietary information relating to products, processes, know-how, designs, formulas, developmental or experimental work, computer programs, data bases, other original works of authorship, customer lists, business plans, financial information or other subject matter pertaining to any business of the Company or any of its clients, consultants or licensees. b. Former Employer Information. I agree that I will not, during my employment with the Company, improperly use or disclose any proprietary information or trade secrets of my former or concurrent employers or companies, if any, and that I will not bring onto the premises of the Company any unpublished document or any property belonging to my former or concurrent employers or companies, if any, unless consented to in writing by said employers or companies. c. Third Party Information. I recognize that the Company has received and in the future will receive from third parties their confidential or proprietary information subject to a duty on the Company’s part to maintain the confidentiality of such information and to use it only for certain limited purposes. I agree that I owe the Company and such third parties, during the term of my employment and thereafter, a duty to hold all such confidential or proprietary information in the strictest confidence and not to disclose it to any person, firm or corporation (except as necessary in carrying out my work for the Company consistent with the Company’s agreement with such third party) or to use it for the benefit of anyone other than for the Company or such third party (consistent with the Company’s agreement with such third party) without the express written authorization of the Board of Directors of the Company. 2. Retaining and Assigning Inventions and Original Works a. Inventions and Original Works Retained by Me. I have attached hereto, as Exhibit A, a list describing all inventions, original works of authorship, developments, improvements, and trade secrets which were made by me prior to my employment with the Company, which belong to me, which relate to the Company’s proposed business and products, and which are not assigned to the Company; or, if no such list is attached, I represent that there are no such inventions. b. Inventions and Original Works Assigned to the Company. I agree that I will promptly -------------------------------------------------------------------------------- make full written disclosure to the Company, will hold in trust for the sole right and benefit of the Company, and will assign to the Company all my right, title, and interest in and to any and all inventions, original works of authorship, developments, improvements or trade secrets which I may solely or jointly conceive or develop or reduce to practice, or cause to be conceived or developed or reduced to practice, during the period of time I am in the employ of the Company. I recognize, however, that Section 2870 of the California Labor Code (as set forth in Exhibit B attached hereto) exempts from this provision any invention as to which I can prove the following: (i) It was developed entirely on my own time; and (ii) No equipment, supplies, facilities or trade secrets of the Company were used in its development; and (iii) It either (aa) does not relate, at the time the invention was conceived or reduced to practice, to the Company’s business or to the Company’s actual or demonstrably anticipated research and development; or (bb) does not result from any work performed by me for the Company. I acknowledge that all original works of authorship which are made by me (solely or jointly with others) within the scope of my employment and which are protectable by copyright are “works made for hire,” as that term is defined in the United States Copyright Act (17 USCA, Section 101). c. Maintenance of Records. I agree to keep and maintain adequate and current written records of all inventions and original works of authorship made by me (solely or jointly with others) during the term of my employment with the Company. The records will be in the form of notes, sketches, drawings, and any other format that may be specified by the Company. The records will be available to and remain the sole property of the Company at all times. d. Inventions Assigned to the United States. I agree to assign to the United States government all my right, title, and interest in and to any and all inventions, original works of authorship, developments, improvements or trade secrets whenever such full title is required to be in the United States by a contract between the Company and the United States or any of its agencies. e. Obtaining Letters Patent and Copyright Registrations. I agree that my obligation to assist the Company to obtain United States or foreign letters patent and copyright registrations covering inventions and original works of authorship assigned hereunder to the Company shall continue beyond the termination of my employment, but the Company shall compensate me at a reasonable rate for time actually spent by me at the Company’s request on such assistance. If the Company is unable because of my mental or physical incapacity or for any other reason to secure my signature to apply for or to pursue any application for any United States or foreign letters patent or copyright registrations covering inventions or original works of authorship assigned to the Company as above, then I hereby irrevocably designate and appoint the Company and its duly authorized officers and agents as my agent and attorney in fact, to act for and in my behalf and stead to execute and file any such applications and to do all other lawfully permitted acts to further the prosecution and issuance of letters patent or copyright registrations thereon with the same legal force and effect as if executed by me. I hereby waive and quitclaim to the Company any and all claims, of any nature whatsoever, which I now or may hereafter have for infringement of any patents or copyrights, resulting from any such application for letters patent or copyright registrations assigned hereunder to the Company. -------------------------------------------------------------------------------- f. Exception to Assignments. I understand that the provisions of this Agreement requiring assignment to the Company do not apply to any invention which qualifies fully under the provisions of Section 2870 of the California Labor Code, a copy of which is attached hereto as Exhibit B. I will advise the Company promptly in writing of any inventions, original works of authorship, developments, improvements or trade secrets that I believe meet the criteria in Subparagraphs 2b(i), (ii), and (iii) above; and I will at that time provide to the Company in writing all evidence necessary to substantiate that belief. I understand that the Company will keep in confidence and will not disclose to third parties without my consent any confidential information disclosed in writing to the Company relating to inventions that qualify fully under the provisions of Section 2870 of the California Labor Code. 3. Conflicting Employment. I agree that, during the term of my employment with the Company, I will not engage in any other employment, occupation, consulting or other business activity directly related to the business in which the Company is now involved or becomes involved during the term of my employment, nor will I engage in any other activities that conflict with my obligations to the Company. 4. Returning Company Documents. I agree that, at the time of leaving the employ of the Company, I will deliver to the Company (and will not keep in my possession or deliver to anyone else) any and all devices, records, data, notes, reports, proposals, lists, correspondence, specifications, drawings, blueprints, sketches, materials, equipment, other documents or property, or reproductions of any aforementioned items belonging to the Company, its successors or assigns. In the event of the termination of my employment, I agree to sign and deliver the “Termination Certification” attached hereto as Exhibit C. 5. Representations. I agree to execute any proper oath or verify any proper document required to carry out the terms of this Agreement. I represent that my performance of all the terms of this Agreement will not breach any agreement to keep in confidence proprietary information acquired by me in confidence or in trust prior to my employment by the Company. I have not entered into, and I agree I will not enter into, any oral or written agreement in conflict herewith. 6. General Provisions a. Governing Law. This Agreement will be governed by the laws of the State of California. b. Entire Agreement. This Agreement sets forth the entire agreement and understanding between the Company and me relating to the subject matter herein and merges all prior discussions between us. No modification of or amendment to this Agreement, nor any waiver of any rights under this agreement, will be effective unless in writing signed by the party to be charged. Any subsequent change or changes in my duties, salary or compensation will not affect the validity or scope of this Agreement. c. Severability. If one or more of the provisions in this Agreement are deemed void by law, then the remaining provisions will continue in full force and effect. d. Successors and Assigns. This Agreement will be binding upon my heirs, executors, administrators and other legal representatives and will be for the benefit of the Company, its successors, and its assigns.   Date:                              Name: -------------------------------------------------------------------------------- EXHIBIT A LIST OF PRIOR INVENTIONS AND ORIGINAL WORKS OF AUTHORSHIP   Title   Date   Identifying Number or Brief Description             Name of Employee:                                                       -------------------------------------------------------------------------------- EXHIBIT B CALIFORNIA LABOR CODE SECTION 2870 EMPLOYMENT AGREEMENTS; ASSIGNMENT OF RIGHTS “(a) Any provision in an employment agreement which provides that an employee shall assign, or offer to assign, any of his or her rights in an invention to his or her employer shall not apply to an invention that the employee developed entirely on his or her own time without using the employer’s equipment, supplies, facilities, or trade secret information except for those inventions that either: (1) Relate at the time of conception or reduction to practice of the invention to the employer’s business, or actual or demonstrably anticipated research or development of the employer. (2) Result from any work performed by the employee for the employer. (b) To the extent a provision in an employment agreement purports to require an employee to assign an invention otherwise excluded from being required to be assigned under subdivision (a), the provision is against the public policy of this state and is unenforceable.” -------------------------------------------------------------------------------- EXHIBIT C ALCiS HEALTH, INC. TERMINATION CERTIFICATION This is to certify that I do not have in my possession, nor have I failed to return, any devices, records, data, notes, reports, proposals, lists, correspondence, specifications, drawings, blueprints, sketches, materials, equipment, other documents or property, or reproductions of any aforementioned items belonging to ALCiS Health, Inc., its subsidiaries, affiliates, successors or assigns (together, the “Company”). I further certify that I have complied with all the terms of the Company’s Confidential Information and Inventions Agreement signed by me, including the reporting of any inventions and original works of authorship (as defined therein), conceived or made by me (solely or jointly with others) covered by that agreement. I further agree that, in compliance with the Employee Confidential Information and Inventions Agreement, I will preserve as confidential all trade secrets, confidential knowledge, data or other proprietary information relating to products, processes, know-how, designs, formulas, developmental or experimental work, computer programs, data bases, other original works of authorship, customer lists, business plans, financial information or other subject matter pertaining to any business of the Company or any of its clients, consultants or licensees.   Date:                              Name: -------------------------------------------------------------------------------- Nondisclosure and Non-Circumvention Agreement THIS AGREEMENT is made this      day of             , 2006 (the “Effective Date”), by and between ALCIS HEALTH, INC. (“Company”) and                                                                                        (“Recipient”). The undersigned intend to engage in discussions concerning the Company’s actual or proposed technology, technology acquisitions (including but not limited to acquisition of patented anti-inflammatory and liposomal delivery system technologies), designs, concepts, innovations, products and/or services of Company and plans, studies or projections with respect thereto, all of which are non-public and unannounced, relating to the Company’s current and planned products (hereinafter collectively referred to as the “Company Business”); Whereas Recipient desires to obtain certain information for the sole purpose of entering into a business or investment relationship with the Company, understanding that the Contact Sources are important and valuable to the Company’s current and future business ventures, and whereas Recipient has no intent to partner with such Contact Sources in a manner which is not in Company’s best interests; Whereas, because such discussions may require disclosure of information considered confidential and proprietary by Company, including the identity of the current owner of the patented anti-inflammatory and liposomal delivery system technologies, and because Company will participate in such discussions only upon the understanding set forth herein, Recipient agrees with Company that Recipient will maintain the secrecy of such information as set forth below; For good and valuable consideration, which is hereby acknowledged as received, the parties agree as follows: (1) For the purposes of establishing and enforcing this Agreement, the parties do hereby agree upon the following definitions as used herein: “Representative Relationship” shall be interpreted to mean any agent, licensee, employment or independent contractor relationship entered into for the purpose of providing or receiving funds, license rights, technology, products and/or services from or to the Contact Source. “Contact Source” shall be interpreted to mean any person, partnership, corporation or other legal entity, including but not limited to those persons, partnerships, corporations or other legal entities with whom Company has a current working relationship. (2) For each Contact Source disclosed by Company, the term (“Term”) of this Agreement shall commence on the Effective Date and continue until three (3) years after the date Company’s contractual relationship with such Contact Source terminates. The Term for any Contact Source shall extend to and continue during any Company/Contact Source contract renewal periods. During the Term, Recipient does hereby agree that neither Recipient nor Recipient’s employees, agents, consultants, corporations, divisions, subsidiaries or partnerships or any other person, group or entity associated with Recipient, will make contact with, attempt to deal with or enter into (i) any competitive contract with such Contact Source, (ii) any contract or relationship with such Contact Source which is harmful to Company’s interests or (iii) any Representative Relationship with any Contact Source introduced to Recipient by agents or principals of Company, without Company’s prior written consent to such contract or relationship, which may be withheld in Company’s reasonable discretion. (3) Recipient does hereby agree to keep confidential and not to disclose the name, address, telephone, and fax number(s) of any Contact Source introduced to Recipient by agents or principals of Company, as well as any other confidential information that Recipient receives during the Term. Recipient does further agree and acknowledge that such information, including the identity and means of contact of any Contact Source introduced to Recipient by agents or principals of Company, is the proprietary information, trade secret and property of Company and shall so remain for the Term. Upon termination of discussions or upon the written request of Company, Recipient will return forthwith all written or descriptive matter of every kind including but not limited to models, prototypes, notes, documents, etc. which contain such Confidential Information. Recipient agrees to hold each item of Confidential Information received in confidence until three (3) years after the expiration or termination of this Agreement. -------------------------------------------------------------------------------- (4) “Confidential Information”, as used herein, shall mean all information, noted as “Confidential” as set forth below, which is disclosed or otherwise provided by Company, or any representations thereof which relates to or refers to Company information, business strategy, and technology. Confidential Information shall not include such information:     a. which was in the public domain prior to any such disclosure by Company;     b. which, after disclosure by Company, comes into the public domain through no fault of the Recipient;     c. which is disclosed to Recipient by a third party lawfully and with a legitimate right to disclose; or     d. which was in the legitimate possession of Recipient prior to such disclosure as evidenced by Recipient’s written records. Recipient will hold all Confidential Information in trust and confidence; and will not at any time, without the prior written consent of Company, disclose Confidential Information to any person other than an employee of Recipient who is bound to maintain the confidentiality of such Confidential Information and who has an actual need to know such Confidential Information in order to advance the purposes of this Agreement and the discussions pursuant hereto; and, will not use or employ any Confidential Information in connection with any business or commercial activity which is separate from or does not involve Company. Notwithstanding the definition of Company Information, and notwithstanding the public filing status of the anti-inflammatory and liposomal delivery system patents, Recipient will not discuss the anti-inflammatory and liposomal delivery system patents or their availability for acquisition with any party other than the Company for a period of 3 years from execution of this agreement. (5) In the event that any litigation is commenced between the Recipient and Company relative to this Agreement or the rights and duties of the Recipient or Company under this Agreement, the prevailing party in any such litigation shall be entitled, in addition to such relief as may be granted, to the actual sum expended for attorneys’ fees and court costs as determined by the court in such litigation. Should any part or provision of this Agreement be deemed invalid or unenforceable, it is the intention of the parties hereto that the remaining portions of the Agreement shall remain in full force and effect. This Agreement shall be binding upon and inure to the benefit of the successors, heirs, assignees, agents and principals of the parties hereto. This Agreement shall not be modified or amended except in writing and signed by the parties hereto and specifically referring to this Agreement. This Agreement shall be construed under the laws of California, United States of America and any dispute arising out of this Agreement shall be adjudicated in a court in the State of California, United States of America. IN WITNESS WHEREOF, this Agreement is executed in the City of San Jose, County of Santa Clara, pursuant to the Laws of the State of California on the date first hereinabove written.   ALCIS HEALTH, INC.     Recipient: 560 S. Winchester Blvd., Fifth Floor, San Jose, CA 95120     Signature _____________________________________     Signature ____________________________________ Name ________________________________________     Name _______________________________________ Title _________________________________________     Title ________________________________________ Date:             , 2006                         , 2006

Exhibit 10.2 DPL INC. 2006 DEFERRED COMPENSATION PLAN FOR EXECUTIVES EFFECTIVE SEPTEMBER 19, 2006 DPL Inc. hereby adopts the DPL Inc. 2006 Deferred Compensation Plan For Executives on the terms and conditions hereinafter set forth, effective as of September 19, 2006. ARTICLE I.  PURPOSE The purpose of this Plan is to provide a select group of management or highly compensated employees of the Company with the opportunity to defer the receipt of base salary and incentive compensation payments which may be earned by such executives under any plan or program which the Committee (as defined below) may designate from time to time, in accordance with the provisions of the Plan. ARTICLE II.  DEFINITIONS For the purposes hereof, the following words and phrases shall have the meanings set forth below, unless their context clearly requires a different meaning: Section 2.1            “Account” means the bookkeeping account maintained by the Company on behalf of each Participant pursuant to Section 3.3 that is comprised of the Base Salary Subaccount and the Incentive Compensation Subaccount to which deferred Base Salary and Incentive Compensation, respectively, are credited. Section 2.2            “Base Salary” means the annual fixed or base compensation payable to a Participant. Section 2.3            “Base Salary Payment Election” means the Election Agreement (or portion thereof) completed by a Participant and filed with the Company that indicates the time of commencement of payment and form of payment of the Participant’s Base Salary that is or will be deferred pursuant to a Deferral Election under the Plan. Section 2.4            “Base Salary Subaccount” means the bookkeeping account maintained by the Company on behalf of each Participant pursuant to Section 3.3 that is credited with Base Salary that is deferred by a Participant. Section 2.5            “Beneficiary” or “Beneficiaries” means the person or persons, including one or more trusts, designated by a Participant in accordance with the Plan to receive payment of the remaining balance of the Participant’s Account in the event of the death of the Participant prior to receipt of the entire amount credited to the Participant’s Account. Section 2.6            “Board” means the Board of Directors of the Company. -------------------------------------------------------------------------------- Section 2.7            “Calendar Year” means each calendar year commencing on or after January 1, 2006. Section 2.8            “Change of Control” means the consummation of any Change of Control of the Company, or its principal subsidiary, The Dayton Power and Light Company (“DP&L”), of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as determined by the Board in its sole discretion; provided that, without limitation, such a Change of Control shall be deemed to have occurred if: (a)           any “Person” (as such term is defined in  Sections 13(d) or 14(d)(2) of the Exchange Act; hereafter, a “Person”) is on the date hereof or becomes the beneficial owner, directly or indirectly, of securities of the Company or DP&L representing (i) 25% or more of the combined voting power of the then outstanding Voting Stock of the Company or DP&L if the acquisition of such beneficial ownership is not approved by the Board prior to the acquisition or (ii) 50% or more of such combined voting power in all other cases; (i)            for purposes of this Section 2.8, the following acquisitions shall not constitute a Change of Control: (A) any acquisition of Voting Stock of the Company or DP&L directly from the Company or DP&L that is approved by a majority of those persons serving as directors of the Company or DP&L on the date of this Plan (the “Original Directors”) or their Successors (as defined below), (B) any acquisition of Voting Stock of the Company or DP&L by the Company or any Subsidiary, and (C) any acquisition of Voting Stock of the Company or DP&L by the trustee or other fiduciary holding securities under any employee benefit plan (or related trust) sponsored or maintained by DPL or any Subsidiary (the term “Successors” shall mean those directors whose election or nomination for election by shareholders has been approved by the vote of at least two-thirds of the Original Directors and previously qualified Successors serving as directors of the Company or DP&L, as the case may be, at the time of such election or nomination for election); (ii)           if any Person is or becomes the beneficial owner of 25% or more of combined voting power of the then-outstanding Voting Stock of the Company or DP&L as a result of a transaction described in clause (A) of Section 2.8(a)(i) above and such Person thereafter becomes the beneficial owner of any additional shares of Voting Stock of the Company or DP&L representing 1% or more of the then-outstanding Voting Stock of the Company or DP&L, other than in an acquisition directly from the Company or DP&L that is approved by a majority of the Original Directors or their Successors 2 -------------------------------------------------------------------------------- or other than as a result of a stock dividend, stock split or similar transaction effected by the Company or DP&L in which all holders of Voting Stock of the Company or DP&L are treated equally, such subsequent acquisition shall be treated as a Change of Control; (iii)          a Change of Control will not be deemed to have occurred if a Person is or becomes the beneficial owner of 25% or more of the Voting Stock of the Company or DP&L as a result of a reduction in the number of shares of Voting Stock of the Company or DP&L outstanding pursuant to a transaction or series of transactions that is approved by a majority of the Original Directors or their Successors unless and until such Person thereafter becomes the beneficial owner of any additional shares of Voting Stock of the Company or DP&L representing 1% or more of the then-outstanding Voting Stock of the Company or DP&L, other than as a result of a stock dividend, stock split or similar transaction effected by the Company or DP&L in which all holders of Voting Stock are treated equally; and (iv)          if at least a majority of the Original Directors or their Successors determine in good faith that a Person has acquired beneficial ownership of 25% or more of the Voting Stock of the Company or DP&L inadvertently, and such Person divests as promptly as practicable but no later than the date, if any, set by the Original Directors or their Successors a sufficient number of shares so that such Person beneficially owns less than 25% of the Voting Stock of the Company or DP&L, then no Change of Control shall have occurred as a result of such Person’s acquisition; or (b)           the Company or DP&L consummates a merger or consolidation, or consummates a “combination” or “majority share acquisition” in which it is the “acquiring corporation” (as such terms are defined in Ohio Rev. Code § 1701.01 as in effect on December 31, 1990) and in which shareholders of the Company or DP&L, as the case may be, immediately prior to entering into such agreement, will beneficially own, immediately after the effective time of the merger, consolidation, combination or majority share acquisition, securities of the Company or DP&L or any surviving or new corporation, as the case may be, having less than 50% of the “voting power” of DPL or DP&L or any surviving or new corporation, as the case may be, including “voting power” exercisable on a contingent or deferred basis as well as immediately exercisable “voting power”, excluding any merger of DP&L into the Company or of the Company into DP&L; (c)           the Company or DP&L consummates a sale, lease, exchange or other transfer or disposition of all or substantially all of its assets to any Person other than to a wholly owned subsidiary or, in the case of DP&L, to the Company or a wholly owned subsidiary(ies) of the Company; but not 3 -------------------------------------------------------------------------------- including (i) a mortgage or pledge of assets granted in connection with a financing or (ii) a spin-off or sale of assets if the Company continues in existence and its common shares are listed on a national securities exchange, quoted on the automated quotation system of a national securities association or traded in the over-the-counter market; or (d)           the Original Directors and/or their Successors do not constitute a majority of the whole Board or the Board of Directors of DP&L, as the case may be; or (e)           approval by the shareholders of the Company or DP&L of a complete liquidation or dissolution of the Company or DP&L, as the case may be. Section 2.9            “Code” means the Internal Revenue Code of 1986, as amended. Section 2.10         “Committee” means the Compensation Committee of the Board or such other Committee as may be authorized by the Board to administer the Plan. Section 2.11         “Common Stock” means the common stock, par value $0.01 per shares, of the Company. Section 2.12           “Company” means DPL Inc., an Ohio corporation, and any entity that succeeds DPL Inc. by merger, reorganization or otherwise. Section 2.13           “Deferral Election” means the Election Agreement (or portion thereof) completed by a Participant and filed with the Company that indicates the amount of his or her Base Salary and/or Incentive Compensation that is or will be deferred under the Plan for a Deferral Period. Section 2.14           “Deferral Period” means the calendar year that commences after each Election Filing Date. Section 2.15           “Disability” means a Participant’s inability to perform the duties required on a full-time basis for a period of six consecutive months because of physical or mental illness or other physical or mental disability or incapacity. Section 2.16           “Election Agreement” means an agreement in the form that the Company may designate from time to time that is consistent with the terms of the Plan. Section 2.17           “Election Filing Date” means December 31 of the Calendar Year immediately prior to the first day of the Calendar Year for which Base Salary and/or Incentive Compensation would otherwise be earned. Section 2.18           “Eligible Executive” means the Company’s Chief Executive Officer and each other officer of the Company that the Committee determines should be an Eligible Executive hereunder.  Unless otherwise determined by the Committee, an Eligible Executive shall continue as such until Termination of Employment. 4 -------------------------------------------------------------------------------- Section 2.19           “ERISA” means the Employee Retirement Income Security Act of 1974, as amended. Section 2.20           “Hypothetical Investment Fund or Funds” means any investment fund designated by the Company pursuant to Section 3.3. Section 2.21           “Incentive Compensation” means cash incentive compensation payable pursuant to the Company’s Executive Incentive Compensation Plan, effective January 1, 2006. Section 2.22         “Incentive Compensation Payment Election” means the Election Agreement (or portion thereof) completed by a Participant and filed with the Company that indicates the time of commencement of payment and form of payment of the Participant’s Incentive Compensation that is or will be deferred pursuant to a Deferral Election under the Plan. Section 2.23           “Incentive Compensation Subaccount” means the bookkeeping account maintained by the Company on behalf of each Participant pursuant to Section 3.3 that is credited with Incentive Compensation that is deferred by a Participant. Section 2.24           “Incentive Filing Date” means the date six months prior to the end of the performance period with respect to which the Incentive Compensation is earned. Section 2.25         “Key Employee” means a key employee as defined in Section 409A of the Code and Section 416(i) of the Code (without regard to paragraph (5) thereof) of the Company (or a controlled group member). Section 2.26           “Participant” means any Eligible Executive who has at any time made a Deferral Election in accordance with Section 3.2 and who, in conjunction with his or her Beneficiary, has not received a complete distribution of the amount credited to his or her Account. Section 2.27           “Payment Election” means the Base Salary Payment Election and the Incentive Compensation Payment Election. Section 2.28           “Plan” means this deferred compensation plan, which shall be known as the DPL Inc. 2006 Deferred Compensation Plan For Executives.  The Plan is unfunded and is maintained by the Company primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees of the Company. Section 2.29           “Plan Administrator” means the Committee. Section 2.30           “Subsidiary” means a corporation, partnership, joint venture. unincorporated association or other entity in which the Company has a direct or indirect ownership or other equity interest. 5 -------------------------------------------------------------------------------- Section 2.31           “Termination of Employment” means a separation from service as defined under Section 409A of the Code. Section 2.32           “Unforeseeable Emergency” means an event that results in a severe financial hardship to a Participant or Beneficiary resulting from (a) an illness or accident of the Participant or Beneficiary or his or her spouse or dependent (as defined in Section 152(a) of the Code), (b) loss of the Participant’s or Beneficiary’s property due to casualty, or (c) other similar extraordinary circumstances arising as a result of events beyond the control of the Participant or Beneficiary. Section 2.33           “Voting Stock” means securities entitled to vote generally in the election of directors. ARTICLE III.  ELECTION TO DEFER Section 3.1            Eligibility.  An Eligible Executive may make an annual Deferral Election with respect to receipt of all or a specified part of his or her Base Salary and/or Incentive Compensation for any Calendar Year in accordance with Section 3.2.  An Eligible Executive who makes a Deferral Election must also make a Payment Election with respect to the amount deferred in accordance with Section 3.4.  An Eligible Executive’s entitlement to defer shall cease with respect to the Deferral Period following the Deferral Period in which he or she ceases to be an Eligible Executive. Section 3.2            Deferral Elections.  All Deferral Elections, once effective, shall be irrevocable, shall be made on an Election Agreement filed with the Company, and shall comply with the following requirements: (a)           The Deferral Election on the Election Agreement shall specify: (i)            the percentage or the dollar amount of a Participant’s Base Salary and/or Incentive Compensation, and (ii)           in accordance with Section 3.3(b), the investment election with respect to the deemed investment of the Base Salary and/or Incentive Compensation. (b)           The Deferral Election shall be made by, and shall be effective as of, the applicable Election Filing Date; provided, however, that to the extent permitted by Section 409A of the Code, the Company may permit Participants to make a Deferral Election with respect to Incentive Compensation that constitutes “performance-based compensation” (within the meaning of Section 409A(a)(4)(B)(iii) of the Code) at a time later than the Election Filing Date but no later than the Incentive Filing Date, and in such event, the Deferral Election shall be effective as of such Incentive Filing Date.  Notwithstanding the foregoing, an employee who first becomes an Eligible Executive during the course of a Calendar Year, rather than as of the applicable Election Filing Date, shall make such Deferral Election with respect to Base Salary and/or Incentive Compensation within thirty days following the date the employee first becomes 6 -------------------------------------------------------------------------------- an Eligible Executive, and such Deferral Election shall be effective on the date made and, unless the proviso in the first sentence of this Section 3.2(b) applies, shall be effective with regard to Base Salary and/or Incentive Compensation earned during such Calendar Year following the filing of the Election Agreement with the Company as determined pursuant to the pro-ration method permitted under Section 409A of the Code. Section 3.3            Accounts. (a)           Base Salary and Incentive Compensation that a Participant elects to defer shall be credited to the Account on the date the Base Salary or Incentive Compensation would otherwise have been paid to the Participant.  Credits or charges representing income, expenses, gains or losses allocable to the Account which would be applicable if such Account had been invested on a tax deferred basis in the Hypothetical Investment Fund(s) selected by the Participant or the Participant’s Beneficiary as provided in Section 3.3(b) shall also be credited to the Account.  The Company shall also enter on the books of each Participant’s Account debits for any distributions made from the Account. (b)           The Company shall designate a Hypothetical Investment Fund or Funds under this Plan, which may, but need not, include one or more of the investment funds provided under The Dayton Power and Light Company Employee Savings Plan or offered by the trustee thereunder (which shall not include Common Stock).  Any such designation shall be in a writing which may be amended or supplemented from time to time by the Company pursuant to rules adopted by the Company.  Each Participant shall elect a Hypothetical Investment Fund (or, if permitted by rules adopted by the Company, one or more Hypothetical Investment Funds) in which the amount of Base Salary and/or Incentive Bonus that a Participant defers under this Plan shall be deemed invested.  Such an election may be made in accordance with rules and procedures established by the Company.  Any Participant may change his investment election either prospectively or with respect to amounts previously credited to his Account in accordance with procedures specified by the Company.  In the absence of an investment election by a Participant, the company shall select the Hypothetical Investment Fund(s) which shall be applicable to such Participant’s Account. Section 3.4            Initial Payment Elections.  Subject to Section 3.4(d), 3.5, 3.6, 3.7, and 3.8 of this Plan, all Payment Elections shall be irrevocable, shall be made on an Election Agreement filed with the Company and shall comply with the following requirements: (a)           Each Participant shall make a Base Salary Payment Election with respect to Base Salary deferred pursuant to the Deferral Election and a separate Incentive Compensation Payment Election with respect to Incentive Compensation deferred pursuant to the Deferral Election.   7 -------------------------------------------------------------------------------- (b)           Each Base Salary Payment Election and each Incentive Compensation Payment Election shall contain the Participant’s elections regarding the time of the commencement of payment of amounts in his or her Base Salary Subaccount and Incentive Compensation Subaccount, to the extent the Participant does not already have an election regarding the time of the commencement of payment applicable to his or her Base Salary Subaccount or Incentive Compensation Subaccount.  In addition, if the Participant has elected, pursuant to Section 3.4(a)(i)(B), to commence payment in a specified year, the Payment Election(s) for the Deferral Period immediately prior to such specified year shall contain the Participant’s election regarding the time of the commencement of payment of amounts in his or her Base Salary Subaccount and Incentive Compensation Subaccount for that and all future Deferral Periods. (i)            A Participant may elect to commence payment (A) upon the date on which he or she incurs a Termination of Employment for any reason, including, without limitation, by reason of death, retirement, or Disability, or (B) in a specified year that begins at least two years after the date on which the Deferral Election becomes effective. (ii)           Payments made in accordance with the Participant’s elections under Section 3.4(a)(i)(A) shall be paid or commence to be paid on the date of the Termination of Employment.  Payments made in accordance with the Participant’s election under Section 3.4(a)(i)(B) with respect to Base Salary shall be paid or commence to be paid on January 31 of the specified year and payments made in accordance with the Participant’s election under Section 3.4(a)(i)(B) with respect to Incentive Compensation shall be paid or commence to be paid on January 31 of the specified year. (iii)          Notwithstanding the foregoing provisions of this Section 3.4(a), in the event that a Participant elects to commence payments in a specified year, and prior to the date such payment is due to be paid or commence to be paid (as described Section 3.4(a)(ii)) he or she incurs a Termination of Employment, payment of the Participant’s Account shall commence, in the form or forms elected pursuant to Section 3.4(c) and/or (d), on the date of such Termination of Employment. (c)           The Base Salary Payment Election and the Incentive Compensation Payment Election shall also contain the Participant’s elections regarding the form of payment of amounts in his or her Base Salary Subaccount and Incentive Compensation Subaccount, to the extent the Participant does not already have an election regarding the form of payment applicable to his or her Base Salary Subaccount and Incentive Compensation Subaccount.  In addition, if the Participant has elected, pursuant to Section 3.4(b)(i)(B), to commence payment in a specified year, the Payment Election(s) for the Deferral Period immediately prior to such specified year shall contain the Participant’s election 8 -------------------------------------------------------------------------------- regarding form of payment of amounts in his or her Base Salary Subaccount and Incentive Compensation Subaccount for that and all future Deferral Periods. (i)            The Participant may elect to receive amounts in his or her Base Salary Subaccount and Incentive Compensation Subaccount in one of the following forms:  (A) a single, lump sum payment or (B) a number of annual installments over a period of up to twenty years. (ii)           In the event that a Participant’s Base Salary Subaccount or Incentive Compensation Subaccount is payable in annual installments, the amount of each installment shall be equal to the value, as of December 31 of the calendar year immediately prior to the date of the respective installment payment, of the Participant’s Base Salary Subaccount or Incentive Compensation Subaccount, as the case may be, divided by the number of installment payments then remaining in the installment period; (A)          The portion of the Base Salary Subaccount or Incentive Compensation Subaccount subject to such installment payments that remains unpaid from time to time shall continue to be credited with gains, losses, interest and other earnings. (B)           The final installment payment shall include an adjustment for gains, losses, interest and other earnings during the period between the beginning of the calendar year in which the final installment payment is made and the date of such final payment. (d)           The Payment Election(s) shall be made by, and shall be effective as of, the applicable Election Filing Date or Incentive Filing Date, as the case may be.  Except as provided in the following sentence, a Participant may not have more than one Base Salary Payment Election and one Incentive Compensation Payment Election in effect at any one time.  If the Participant has elected, pursuant to Section 3.4(b)(i)(B), to commence payment in a specified year, the Payment Election(s) for the Deferral Period immediately prior to such specified year shall contain the Participant’s election regarding form of payment of amounts in his or her Base Salary Subaccount and/or Incentive Compensation Subaccount for that and all future Deferral Periods. (e)           If the Payment Election(s) are not made by the applicable Election Filing Date or Incentive Filing Date, as the case may be, or are insufficient to be deemed effective as of such date, then a Participant’s Deferral Election shall be null and void. (f)            Notwithstanding the foregoing provisions of this Section 3.4, if the Participant is a Key Employee and to the extent the “short-term deferral” exception under Section 409A of the Code does not apply, then the payment on account of Termination of Employment shall commence as soon as practicable 9 -------------------------------------------------------------------------------- following six months after such Termination of Employment (or, if earlier, the date of death). (g)           The payment of a single, lump-sum amount, or the payment of a number of annual installments as designated by the Participant in the Election Agreement, to a Participant (or his or her Beneficiary) pursuant to this Section 3.4 shall discharge all obligations of the Company to such Participant (or his or her Beneficiary) under the Plan. Section 3.5            Subsequent Payment Elections.  A Participant may make a subsequent Payment Election(s) to change the time of the commencement of payment(s) of his or her Base Salary Subaccount and Incentive Compensation Subaccount, the form of payment of his or her Base Salary Subaccount and Incentive Compensation Subaccount, or both, with respect to an amount previously deferred under a Deferral Election if all of the following requirements are met: (a)           Such subsequent Payment Election(s) may not take effect until at least twelve months after the date on which the subsequent Payment Election is made; (b)           In the case of a subsequent Payment Election(s) related to a payment not described in Section 3.6 or Section 3.8, the first payment under such subsequent Payment Election(s) shall in all cases be deferred for a period of not less than five years from the date such payment would otherwise have been made (or, in the case of installment payments, which are treated as a single payment for purposes of this Section 3.5, five years from the date the first installment payment was scheduled to be paid); and (c)           Any subsequent Payment Election(s) related to a distribution that is to be made at a specified time or pursuant to a fixed schedule pursuant to Section 3.4 must be made not less than twelve months prior to the date the payment was scheduled to be made under the prior Payment Election(s) (or, in the case of installment payments, which are treated as a single payment for purposes of this Section 3.5, twelve months prior to the date the first installment payment was scheduled to be paid). Section 3.6            Death of a Participant.  In the event of the death of a Participant, the remaining amount of the Participant’s Account shall be paid to the Beneficiary or Beneficiaries designated in a writing on a form that the Company may designate from time to time (the “Beneficiary Designation”), in accordance with the Participant’s Payment Election(s), or in accordance with a special payment election filed by the Participant with the Company at the same time as the Participant’s Payment Election(s) under Section 3.4 or Section 3.5 is filed with the Company that is to be operative and override any other payment election under the Participant’s Payment Election(s) in the event of the death of the Participant.  Any special payment election filed by a Participant subsequent to the filing of his or her initial Payment Election(s) under Section 3.4 must meet such additional requirements as the Company determines are appropriate to avoid 10 -------------------------------------------------------------------------------- the inclusion of the amounts subject to such special payment election in the gross income of a Participant or Beneficiary under Section 409A(a)(1) of the Code, including, without limitation, the requirements under Section 3.5.  A Participant’s Beneficiary Designation may be changed at any time prior to his or her death by the execution and delivery of a new Beneficiary Designation.  The Beneficiary Designation on file with the Company that bears the latest date at the time of the Participant’s death shall govern.  In the absence of a Beneficiary Designation or the failure of any Beneficiary to survive the Participant, the amount of the Participant’s Account shall be paid to the Participant’s estate in a lump sum.  In the event of the death of the Beneficiary or Beneficiaries after the death of a Participant, the amount of the Participant’s Account shall be paid to the estate of the last surviving Beneficiary in a lump sum. Section 3.7            Small Payments.  Notwithstanding the foregoing, if at the time of a Participant’s Termination of Employment the Participant’s Account balance is less than $100,000, such Account shall be automatically paid to such Participant in a single, lump-sum payment on the date of such Termination of Employment; provided, however, that if the Participant is a Key Employee and to the extent the “short-term deferral” exception under Section 409A of the Code does not apply, then the payment on account of Termination of Employment shall commence as soon as practicable following six months after such Termination of Employment (or, if earlier, the date of death). Section 3.8            Unforeseeable Emergency.  Notwithstanding the foregoing, in the event of an Unforeseeable Emergency and at the request of a Participant or Beneficiary, accelerated payment shall be made to the Participant or Beneficiary of all or a part of his or her Account.  Payments of amounts as a result of an Unforeseeable Emergency may not exceed the amount necessary to satisfy such Unforeseeable Emergency plus amounts necessary to pay taxes reasonably anticipated as a result of the distribution(s), after taking into account the extent to which the hardship is or may be relieved through reimbursement or compensation by insurance or otherwise by liquidation of the Participant’s assets (to the extent the liquidation of such assets would not itself cause severe financial hardship). Section 3.9              Termination of Participation.  Notwithstanding any other provision of the Plan, a Participant’s active participation in the Plan shall terminate upon a determination by the Committee that the Participant is not a member of a select group of management or highly compensated employees of his or her employer, within the meaning of ERISA. ARTICLE IV.  ADMINISTRATION Section 4.1            Administration. (a)           The Plan shall be administered by the Plan Administrator.  The Plan Administrator shall have discretion to interpret where necessary all provisions of the Plan (including, without limitation, by supplying omissions from, correcting deficiencies in, or resolving inconsistencies or ambiguities in, the 11 -------------------------------------------------------------------------------- language of the Plan), to make factual findings with respect to any issue arising under the Plan, to determine the rights and status under the Plan of Participants or other persons, to resolve questions (including factual questions) or disputes arising under the Plan and to make any determinations with respect to the benefits payable under the Plan and the persons entitled thereto as may be necessary for the purposes of the Plan.  Without limiting the generality of the foregoing, the Plan Administrator is hereby granted the authority (i) to determine whether a particular employee is a Participant, and (ii) to determine if a person is entitled to benefits hereunder and, if so, the amount and duration of such benefits.  The Plan Administrator’s determination of the rights of any person hereunder shall be final and binding on all persons, subject only to the provisions of Sections 4.3, 4.4 and 4.5 hereof. (b)           The Plan Administrator may delegate any of its administrative duties, including, without limitation, duties with respect to the processing, review, investigation, approval and payment of benefits, to a named administrator(s) or an employee of the Company. (c)           It is intended that, to the extent applicable, all Participant elections hereunder will comply with the Section 409A of the Code.  The Plan Administrator is authorized to adopt rules or regulations deemed necessary or appropriate in connection therewith to anticipate and/or comply with the requirements thereof (including any transition rules thereunder). Section 4.2            Regulations.  The Plan Administrator shall promulgate any rules and regulations it deems necessary in order to carry out the purposes of the Plan or to interpret the provisions of the Plan; provided, however, that no rule, regulation or interpretation shall be contrary to the provisions of the Plan or Section 409A of the Code.  The rules, regulations and interpretations made by the Plan Administrator shall, subject only to the provisions of Sections 4.3, 4.4 and 4.5 hereof, be final and binding on all persons. Section 4.3            Claims Procedures. (a)           The Plan Administrator shall determine the rights of any person to any benefit hereunder.  Any person who believes that he or she has not received the benefit to which he or she is entitled under the Plan must file a claim in writing with the Plan Administrator specifying the basis for his or her claim and the facts upon which he or she relies in making such a claim. (b)           The Plan Administrator will notify the claimant of its decision regarding his or her claim within a reasonable period of time, but not later than 90 days following the date on which the claim is filed, unless special circumstances require a longer period for adjudication and the claimant is notified in writing of the reasons for an extension of time prior to the end of the initial 90-day period and the date by which the Plan Administrator expects to make the final decision.  In no event will the Plan Administrator be given an extension for processing the 12 -------------------------------------------------------------------------------- claim beyond 180 days after the date on which the claim is first filed with the Plan Administrator. If such a claim is denied, the Plan Administrator’s notice will be in writing, will be written in a manner calculated to be understood by the claimant and will contain the following information: (i)            The specific reason(s) for the denial; (ii)           A specific reference to the pertinent Plan provision(s) on which the denial is based; (iii)          A description of additional information or material necessary for the claimant to perfect his or her claim, if any, and an explanation of why such information or material is necessary; and (iv)          An explanation of the Plan’s claim review procedure and the applicable time limits under such procedure and a statement as to the claimant’s right to bring a civil action under ERISA after all of the Plan’s review procedures have been satisfied. If additional information is needed, the claimant shall be provided at least 45 days within which to provide the information and any otherwise applicable time period for making a determination shall be suspended during the period the information is being obtained. Within 60 days after receipt of a denial of a claim, the claimant must file with the Plan Administrator, a written request for review of such claim.  If a request for review is not filed within such 60-day period, the claimant shall be deemed to have acquiesced in the original decision of the Plan Administrator on his or her claim.  If a request for review is filed, the Plan Administrator shall conduct a full and fair review of the claim.  The claimant will be provided, upon request and free of charge, reasonable access to and copies of all documents and information relevant to the claim for benefits.  The claimant may submit issues and comments in writing, and the review must take into account all information submitted by the claimant regardless of whether it was reviewed as part of the initial determination.  The decision by the Plan Administrator with respect to the review must be given within 60 days after receipt of the request for review, unless circumstances warrant an extension of time not to exceed an additional 60 days.  If this occurs, written notice of the extension will be furnished to the claimant before the end of the initial 60-day period, indicating the special circumstances requiring the extension and the date by which the Plan Administrator expects to make the final decision.  The decision shall be written in a manner calculated to be understood by the claimant, and it shall include (A)          The specific reason(s) for the denial; (B)           A reference to the specific Plan provision(s) on which the denial is based; 13 -------------------------------------------------------------------------------- (C)           A statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to and copies of all information relevant to the claimant’s claim for benefits; and (D)          A statement describing any voluntary appeal procedures offered by the Plan and a statement of the claimant’s right to bring a civil action under ERISA. (c)           The Plan Administrator’s decision on review shall be, to the extent permitted by applicable law, final and binding on all interested persons. Section 4.4            Arbitration.  After a Participant has exhausted all administrative remedies as provided in Section 4.3, any disputes arising hereunder may, at the election of the Participant, be submitted for non-binding arbitration to an arbitrator appointed under the auspices of the American Arbitration Association (“AAA”) office in Cincinnati, Ohio, or if closer, the AAA office that is located in a U.S. city nearest to the general corporate offices of the Company for resolution under the AAA Employment Dispute Arbitration Rules.  Such arbitration shall be held in such place as the parties and the arbitrator shall mutually agree.  The arbitrator shall apply applicable Federal and state law, including ERISA.  The provisions of ERISA, including, but not limited to, preemption, review of claims, and standards of review, shall be applied by the arbitrator to the same extent as if the matter were proceeding in federal court.  The state law applied shall be the law of the state in which the general corporate offices of the Company are located (Ohio as of the date hereof).  The entire cost of the proceedings, except for the Participant’s attorney’s fees and costs, shall be borne by the Company. Section 4.5            Revocability of Plan Administrator/Employer Action.  Any action taken by the Plan Administrator or the employer with respect to the rights or benefits under the Plan of any person shall be revocable by the Plan Administrator or the employer as to payments not yet made to such person, and acceptance of any benefits under the Plan constitutes acceptance of and agreement to the Plan Administrator’s or the employer’s making any appropriate adjustments in future payments to such person to recover from such person any excess payment or make up any underpayment previously made to him or her. ARTICLE V.  AMENDMENT AND TERMINATION Section 5.1            Amendment. (a)           The Committee may at any time (without the consent of the Participants) amend any or all of the provisions of this Plan, except that no such amendment may adversely affect the amount of any Participant’s accrued benefit as of the date of such amendment, without the prior written consent of the affected Participant.  A proper amendment of this Plan automatically shall effect a corresponding amendment to all Participants’ rights hereunder. 14 -------------------------------------------------------------------------------- (b)           Without limiting the generality of the foregoing, the Committee shall have the authority to adopt an amendment to the Plan that conforms the terms of the Plan to the requirements of Section 409A of the Code at such time as the Company determines is necessary to comply with Section 409A of the Code. Section 5.2            Termination.  The Committee, in its sole discretion, may terminate this Plan at any time and for any reason whatsoever, except that, subject to Subsection (b) hereof, no such termination may adversely affect the amount of any Participant’s accrued benefit as of the date of such termination, without the prior written consent of the affected Participant.  Notwithstanding the preceding sentence, the Compensation Committee, in its sole discretion, may terminate this Plan to the extent and in circumstances described in Prop. Treas. Reg. § 1.409A-3(h)(2)(viii), or any successor provision.  A proper termination of this Plan automatically shall effect a termination of all Participants’ rights and benefits hereunder without further action, to the extent that such Participants have received payment of their balances under the Plan.  Written notice of any termination shall be given to the Participants as soon as practicable after a proper termination. ARTICLE VI.  MISCELLANEOUS Section 6.1            Section 409A of the Code.  It is intended that the Plan (including all amendments thereto) comply with the provisions of Section 409A of the Code, so as to prevent the inclusion in gross income of any retirement benefit accrued hereunder in a taxable year that is prior to the taxable year or years in which such amount would otherwise be actually distributed or made available to the Participants.  It is intended that the Plan shall be administered in a manner that will comply with Section 409A of the Code.  Any Plan provisions that would cause the Plan to fail to satisfy Section 409A of the Code shall have no force and effect unless and until amended to comply with Section 409A of the Code (which amendment may be retroactive to the extent permitted by Section 409A of the Code). Section 6.2            Non-Alienation of Deferred Compensation.  No right or interest under the Plan of any Participant or Beneficiary shall be (a) assignable or transferable in any manner, (b) subject to alienation, anticipation, sale, pledge, encumbrance, attachment, garnishment or other legal process or (c) in any manner liable for or subject to the debts or liabilities of the Participant or Beneficiary.  Notwithstanding the foregoing, to the extent permitted by Section 409A of the Code, the Committee shall honor a judgment, order or decree from a state domestic relations court which requires the payment of part or all of a Participant’s or Beneficiary’s interest under this Plan to an “alternate payee” as defined in Section 414(p) of the Code. Section 6.3            Interest of Participant.  The obligation of the Company under the Plan to make payment of amounts reflected in an Account merely constitutes the unsecured promise of the Company to make payments from its general assets and no Participant or Beneficiary shall have any interest in, or a lien or prior claim upon, any property of the Company or a property interest in his or her Account.  Further, no Participant or Beneficiary shall have any claim whatsoever against any Subsidiary for 15 -------------------------------------------------------------------------------- amounts reflected in an Account.  Nothing in the Plan shall be construed as guaranteeing future employment to Eligible Executives.  It is the intention of the Company that the Plan be unfunded for tax purposes and for purposes of Title I of ERISA.  The Company may, but need not, establish a trust to fund its obligations under the Plan.  In such event, the Company may establish a trust or use an already existing trust, either the Company’s Amended and Restated Master Trust, dated January 1, 2001, or the Company’s Second Amended and Restated Master Trust, dated January 1, 2001 (such new trust or an existing trust, each, a “Master Trust”), and may fund such Master Trust; provided, however, that any funds contained therein shall remain liable for the claims of the Company’s general creditors.  Notwithstanding the above, upon the earlier to occur of (a) a Change of Control or (b) a declaration by the Board that a Change of Control is imminent, the Company shall promptly to the extent it has not previously done so transfer to the trustee of such Master Trust, to be added to the principal thereof, an amount equal to (A) the aggregate amount credited to the Accounts of all of the Participants and Beneficiaries under the Plan, less (B) the surplus, if any, in the Master Trust at such time that is not dedicated to the payment of benefits under any other benefit plan sponsored by the Company. Section 6.4            Claims of Other Persons.  The provisions of the Plan shall in no event be construed as giving any other person, firm or corporation any legal or equitable right as against the Company or any Subsidiary or the officers, employees or directors of the Company or any Subsidiary, except any such rights as are specifically provided for in the Plan or are hereafter created in accordance with the terms and provisions of the Plan. Section 6.5            Severability; Failure to Satisfy Section 409A.  The invalidity and unenforceability of any particular provision of the Plan shall not affect any other provision hereof, and the Plan shall be construed in all respects as if such invalid or unenforceable provision were omitted.  Any provisions that would cause any amount deferred or payable under the Plan to be includible in the gross income of any Participant or Beneficiary under Section 409A(a)(1) of the Code shall have no force and effect unless and until amended to cause such amount to not be so includible (which amendment may be retroactive to the extent permitted by Section 409A of the Code). Section 6.6            Expenses.  The Company shall pay all expenses incurred in the administration and operation of the Plan. Section 6.7            Governing Law.  Except when preempted by federal law, this Plan shall be regulated, construed and administered under the laws of the State of Ohio. Section 6.8            Relationship to Other Plans.  The Plan is intended to serve the purposes of and to be consistent with any incentive compensation plan approved by the Committee for purposes of the Plan. 16 -------------------------------------------------------------------------------- Section 6.9            Headings; Interpretation. (a)           Headings in this Plan are inserted for convenience of reference only and are not to be considered in the construction of the provisions hereof. (b)           Any reference in this Plan to Section 409A of the Code will also include any proposed, temporary or final regulations, or any other guidance, promulgated with respect to such Section 409A by the U.S. Department of Treasury or the Internal Revenue Service. (c)           For purposes of the Plan, the phrase “permitted by Section 409A of the Code,” or words or phrases of similar import, shall mean that the event or circumstance that may occur or exist only if permitted by Section 409A of the Code would not cause an amount deferred or payable under the Plan to be includible in the gross income of a Participant or Beneficiary under Section 409A(a)(1) of the Code.   17 --------------------------------------------------------------------------------

License Amendment L-024-2006/1 WHEREAS, the National Institutes of Health (“NIH”), on behalf of the Public Health Service (“PHS”) and the Department of Health and Human Services (“DHHS”), and NeoPharm, Inc. (“Licensee”) entered into license agreement (L-024-2006/0; the “Agreement”) effective May 30, 2006 under which HHS Ref. E-173-1992/0 corresponding to US. Patent 5,720,720; entitled “Convection-Enhanced Drug Delivery,” was licensed nonexclusively to be used for the administration of therapeutics to the central nervous system, including IL-13PE:38QQR compounds and compositions. WHEREAS, Licensee desires to broaden the nonexclusive field of use granted in order for the Agreement to be in parity with Licensee’s other executed or pending agreements with PHS that are not limited by indication. WHEREAS, Licensee desires to obtain the rights to sublicense the Licensed Patent Rights in conjunction with the sublicensing of a therapeutic for administration using the Licensed Process. WHEREAS, Licensee desires to extend their benchmarks to better conform to commercialization expectations. NOW THEREFORE, in consideration of the foregoing, PHS and Licensee hereby agree to the following provisions and to amend the Agreement as follows: All bolded items defined in Agreement remain in effect under this License Amendment. Paragraph 1.02 is replaced in its entirety with the following: 1.02   By assignment of rights from PHS employees and other inventors, DHHS, on behalf of the United States Government, owns intellectual property rights claimed in any United States and/or foreign patent applications or patents corresponding to the assigned inventions.  All rights, titles and interests in the Licensed Patent Rights are owned by DHHS by assignment of rights from the inventors of the Licensed Patent Rights.  DHHS also owns any tangible embodiments of these inventions actually reduced to practice by PHS.       Paragraph 2.08 is replaced in its entirety with the following:   2.08   “Drug” means any pharmaceutical or pharmaceutical composition developed or licensed by Licensee for treating Cancer.       Paragraph 2.10 is replaced in its entirety with the following:       2.10   “Net Sales” means the total gross receipt for sales of Drug administered or recommended for administration using the Licensed Process for the treatment of cancer by or on behalf of Licensee and from making available to others without sale orother dispositions, whether invoiced or not, less returns and allowances, packing costs, insurance costs,   --------------------------------------------------------------------------------     freight out, taxes or excise duties imposed on the transaction (if separately invoiced), and wholesaler and cash discounts in amounts customarily in the trade to the extent actually granted.  No deductions shall be made for commissions paid to individuals, whether they are with independent sales agencies or regularly employed by Licensee, or sublicensees, and on its payroll, or for the cost of collections.       Article 4 — Sublicensing is replaced in its entirety with the following:       4.01   Upon written approval by PHS, which approval shall not be unreasonably withheld, Licensee may enter into sublicensing agreements under the Licensed Patent Rights provided that said sublicense is also in conjunction with the sublicense of Drug.       4.02   Licensee agrees to pay PHS additional sublicensing royalties of One and One-half percent (1.5%) but not to exceed Two-Hundred Thousand US. Dollars (USD$200,000), on the fair market value of any up-front consideration received for granting each sublicense within sixty (60) days of the execution of each sublicense.       4.03   Licensee agrees that any sublicenses granted by it shall provide that the obligations to PHS under Paragraphs 5.01, 8.01, 10.01-10.02, 12.05 and 13.07-13.08 of this Agreement shall be binding on the sublicensee as if it were a party to this Agreement. Licensee further agrees to attach copies of these Paragraphs to all sublicense agreements.       4.04   Any sublicenses granted by Licensee shall provide for the termination of the sublicense, or the conversion to a license directly between such sublicensees and PHS, at the option of the sublicensee, upon termination of this Agreement under Article 13. Such conversion is subject to PHS approval and contingent upon acceptance by the sublicensee of the remaining provisions of this Agreement.       4.05   Licensee agrees to forward to PHS a copy of each fully executed sublicense agreement postmarked within thirty (30) days of the execution of such agreement. To the extent permitted by law, PHS agrees to maintain each such sublicense agreement in confidence.       4.06   Licensee agrees to forward semi-annually to PHS a copy of progress reports pursuant under Article 9 received by Licensee from its sublicensees during the preceding half-year period as shall be pertinent to a royalty accounting to PHS by Licensee for activities under the sublicense.       Paragraph 6.07 is replaced in its entirety with the following:   6.07   On sales of Drug administered or recommended for administration using a Licensed Process by Licensee or its sublicensees made in other than an arm’s-length transaction, the value of the Net Sales attributed under this Article 6 to such a transaction shall be that which would have been received in all arm’s-length transaction, based on sales of like quantity and quality products on or about the time of such transaction.  This provision applies only to commercial sales and excludes all charitable distributions of Drug.   2 --------------------------------------------------------------------------------   Paragraph 9.02 is replaced in its entirety with the following:   9.02   Licensee shall provide written annual reports on its product development progress or efforts to commercialize under the Commercial Development Plan for each of the Licensed Fields of Usewithin sixty (60) days after December 31 or each calendar year.  These progress reports shall include, but not be limited to: progress on research and development, status of applications for regulatory approvals, manufacturing, sublicensing, marketing, importing, and sales during the preceding calendar year, as well as, plans for the present calendar year.  PHS also encourages these reports to include information on any of Licensee’s public service activities that relate to the Licensed Patent Rights.  If reported progress differs from that projected in the Commercial Development Plan and Benchmarks, Licensee shall explain the reasons for these differences.  In the annual report, Licensee may propose amendments to the Commercial Development Plan, acceptance of which by PHS may not be denied unreasonably.  Licensee agrees to provide any additional information reasonably required by PHS to evaluate Licensee’s performance under this Agreement.  Licensee may amend the Benchmarks at any time upon written approval by PHS. PHS shall not unreasonably withhold approval of any request of Licensee to extend the time periods of this schedule if the request is supported by a reasonable showing by Licensee of diligence in its performance under the Commercial Development Plan and toward bringing the Licensed Products to the point of Practical Application as defined in 37 CFR §404.3(d).  Licensee shall amend the Commercial Development Plan and Benchmarks at the request of PHS to address any Licensed Fields of Use not specifically addressed in the plan originally submitted.       Paragraphs 12.05 and 12.06 are replaced in its entirety with the following:       12.05   Licensee shall indemnify and hold PHS, its employees, students, fellows, agents, and consultants harmless from and against all liability, demands, damages, expenses, and losses, including but not limited to death, personal injury, illness, or property damage in connection with or arising out of:         (a) the use by or on behalf of Licensee, its sublicensees, directors, employees, or third parties of any Licensed Patent Rights; or   (b) the design, manufacture, distribution, or use of any Licensed Products, Licensed Processes or materials by Licensee, or other products or processes developed in connection with or arising out of the Licensed Patent Rights.       12.06   Licensee agrees to maintain a liability insurance program consistent with sound business practice.       Paragraph.13. 08 is replaced in its entirety with the following:       13.08   Within ninety (90) days of expiration or termination of this Agreement under this Article 13, a final report shall be submitted by Licensee. Any royalty payments, including those incurred but not yet paid (such as the full minimum annual royalty), and those related to patent expense, due to PHS shall become immediately due and payable upon termination or expiration.  If terminated under this Article 13, sublicensees may elect to convert their sublicenses to direct licenses with PHS pursuant to Paragraph 4.3.  Unless otherwise specifically provided for under this Agreement, upon termination or expiration of this Agreement, Licensee shall return all Licensed Products or other materials included within the Licensed Patent Rights to PHS or provide PHS with certification of the destruction thereof.   3 -------------------------------------------------------------------------------- Appendix B — “Licensed Fields of Use and Territory” is replaced in its entirety with the following: Licensed Fields of Use: Nonexclusive for using the licensed Process to administer Drug to treat cancer. Licensed Territory: The United States of America including its Territories, Commonwealths and Possessions. Appendix E — “Benchmarks and Performance” is replaced in its entirety with the following: Licensee agrees to the following Benchmarks for its performance under this Agreement and within thirty (30) days of achieving a Benchmark, agrees to notify PHS that the Benchmark has been achieved. Pursuant to these Benchmarks, the efforts of a sublicensee shall be considered the efforts of Licensee . ·                   By September 30, 2007, Licensee will submit an application for approval by the U.S. Food and Drug Administration of the use of convection enhanced delivery for administering Drug in the treatment of cancer. ·                   By April 30, 2008, Licensee will achieve a First Commercial Sale of Drug administered by or recommended for administration by convection enhanced delivery. In all other respects, the Agreement effective May 30, 2006 remains in full force and effect. The effective date of this License Amendment shall be the date when the last party hereto signs. SIGNATURES BEGIN ON NEXT PAGE 4 -------------------------------------------------------------------------------- SIGNATURE PAGE For PHS: /s/ Steven M. Ferguson   08/11/06   Steven M. Ferguson Date Director, Division of TechnologyDevelopment and Transfer Office of Technology Transfer   National Institutes of Health     Mailing Address for Agreement and License Amendment notices: Chief, Monitoring & Enforcement Branch, DTDT Office of Technology Transfer National Institutes of Health 6011 Executive Boulevard, Suite 325 Rockville, Maryland 20852-3804 U.S.A For Licensee (Upon, information and belief, the undersigned expressly certifies or affirms that the contents of any statements of Licensee made or referred to in this document are truthful and accurate.): By: /s/ Guillermo Herrera   08/21/06   Signature of Authorized Official Date   Guillermo Herrera     Printed Name       CEO, President     Title     I.              Official and Mailing Address for Agreement and License Amendment notices: NeoPharm 1850 Lakeside Drive Waukegan, IL  60085 II.                                     Official and Mailing Address for Financial notices (Licensee’s contact person for royalty payments) 5 --------------------------------------------------------------------------------   Timothy P. Walbert         Name       Executive Vice President       Title                     Email Address: twalbert@neopharm.com Phone: (847)406-1710 Fax: (847) 406-1734   Any false or misleading statements made, presented, or submitted to the Government, including any relevant omissions, under this License Amendment and during the course of negotiations of this License Amendment are subject to all applicable civil and criminal statutes including Federal statutes 31 U.S.C. §§3801-3812 (civil liability) and 18 U.S.C. §1001 (criminal liability including fine(s) or imprisonment). 6 --------------------------------------------------------------------------------

Exhibit 10.18.2   Old Dominion Freight Line, Inc. Non-Executive Director Compensation Structure Effective Date - July 31, 2006     Board of Directors Audit Committee Compensation Committee Governance and Nomination Committee Annual Retainer, Chair N/A $10,000 $7,500 $7,500 Annual Retainer, Member $27,500 $5,000 $3,000 $3,000 Meeting Fee * $1,500 $1,500 $1,500 $1,500   * Compensation is not paid for telephonic meetings.

  Exhibit 10.10.4 AMENDMENT NO. 4 TO TRINITY INDUSTRIES, INC. 1998 STOCK OPTION AND INCENTIVE PLAN      WHEREAS, TRINITY INDUSTRIES, INC. (the “Company”) adopted the TRINITY INDUSTRIES, INC. 1998 STOCK OPTION AND INCENTIVE PLAN (the “Plan”); and      WHEREAS, pursuant to Section 22 of the Plan, the Board reserved the right to amend any provision of the Plan; and      WHEREAS, the Board has determined that it is appropriate to amend Section 25 of the Plan to allow greater flexibility for Participants who are subject to tax withholding obligations related to Awards under the Plan;      NOW, THEREFORE, the Plan is amended as follows: I.      Section 25 of the Plan is amended by adding a new paragraph (c) and (d) to read as follows:      “(c) With respect to any Award, other than a Stock Option award, unless the Committee shall otherwise determine, the recipient of the Award may elect to provide for withholding of federal, state and local taxes and federal payroll taxes at a rate up to the maximum marginal rate for such taxes, in addition to withholding for such taxes required under Section 25(a) above. Any such additional tax withheld at the election of the recipient shall be satisfied either (a) by payment by the recipient to the Company of an amount of such withholding obligation in cash; (b) in the case of cash Awards, through retention by the Company of cash equal to the amount of the additional withholding requested; or (c) in the case of Awards deliverable in Shares, through retention by the Company of a number of Shares having a Fair Market Value equal to the amount of the additional withholding requested. The cash payment or amount equal to the Fair Market Value of the Shares so withheld, as the case may be, shall be remitted by the Company to the appropriate taxing authorities. The Committee may determine from time to time the time and manner in which the recipient may elect to satisfy such additional withholding requested by either the Cash Method or the Share Retention Method.”      “(d) With respect to Stock Option awards, unless the Committee shall otherwise determine, the Participant may elect to provide for withholding of federal, state and local taxes and federal payroll taxes beyond the withholding for such taxes as required under Section 25(a) above up to the maximum marginal rate for such taxes. Any such additional tax withheld shall be satisfied, at the   --------------------------------------------------------------------------------   election of the recipient of the Stock Option award, either (a) by payment by the recipient to the Company of an amount of such withholding in cash or (b) through delivery to the Company of a number of Shares that have been owned for at least six months having a Fair Market Value equal to the amount of the additional withholding requested. The cash payment or amount equal to the Fair Market Value of the Shares so withheld, as the case may be, shall be remitted by the Company to the appropriate taxing authorities. The Committee may determine from time to time the time and manner in which the recipient may elect to satisfy any such additional withholding by the delivery of either cash or shares. Notwithstanding the foregoing, in the event a recipient of a Stock Option award elects to provide for additional withholding, as described above, and the Committee determines, in its sole discretion, that such additional withholding would result in (i) a modification of the recipient’s Stock Option award and (ii) a violation of Section 409A of the Code, and as a result, such Stock Option award would be subject to the taxes described in Section 409A(a)(1) of the Code, no additional withholding shall be permitted with respect to such Stock Option award. II.      In all other respects, the terms of the Plan are ratified and confirmed.      Executed this                                         day of                                        , 2005.               TRINITY INDUSTRIES, INC.               By:                   Name:                   Title:                

Exhibit 10.1   MORNINGSTAR, INC. 2004   STOCK INCENTIVE PLAN   FORM OF RESTRICTED STOCK UNIT AWARD AGREEMENT   THIS RESTRICTED STOCK UNIT AWARD AGREEMENT (including Schedule 1 hereto, the “Award Agreement”) is made under the Morningstar, Inc. 2004 Stock Incentive Plan (the “Plan”) as of the Grant Date specified in Schedule 1 to this Award Agreement (“Schedule 1”). Any term capitalized but not defined in this Award Agreement will have the meaning set forth in the Plan.   BETWEEN:   (1)           MORNINGSTAR, INC., an Illinois corporation (the “Company”); and   (2)           The Participant identified in Schedule 1.   1              GRANT OF RESTRICTED STOCK UNITS   1.1           IN ACCORDANCE WITH THE TERMS OF THE PLAN AND SUBJECT TO THE TERMS AND CONDITIONS OF THIS AWARD AGREEMENT, THE COMPANY HEREBY GRANTS TO THE PARTICIPANT THE NUMBER OF RESTRICTED STOCK UNITS SPECIFIED IN SCHEDULE 1.   1.2           EACH RESTRICTED STOCK UNIT IS A NOTIONAL AMOUNT THAT REPRESENTS ONE UNVESTED SHARE OF COMMON STOCK, NO PAR VALUE, OF THE COMPANY (A “SHARE”). EACH RESTRICTED STOCK UNIT CONSTITUTES THE RIGHT, SUBJECT TO THE TERMS AND CONDITIONS OF THE PLAN AND THIS AWARD AGREEMENT, TO DISTRIBUTION OF A SHARE IF AND WHEN THE RESTRICTED STOCK UNIT VESTS.   1.3           THE PARTICIPANT HEREBY AGREES TO BE BOUND BY THE TERMS OF THIS AWARD AGREEMENT AND THE PLAN.   1.4           FURTHER DETAILS OF THE RESTRICTED STOCK UNITS GRANTED TO THE PARTICIPANT UNDER THE TERMS OF THIS AWARD AGREEMENT ARE SET FORTH IN SCHEDULE 1.   1.5           IN THE CASE OF CONFLICT BETWEEN THE TERMS CONTAINED IN THIS AWARD AGREEMENT AND THOSE CONTAINED IN THE PLAN, THE PLAN SHALL PREVAIL, UNLESS AND TO THE EXTENT OTHERWISE EXPRESSLY STATED IN THIS AWARD AGREEMENT.   2              RIGHTS AS A SHAREHOLDER   2.1           UNLESS AND UNTIL A RESTRICTED STOCK UNIT HAS VESTED AND THE SHARE UNDERLYING IT HAS BEEN DISTRIBUTED TO THE PARTICIPANT, THE PARTICIPANT WILL NOT BE ENTITLED TO VOTE THAT SHARE.   --------------------------------------------------------------------------------   2.2           IF THE COMPANY DECLARES A CASH DIVIDEND ON THE SHARES, THEN, ON THE PAYMENT DATE OF THE DIVIDEND, THE PARTICIPANT WILL BE CREDITED WITH DIVIDEND EQUIVALENTS EQUAL TO THE AMOUNT OF CASH DIVIDEND PER SHARE MULTIPLIED BY THE NUMBER OF RESTRICTED STOCK UNITS CREDITED TO THE PARTICIPANT THROUGH THE RECORD DATE FOR THE DIVIDEND. THE DIVIDEND EQUIVALENTS CREDITED TO THE PARTICIPANT UNDER THE PRECEDING SENTENCE WILL BE DEEMED TO BE REINVESTED IN ADDITIONAL RESTRICTED STOCK UNITS AND CREDITED TO THE PARTICIPANT’S RESTRICTED STOCK UNIT ACCOUNT. THE RESTRICTED STOCK UNITS CREDITED AS A RESULT OF SUCH DIVIDEND EQUIVALENTS WILL BE SUBJECT TO THE SAME TERMS REGARDING VESTING AND FORFEITURE AS THE PARTICIPANT’S RESTRICTED STOCK UNITS AWARDED HEREUNDER, AND, SUBJECT TO THE FOLLOWING SENTENCE, WILL BE DISTRIBUTED IN SHARES AT THE SAME TIME AND IN THE SAME PROPORTION THAT THE SHARES ASSOCIATED WITH THE PARTICIPANT’S RESTRICTED STOCK UNITS ARE DELIVERED (OR FORFEITED AT THE TIME THAT THE PARTICIPANT’S RESTRICTED STOCK UNITS ARE FORFEITED). FRACTIONAL SHARES MAY BE SETTLED IN CASH OR OTHERWISE, INCLUDING BY ROUNDING UP OR DOWN TO THE NEAREST WHOLE NUMBER, AS THE COMMITTEE DETERMINES.   3              TERMINATION OF SERVICE AND OTHER CHANGES IN SERVICE STATUS   3.1           IF THE PARTICIPANT’S SERVICE (AS DEFINED IN SECTION 3.3) TERMINATES FOR ANY REASON OTHER THAN DISABILITY OR DEATH, THE PARTICIPANT WILL FORFEIT THE RIGHT TO RECEIVE SHARES UNDERLYING ANY RESTRICTED STOCK UNITS THAT HAVE NOT VESTED AT THAT TIME. NOTWITHSTANDING ANYTHING IN THE PLAN TO THE CONTRARY, FOR PURPOSES OF THIS AWARD AGREEMENT, “DISABILITY” SHALL MEAN THE CONDITION OF BEING “DISABLED” AS PROVIDED IN CODE SECTION 409A(A)(2)(C) OR A DETERMINATION OF THE UNITED STATES SOCIAL SECURITY ADMINISTRATION WITH RESPECT TO THE EXISTENCE OF A DISABILITY.   3.2           IF THE PARTICIPANT’S SERVICE TERMINATES ON ACCOUNT OF THE DISABILITY OR DEATH OF THE PARTICIPANT, THE PARTICIPANT OR THE PARTICIPANT’S BENEFICIARY UNDER THE PLAN WILL BE ENTITLED TO RECEIVE THE SHARES UNDERLYING ALL OF THE RESTRICTED STOCK UNITS AWARDED HEREUNDER, INCLUDING THOSE THAT HAVE NOT THEN VESTED.   3.3           FOR PURPOSES OF THIS AWARD AGREEMENT “SERVICE” MEANS THE PROVISION OF SERVICES TO THE COMPANY OR ITS AFFILIATES IN THE CAPACITY OF AN EMPLOYEE OR A DIRECTOR BUT NOT AS A CONSULTANT. FOR PURPOSES OF THIS AWARD AGREEMENT, THE TRANSFER OF AN EMPLOYEE FROM THE COMPANY TO AN AFFILIATE, FROM AN AFFILIATE TO THE COMPANY OR FROM AN AFFILIATE TO ANOTHER AFFILIATE SHALL NOT BE A TERMINATION OF SERVICE. HOWEVER, IF THE AFFILIATE FOR WHICH AN EMPLOYEE IS PROVIDING SERVICES CEASES TO BE AN AFFILIATE OF THE COMPANY DUE TO A SALE, TRANSFER OR OTHER REASON, AND THE EMPLOYEE CEASES TO PERFORM SERVICES FOR THE COMPANY OR ANY AFFILIATE, THE EMPLOYEE SHALL INCUR A TERMINATION OF SERVICE.   3.4           NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS AWARD AGREEMENT, THE VESTING PERIODS DESCRIBED IN SCHEDULE 1 WILL BE SUSPENDED WHILE THE PARTICIPANT IS ON UNPAID LEAVE OF ABSENCE OR SERVING AS A PART-TIME EMPLOYEE AND THE VESTING DATES WILL BE EXTENDED BY THE LENGTH OF TIME THAT THE PARTICIPANT   2 --------------------------------------------------------------------------------   IS ON UNPAID LEAVE OF ABSENCE OR SERVING AS A PART-TIME EMPLOYEE, AS THE CASE MAY BE. THE COMPANY SHALL HAVE THE SOLE DISCRETION TO DETERMINE WHETHER A PARTICIPANT IS ON UNPAID LEAVE OF ABSENCE OR SERVING AS A PART-TIME EMPLOYEE.   4              ELECTION TO DEFER   4.1           THE PARTICIPANT MAY ELECT TO DEFER DELIVERY OF ANY OR ALL SHARES DUE TO HIM OR HER UNDER THIS AWARD AGREEMENT TO A DATE BEYOND THE APPLICABLE VESTING DATE, BY MAKING A TIMELY DEFERRAL ELECTION. IN HIS OR HER ELECTION TO DEFER, THE PARTICIPANT MAY CHOOSE TO DEFER TO A PARTICULAR ANNIVERSARY OF THE GRANT DATE, BEGINNING WITH THE FOURTH AND ENDING WITH THE TENTH ANNIVERSARY OF THE GRANT DATE. IF A PARTICIPANT’S SERVICE TERMINATES FOR ANY REASON BEFORE THE ANNIVERSARY OF THE GRANT DATE SPECIFIED IN A DEFERRAL ELECTION, HE OR SHE WILL BE DEEMED TO HAVE ELECTED TO DEFER DELIVERY TO THE NEXT OCCURRING ANNIVERSARY OF THE GRANT DATE FOLLOWING HIS OR HER TERMINATION OF SERVICE OR, IF THE PARTICIPANT IS THEN AN EXECUTIVE OFFICER OF THE COMPANY, IF LATER, FOLLOWING THE EXPIRATION OF THE SIX-MONTH PERIOD FOLLOWING HIS OR HER TERMINATION OF SERVICE. IF THE PARTICIPANT DIES PRIOR TO A TERMINATION OF SERVICE, ANY SHARES REMAINING TO BE PAID UNDER THIS AWARD AGREEMENT WILL BE PAID TO HIS OR HER BENEFICIARY DESIGNATED UNDER THE PLAN AS SOON AS PRACTICABLE, REGARDLESS OF ANY OUTSTANDING ELECTION TO DEFER. THE BOARD OR THE COMMITTEE MAY CAUSE SHARES SUBJECT TO AN OUTSTANDING ELECTION TO DEFER TO BE DELIVERED IN ADVANCE OF THE DATE CONTEMPLATED BY SUCH ELECTION TO DEFER IN CONNECTION WITH A CHANGE IN CONTROL EVENT (AS DEFINED IN REGULATIONS PROMULGATED UNDER SECTION 409A OF THE CODE AND AS PERMITTED IN SUCH REGULATIONS IN CONNECTION WITH A PLAN TERMINATION) OR IN CONNECTION WITH ANY OTHER EVENT FOR WHICH THE BOARD OR THE COMMITTEE IS PERMITTED, AT THE TIME OF SUCH EVENT, TO PROVIDE FOR ACCELERATED DISTRIBUTIONS UNDER SECTION 409A OF THE CODE. AN ELECTION TO DEFER WILL BE CONSIDERED TIMELY ONLY IF IT IS FILED WITHIN THE FIRST 30 DAYS OF THE GRANT DATE. NOTWITHSTANDING ANYTHING IN THIS SECTION 4 TO THE CONTRARY, AN ELECTION TO DEFER HEREUNDER SHALL COMPLY WITH THE REQUIREMENTS OF SECTION 409A OF THE CODE OR IT WILL NOT BE A VALID ELECTION.   5              TIMING AND FORM OF PAYMENT   5.1           EXCEPT AS OTHERWISE PROVIDED HEREIN, ONCE A RESTRICTED STOCK UNIT VESTS, THE PARTICIPANT WILL BE ENTITLED TO RECEIVE A SHARE IN ITS PLACE. DELIVERY OF THE SHARE WILL BE MADE AS SOON AS ADMINISTRATIVELY FEASIBLE AFTER ITS ASSOCIATED RESTRICTED STOCK UNIT VESTS, BUT NO LATER THAN 2½ MONTHS FROM THE END OF THE CALENDAR YEAR IN WHICH SUCH VESTING OCCURS, OR AT A LATER DATE ELECTED BY THE PARTICIPANT UNDER SECTION 4.   3 --------------------------------------------------------------------------------   6              WITHHOLDING OBLIGATIONS   6.1           WITHOUT LIMITING THE COMPANY’S POWER OR RIGHTS PURSUANT TO ARTICLE 16 OF THE PLAN AND SUBJECT TO SECTION 6.2, AMOUNTS REQUIRED BY TAX LAW OR REGULATION TO BE WITHHELD BY THE COMPANY WITH RESPECT TO ANY TAXABLE EVENT ARISING UNDER THIS AWARD AGREEMENT WILL BE SATISFIED BY HAVING SHARES WITHHELD IN ACCORDANCE WITH THE FIRST SENTENCE OF SECTION 16.2 OF THE PLAN. IN ADDITION, THE PARTICIPANT MAY ELECT TO DELIVER TO THE COMPANY THE NECESSARY FUNDS TO SATISFY THE WITHHOLDING OBLIGATION, IN WHICH CASE THERE WILL BE NO REDUCTION IN THE SHARES OTHERWISE DISTRIBUTABLE TO THE PARTICIPANT.   6.2           WITHOUT LIMITING THE COMPANY’S POWER OR RIGHTS PURSUANT TO ARTICLE 16 OF THE PLAN, AMOUNTS REQUIRED BY TAX LAW OR REGULATION TO BE WITHHELD BY THE COMPANY WITH RESPECT TO THE VESTING OF A RESTRICTED STOCK UNIT SUBJECT TO AN EFFECTIVE DEFERRAL ELECTION WILL BE SATISFIED BY HAVING THE PARTICIPANT DELIVER TO THE COMPANY THE NECESSARY FUNDS TO SATISFY THE WITHHOLDING OBLIGATION, IT BEING UNDERSTOOD THAT TO THE EXTENT PERMITTED BY LAW, THE COMPANY MAY ELECT TO WITHHOLD SUCH AMOUNTS FROM AMOUNTS IT WOULD OTHERWISE DISTRIBUTE TO THE PARTICIPANT.   7              NOTICES   7.1           ANY NOTICE OR OTHER COMMUNICATION REQUIRED OR PERMITTED UNDER THIS AWARD AGREEMENT MUST BE IN WRITING AND MUST BE DELIVERED PERSONALLY, SENT BY CERTIFIED, REGISTERED OR EXPRESS MAIL, OR SENT BY OVERNIGHT COURIER, AT THE SENDER’S EXPENSE. NOTICE WILL BE DEEMED GIVEN WHEN DELIVERED PERSONALLY OR, IF MAILED, THREE DAYS AFTER THE DATE OF DEPOSIT OR, IF SENT BY OVERNIGHT COURIER, ON THE REGULAR BUSINESS DAY FOLLOWING THE DATE SENT. NOTICE TO THE COMPANY SHOULD BE SENT TO MORNINGSTAR, INC., 225 WEST WACKER DRIVE, CHICAGO, ILLINOIS, 60606, ATTENTION: GENERAL COUNSEL. NOTICE TO THE PARTICIPANT SHOULD BE SENT TO THE ADDRESS OF THE PARTICIPANT CONTAINED IN THE COMPANY’S RECORDS. EITHER PARTY MAY CHANGE THE PERSON AND/OR ADDRESS TO WHOM THE OTHER PARTY MUST GIVE NOTICE BY GIVING SUCH OTHER PARTY WRITTEN NOTICE OF SUCH CHANGE, IN ACCORDANCE WITH THE PROCEDURES DESCRIBED ABOVE.   8              CONSTRUCTION   8.1           THE RESTRICTED STOCK UNITS GRANTED HEREUNDER ARE SUBJECT TO ANY RULES AND REGULATIONS PROMULGATED BY THE COMMITTEE PURSUANT TO THE PLAN, NOW OR HEREAFTER IN EFFECT.   8.2           THE COMPANY AND THE PARTICIPANT MAY AMEND THIS AWARD AGREEMENT ONLY BY A WRITTEN INSTRUMENT SIGNED BY BOTH PARTIES, PROVIDED, THAT THE COMPANY MAY AMEND THIS AWARD AGREEMENT WITHOUT FURTHER ACTION BY THE PARTICIPANT IF (I) SUCH AMENDMENT IS DEEMED BY THE COMPANY TO BE ADVISABLE   4 --------------------------------------------------------------------------------   OR NECESSARY TO COMPLY WITH APPLICABLE LAW, RULE, OR, REGULATION, INCLUDING SECTION 409A OF THE CODE, OR (II) IF SUCH AMENDMENT IS NOT TO THE DETRIMENT OF THE PARTICIPANT.   8.3           THE PARTIES MAY EXECUTE THIS AWARD AGREEMENT IN ONE OR MORE COUNTERPARTS, ALL OF WHICH TOGETHER SHALL CONSTITUTE BUT ONE AWARD AGREEMENT.   IN WITNESS whereof the parties have executed this Restricted Stock Unit Award Agreement as of the Grant Date specified in Schedule 1.     Participant       (Participant’s signature)           (Print name)           Morningstar, Inc.       By:           Its:         PLEASE RETURN BY: «DATE»     5 --------------------------------------------------------------------------------   SCHEDULE 1   DETAILS OF RESTRICTED STOCK UNIT GRANTED TO THE PARTICIPANT   Participant’s name:   «First» «Name»     Grant Date:   «Grant_date»     Number of Restricted Stock Units:   «Total_RSU_Grant»     Vesting of Restricted Stock Units:   Subject to, and except as otherwise provided by, the Award Agreement, including Sections 3.2 and 3.4 thereof, the Restricted Stock Units subject to the Award Agreement vest in installments, with each installment becoming vested on the “Vesting Date” shown below, if the Participant has remained in continuous Service until that Vesting Date. Notwithstanding the foregoing, the Board or the Committee may cause the Restricted Stock Units granted hereby to vest at an earlier date pursuant to its authority under the Plan.               Number of Restricted Stock Units   Vesting Date     «Year1Vest»   «VestDateY1»     «Year2Vest»   «VestDateY2»     «Year3Vest»   «VestDateY3»     «Year4Vest»   «VestDateY4»   6 --------------------------------------------------------------------------------

Exhibit 10.1 Letter of Intent: FPA-CZ Executive Clinic (name subject to change) Joint Venture by US Flagship Patient Advocates and China Beijing Chengzhi Health Consultation Joint Venture Partner A: Flagship Patient Advocates or "FPA" Partner B: Beijing Chengzhi Health Consulting INC, "CZ" Name of the Joint Venture Company:  FPA-CZ Executive Clinic Background: Beijing Chengzhi Health Consulting INC had an initial investment of 8 million RMB (from four partners). The current CZ consists of 19 physicians, 16 nurses, 23 in management, marketing and sales. The current value of the assets of CZ is close to its initial investment and the actual value will be known after the completion of inventory and evaluation process. In the year 2005, there were 5,932 check ups, the total revenue was 1,470,000 RMB; net profit: -4,539,515 RMB). For the first two quarters of 2006, the number of check ups is _____, total revenue is _______ RMB, net profit: ________ RMB). Chairman: Dong Xu Operation problems: CZ initially targeted the middle- and upper-class clients in the market, the clinic itself has not completely built up its overall healthcare platform yet - in 2005, its main business consisted of only check ups without other supporting health services. Personal check ups for the wealthy made up only 2.3 percent of the total revenue; while employees of local enterprises-the middle class- contributed to the other 97.7 percent. Flagship Patient Advocates is a physician-founded, membership-based, private medical group dedicated to the highest level of support service, whether you are at home or traveling. FPA offers the most prominent physician specialists to its members, as well as personalized advocacy for physician referral and emergency support needs, all linked by a sophisticated information-management system. FPA's physician network and patient services have already covered 50 states in the US mainland, as well as Europe, the Caribbeans, and South America. It has developed its network to India, Singapore, Thailand and Hong Kong; it will continue expanding into the Asia market with its main focus on China. FPA is working everyday to expand its international coverage. FPA's parent Company is Patients and Physician Inc. FPA's four largest shareholders are Fred Nazem, Dr. Steve O'Brien, Everett LLC., and Laurus Master Fund. Chairman and CEO: Fred Nazem President and legal counsel: John Flood     --------------------------------------------------------------------------------   Content of the Joint Venture Letter of Intent: FPA-CZ Executive Clinic: CZ and FPA have reached an agreement establishing a new Joint Venture Entity. FPA will provide novel healthcare concepts, technology, products, management structure, and access to its US Flagship Physician network with a total capital investment of $1 million in cash. In exchange for this investment, FPA shall own no less than 51% of the total equity of the New Joint Venture Company. CZ will continue to provide facility renovation and maintenance; market development and governmental relations et al to own up to 49% of the total equity of the new Joint Venture company (will be finalized after inventory and assets evaluation). The Goal:  Introduce FPA Healthcare concept into Chinese healthcare market and build up the highest level of wellness platform to provide the best healthcare service to its members. The Market:  Corporate Executives and employees, local government agency and university employees, Flagship members and international and domestic travelers. Focus: Physical check up, dental services, Medical Screening, Consultation and physician referral and access to the top medical centers, and later emergency and trauma centers. Joint Effort:   1. Build up national-class physician network in China;   2. Service to be provided:   a. Annual physical check ups and Dental clinic.   b. Medvault Implementation.   c. Provide wellness consultation and disease management.   d. Provide FPA membership services (see appendix I).   e. Offer physician referrals to those need to be treated in top medical centers domestic and abroad.   f. FPA provides novel healthcare concepts, technology, products, management structure, access to its US Flagship Physician network et al, CZ provides facility maintenance, market development and governmental relations et al (will be further discussed).   3. FPA would own no less than 51% of the ownership (will be adjusted based on evaluation of total assets);   4. The physician network will hold 10% of the ownership (each party surrenders 5% respectively);   5. The executive management will hold 10% of the stock (each party surrenders 5% respectively);   6. The Board: consisting of 5 members, FPA would elect 3 members, and CZ would elect 2 members;   7. FPA recommends an accountant, CZ recommends a cashier, and the board will appoint a financial controller;   8. Location: Tsinghua Science Park chuangxin building B tower, Beijing;     2 --------------------------------------------------------------------------------     9. Time frame for expansion while continue the current operation:   a. 7/31/2006, upon signing the LOI, FPA commits expenses for Joint Venture legalization.   b. 8/30/2006, business expansion plans for FPA-CZ Clinic. Finish Budget and Proforma, continue preparation work for company registration and licensing; study all related regulations, taxation, central and local policies and supplemental policies and regulations et al, continue physician network development.   c. 9/30/2006, complete registration, licensing, and all related legal processes.   d. 9/30/2006, Get ready for Medvault installation and language conversion portal.   e. 10/30/2006, finalize initial services and operational model, start Medvault adoption (English & Chinese version).   f. 11/1/2006, testing period for whole system. The affairs which are not described in this letter of intent should be further negotiated between CZ and FPA. This is a binding letter of intent which reflects the intention of CZ and FPA and creates rights and obligations on the part of the parties hereto. Fred Nazem, Chairman and CEO, Flagship Patient Advocates, New York, NY Signature: /s/ Fred Nazem                      ,      Date: August 7, 2006              Dong Xu, Chairman, China Beijing Chengzhi Health Consultation   Signature: /s/ Dong Xu                          ,      Date: August 7, 2006                3 --------------------------------------------------------------------------------   Appendix I: FPA is a company of patient advocates, empowered by a host of unique clinical services coupled with a global network of renowned physician specialists. FPA's aim is to give its Members "Clinical Insurance," not the typical health insurance that revolves around money and financial insurance. With one phone call from anywhere at anytime, our Members can enjoy unique privileges that include:   · An immediate response by the company's own in-house MedCierge™ advocacy team-including doctors and registered nurses who attend personally and carefully to every Member who needs referrals to specialists.   · A thorough assessment and evaluation by an FPA Advocate of a Member's specific concerns as part of the process to direct needed clinical and other healthcare services.   · An Advocate securing a priority appointment for the Member with a physician from Medical SpeciaList™-FPA's own network of physician specialists whose practice expertise best matches the Member's clinical needs.   · Additional services of special interest to frequent travelers provided by FPA's special 24/7 units such as MedEmergentCare™ and MedTrauma for emergency hospitalization, and a global air evacuation and transport service.   · A secure, personal electronic health record, My MedVault™, for Members to record, store and manage their health information. MedVault works synergistically with all FPA services as a Lifetime Personal Health Record and a Personalized Emergency Health Record.   4 --------------------------------------------------------------------------------  

Exhibit 10.13 Execution Copy AMENDMENT NO. 8 TO AMENDED AND RESTATED CONSTRUCTION AND TERM LOAN AGREEMENT THIS AMENDMENT NO. 8 TO AMENDED AND RESTATED CONSTRUCTION AND TERM LOAN AGREEMENT (this “Amendment”), dated as of November___, 2001, is made by and among (i) WESTMORELAND-LG&E PARTNERS, a Virginia general partnership, as Borrower (the “Borrower”), (ii) CREDIT SUISSE FIRST BOSTON, NIB CAPITAL BANK N.V., THE BANK OF NOVA SCOTIA, SUMITOMO MITSUI BANKING CORPORATION (formerly known as The Sumitomo Bank Limited), New York Branch, THE SANWA BANK LIMITED, UNION BANK OF CALIFORNIA, N.A., THE FUJI BANK LIMITED, New York Branch, CREDIT LYONNAIS, New York Branch, CREDIT LYONNAIS, Cayman Island Branch, LANDESBANK HESSEN-THURINGEN GIROZENTRALE and each Purchasing Lender, as Lenders, (iii) THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, as Institutional Lender and as Institutional Agent and each Purchasing Institutional Lender, (iv) CREDIT SUISSE FIRST BOSTON, New York Branch, as the Issuing Bank, (v) CREDIT SUISSE FIRST BOSTON, NIB CAPITAL BANK N.V., THE BANK OF NOVA SCOTIA and THE SUMITOMO BANK, LIMITED, New York Branch, as Co-Agents (together with their successors in such capacity) and (vi) CREDIT SUISSE FIRST BOSTON, as Agent for the Lenders, the Institutional Lenders and the Issuing Bank (together with its successors in such capacity).                Reference is made to the Amended and Restated Construction and Term Loan Agreement, dated as of December 1, 1993, as amended by Amendment No. 1 dated as of November 4, 1994, Amendment No. 2 dated as of December 30, 1994, Amendment No. 3 dated as of January 31, 1995, Amendment No. 4 dated as of October 19, 1995, Amendment No. 5 dated as of December 15, 1996, Amendment No. 5 dated as of August 23, 2000, Amendment No. 6 dated as of November 21, 2000 and Amendment No. 7 dated as of November 15, 2001, each among Borrower, the Lenders, the Institutional Lenders, the Issuing Bank, the Co-Agents and Agent (each, as defined therein) and the letter agreement, dated July 20, 1999 from Credit Suisse First Boston as Agent, as Issuing Bank, as Co-Agent and as Securities Intermediary, and acknowledged and agreed to by the Borrower, the Lenders, the Institutional Lenders and the Institutional Agent (collectively, the “Credit Agreement”). W I T N E S S E T H:                WHEREAS, the Bond Letters of Credit will expire on December 20, 2001 and Borrower does not expect the Issuing Bank to renew or extend the terms of the Bond Letters of Credit;                WHEREAS, Borrower desires to provide a Series 1991 Substitute Letter of Credit and a Series 1993 Substitute Letter of Credit after the expiration of the Bond Letters of Credit;                WHEREAS, Credit Suisse First Boston is the issuer of the Rova I Virginia Power Letter of Credit, the Rova II Virginia Power Letter of Credit (collectively, the “Virginia Power Letters of Credit”) and the Bond Letters of Credit; -1- --------------------------------------------------------------------------------                WHEREAS, Borrower desires to arrange for a Series 1991 Substitute Letter of Credit to be in effect in accordance with Section 5.2(b) of the Series 1991 Loan Agreement and for a Series 1993 Substitute Letter of Credit to be in effect in accordance with Section 5.2(b) of the Series 1993 Loan Agreement (the “Substitute Bond Letters of Credit”);                WHEREAS, pursuant to Section 3.4(e) of the Credit Agreement, the term “Lender” or “Lenders” includes the Issuing Bank, in its individual capacity, with respect to any Advances and any Note issued to the Issuing Bank or for its benefit;                WHEREAS, pursuant to Section 9.2 of the Credit Agreement, any Lender may sell to one or more first-class financial institutions, with the consent of Agent, Issuing Bank and the Borrower, its rights or obligations with respect to a Letter of Credit;                WHEREAS, the parties to this Amendment contemplate that the financial institution that issues the Substitute Bond Letters of Credit will assume the rights and obligations of Credit Suisse First Boston with respect to Bond Letters of Credit and all drawings made thereunder, including the participation and funding commitment of Credit Suisse First Boston as set forth in Section 3.2 of the Credit Agreement with respect to any Series 1991 Term Loan and Series 1993 Term Loan;                WHEREAS, in the event that the Substitute Letters of Credit are issued by a financial institution other than Credit Suisse First Boston and Credit Suisse First Boston sells its rights and obligations with respect to Bond Letters of Credit to another financial institution (the effective date of such sale being referred to as the “Bond L/C Transfer Date”), Credit Suisse First Boston will not be the issuing bank with respect to the Substitute Bond Letters of Credit, but will continue to be the issuing bank with respect to the Virginia Power Letters of Credit until the expiration or substitution of the Virginia Power Letters of Credit;                WHEREAS, Section 9.4 of the Credit Agreement requires the written consent of the Majority Lenders and the signature of the Borrower and the Agent in order to amend the Credit Agreement or any other Loan Instrument; and                WHEREAS, the parties hereto desire to amend certain provisions of the Credit Agreement in the manner set forth below in order to (i) permit the substitution of Credit Suisse First Boston, in its capacity as issuer of the Bond Letters of Credit, with another first-class financial institution, (ii) eliminate the requirement of Section 3.2(c) of the Credit Agreement that (x) any issuer of a Series 1991 Substitute Letter of Credit agree to become a Purchasing Lender with pro rata extensions of credit or commitments of an amount at least equal to fifteen percent of the Outstanding Tranche A Extensions of Credit at such time, (y) any issuer of a Series 1993 Substitute Letter of Credit agree to become a Purchasing Lender with pro rata extensions of credit or commitments of an amount at least equal to fifteen percent of the Outstanding Tranche B Extensions of Credit at such time, and (z) the Lenders sell, assign or otherwise transfer, at par, to any such issuer, such portions of the Lenders’ Loans, L/C Reimbursement Obligations or Letter of Credit participations, or commitments therefor in such pro rata amounts as are necessary to provide such issuer with the aforesaid extensions of credit or commitments therefor, and (iii) permit the Borrower to provide a Series 1991 Substitute Letter of Credit and a Series 1993 Substitute Letter of Credit at any time after the expiration of the Bond Letters of Credit. -2- --------------------------------------------------------------------------------                NOW, THEREFORE, in consideration of the premises set forth above and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, each of the parties hereto hereby agrees as follows:                1.       Definitions. For all purposes of this Amendment, capitalized terms used herein (including in the preamble and the recitals hereof) but not otherwise defined herein shall have the meanings set forth in the Credit Agreement including Exhibit X thereto.                2.       Amendment to Exhibit X to the Credit Agreement. Exhibit X to the Credit Agreement is hereby amended as follows:           (a)        The definition of “Cash Revenues” is hereby amended by deleting the words “Issuing Bank” in the twelfth line thereof and replacing such words with the words “Bond L/C Issuing Bank”.           (b)        The definition of “Issuing Bank” is hereby amended by deleting such term and its corresponding definition in its entirety and replacing it with the following language: “Issuing Bank” means (i) Credit Suisse First Boston, New York Branch, and its successors and assigns, in its capacity as the issuer of the Rova I Virginia Power Letter of Credit, the Rova II Virginia Power Letter of Credit, any Rova I Trade Letter of Credit and any Rova II Trade Letter of Credit for so long as such letters of credit are in effect, or (ii) the issuer of any replacement Rova I Virginia Power Letter of Credit, Rova II Virginia Power Letter of Credit any Rova I Trade Letter of Credit and any Rova II Trade Letter of Credit then in effect, and its successors and assigns in such capacity.           (c)        The definition of “Rova I L/C Reimbursement Obligation” is hereby amended by replacing the words “Issuing Bank” in the fifth line thereof with the words “Bond L/C Issuing Bank”.           (d)        The definition of “Rova II L/C Reimbursement Obligation” is hereby amended by replacing the words “Issuing Bank” in the fifth line thereof with the words “Bond L/C Issuing Bank”.           (e)        The definition of “Secured Parties” is hereby amended by inserting the words “the Bond L/C Issuing Bank” immediately after the words “the Issuing Bank,” in the first line thereof.           (f)        The definition of “Series 1991 Letter of Credit” is hereby amended by deleting the words “Issuing Bank” in the second line thereof and replacing such words with the words “Bond L/C Issuing Bank and its successors and assigns”. -3- --------------------------------------------------------------------------------           (g)        The definition of “Series 1991 Letter of Credit Facility” is hereby amended by deleting the words “Issuing Bank” and replacing such words with the words “Bond L/C Issuing Bank and its successors and assigns”.           (h)        The definition of “Series 1993 Letter of Credit” is hereby amended by deleting the words “Issuing Bank” in the sixth line thereof and replacing such words with the words “Bond L/C Issuing Bank and its successors and assigns”.           (i)        The definition of “Series 1993 Letter of Credit Facility” is hereby amended by deleting the words “Issuing Bank” and replacing such words with the words “Bond L/C Issuing Bank and its successors and assigns”.           (j)        The definition of “Taxes” is hereby amended by inserting the words “or the branch of any Bond L/C Issuing Bank issuing any Bond Letters of Credit” immediately after the words “Letters of Credit,” in the eleventh line thereof.           (k)        The definition of “Tranche A Advance” is hereby amended by inserting the words “or by the Bond L/C Issuing Bank, as applicable” in clause (d) thereof immediately after the words “Issuing Bank” in the ninth line thereof.           (l)        The definition of “Tranche A Application for Borrowing” is hereby amended by deleting (i) the words “Issuing Bank” in the fifth line of clause (d) thereof and replacing such words with the words “Bond L/C Issuing Bank” and by inserting before the words “Rova I Letter of Credit” in clause (d) thereof the word “initial.”           (m)        The definition of “Tranche B Advance” is hereby amended by inserting the words “or by the Bond L/C Issuing Bank, as applicable” in clause (d) thereof immediately after the words “Issuing Bank” in the ninth line thereof and by inserting before the words “Rova II Letter of Credit” in clause (d) of thereof the word “initial.”           (n)        Exhibit X is further amended by inserting the following definition in the appropriate alphabetical order:           “Bond L/C Issuing Bank” means Credit Suisse First Boston, New York Branch, and its successors and assigns, in its capacity as the issuer of, and for so long as it is the issuer of the Bond Letters of Credit then in effect or (ii) the issuer of any Series 1991 Substitute Letter of Credit and any Series 1993 Substitute Letter of Credit then in effect and its successors and assigns in such capacity.                3.       Amendments to the Credit Agreement. The Credit Agreement is hereby amended as follows:           (a)        Section 2.3(a)(i) is hereby amended by (i) inserting the words “, the Bond L/C Issuing Bank” immediately after the words “the Lenders” in the second, eighth, thirty-seventh, fortieth, forty-second and the forty-eighth lines thereof, (ii) inserting the words “, the Bond L/C Issuing Bank” immediately after the word “Lender” in the fourth, tenth, eleventh, nineteenth, twenty-fourth, twenty-sixth, forty-eighth and fifty-sixth lines thereof, (iii) inserting the words “, the Bond L/C Issuing Bank” immediately after the words “Issuing Bank” in the fourteenth, fifty-fourth and fifty-seventh lines thereof, and (iv) inserting the words “or Bond L/C Issuing Bank’s” immediately after the words “Issuing Bank’s” in the fiftieth line thereof. -4- --------------------------------------------------------------------------------           (b)        Section 2.3(b) is hereby amended by (i) inserting the words “or the Bond L/C Issuing Bank” immediately after the words “Issuing Bank” in the seventh line thereof and in the fifth and ninth lines of the last paragraph thereof and (ii) inserting the words “or Bond L/C Issuing Bank’s” immediately after the word “Bank’s” in the sixth line of the last paragraph thereof.           (c)        Section 2.3(c) is hereby amended by (i) inserting the words “or Bond L/C Issuing Bank” immediately after the words “Issuing Bank” in the sixth, seventeenth, and twenty-first lines thereof and (ii) inserting the words “or Bond L/C Issuing Bank’s” immediately after the words “Issuing Bank’s” in the seventeenth line thereof.           (d)        Section 2.4(c) is hereby amended by (i) deleting the words “on the Tranche A Conversion Date” in the sixth, seventh and eighth lines of subparagraph (i)(B) thereof and replacing such words with the words “on such Tranche A Repayment Date”, (ii) deleting the words “on the Tranche B Conversion Date” in the sixth, seventh, and eighth lines of subparagraph (i)(D) thereof and replacing such words with the words “on such Tranche B Repayment Date” and (iii) inserting the words “Bond L/C” immediately before the words “Issuing Bank” in the third and seventh lines of subparagraph (ii)(C) thereof.           (e)        Section 2.6(b) is hereby amended by inserting the words “, Bond L/C Issuing Bank” immediately after the words “Institutional Lender” in the second, fourth, seventh, twelfth, nineteenth, twenty-first and twenty-third lines thereof and immediately after the words “Institutional Lenders” in the fifteenth and seventeenth lines thereof.           (f)        Section 2.6(c) is hereby amended by inserting the words “, Bond L/C Issuing Bank” immediately after the words “Institutional Lenders” in the third line thereof.           (g)        Section 2.6(c)(i)(B) is hereby amended by (i) inserting the words “the Bond L/C Issuing Bank,” immediately after the words “Issuing Bank,” in the first line thereof and (ii) inserting the words “or to the Bond L/C Issuing Bank” immediately after the words “Issuing Bank” in the fourth line thereof.           (h)        Section 2.6(c)(ii)(C) is hereby amended by (i) inserting the words “the Bond L/C Issuing Bank,” immediately after the words “Issuing Bank,” in the first line thereof, and (ii) inserting the words “or to the Bond L/C Issuing Bank” immediately after the words “Issuing Bank” in the fifth line thereof. -5- --------------------------------------------------------------------------------           (i)        Sections 3.2(a) through 3.2(b) and Section 3.2(d) through Section 3.2(g) are hereby amended by (i) deleting the words “Issuing Bank” everywhere that such words appear in such sections and replacing such words with the words “Bond L/C Issuing Bank” and (ii) deleting the words “Issuing Bank’s” everywhere that such words appear in such sections and replacing such words with the words “Bond L/C Issuing Bank’s”.           (j)        Section 3.2(b) is hereby amended by inserting the following at the end of the first paragraph thereof after the word “anniversary”:   ;provided further that, in addition to the foregoing, in the case of any Series 1991 Substitute Letter of Credit issued on or after December 20, 1996, such Series 1991 Substitute Letter of Credit may provide either that the term thereof (i) may be renewed for additional periods of one year from each anniversary of the issuance date thereof if the Bond L/C Issuing Bank shall, at least ninety (90) days prior to any such anniversary, give written notice to Borrower that the Series 1991 Substitute Letter of Credit shall be extended beyond the day immediately preceding such anniversary or (ii) shall be automatically renewed for additional periods of one year from each anniversary of the issuance date thereof unless the Bond L/C Issuing Bank shall, at least six months prior to any such anniversary, give written notice to the Borrower that the Series 1991 Substitute Letter of Credit shall not be extended beyond the day immediately preceding such anniversary.           (k)        Section 3.2(b) is hereby amended by inserting the following at the end of the second paragraph thereof after the word anniversary”:   ;provided further that, in addition to the foregoing, in the case of any Series 1993 Substitute Letter of Credit issued on or after December 20, 1996, such Series 1993 Substitute Letter of Credit may provide either that the term thereof (i) may be renewed for additional periods of one year from each anniversary of the issuance date thereof if the Bond L/C Issuing Bank shall, at least six months prior to any such anniversary, give written notice to Borrower that the Series 1993 Substitute Letter of Credit shall be extended beyond the day immediately preceding such anniversary or (ii) shall be automatically renewed for additional periods of one year from each anniversary of the issuance date thereof unless the Bond L/C Issuing Bank shall, at least ninety (90) days prior to any such anniversary, give written notice to the Borrower that the Series 1993 Substitute Letter of Credit shall not be extended beyond the day immediately preceding such anniversary.           (l)        Section 3.2(c) is hereby amended and restated as follows: -6- --------------------------------------------------------------------------------   “(c) Substitute Letters of Credit and Fixed Rate Credit Facilities. Borrower agrees that it shall not be entitled to provide a Series 1991 Substitute Letter of Credit or a Series 1991 Fixed Rate Credit Facility except (A) if the Bond/LC Issuing Bank shall have wrongfully dishonored a Series 1991 Drawing under the Series 1991 Letter of Credit and such wrongful dishonor shall be continuing or (B) if the Bond L/C Issuing Bank shall no longer be a Lender and no other Lender shall have issued a Series 1991 Substitute Letter of Credit or a Series 1991 Fixed Rate Credit Facility or (C) as otherwise provided below in this Section 3.2(c). After the Tranche A Conversion Date, to but not including the first anniversary of the Tranche A Conversion Date, Borrower shall be entitled to provide a Series 1991 Substitute Letter of Credit or a Series 1991 Fixed Rate Credit Facility with the prior written consent of the Bond L/C Issuing Bank and the Majority Lenders (including the Lenders and Institutional Lenders, and which consent shall be given or withheld in the sole discretion of the aforesaid parties) and upon payment to Agent for the account of the Lenders of an amount equal to 0.500% of the amount of the Series 1991 Letter of Credit then outstanding. If the Bond L/C Issuing Bank does not renew the Series 1991 Letter of Credit at the expiration thereof, and if no Lender shall replace the Bond L/C Issuing Bank as the issuer of the Series 1991 Letter of Credit should such replacement be necessary, then Borrower shall be entitled to provide a Series 1991 Substitute Letter of Credit or a Series 1991 Fixed Rate Credit Facility at any time on or after the expiration of the Series 1991 Letter of Credit (whether or not there are any Tranche A Loans then outstanding pursuant to Section 3.2(d)(i)); provided that (1) Borrower must obtain (A) any consent required under the Series 1991 Bond Documents and (B) the prior written consent of Institutional Agent if the issuer of the Series 1991 Substitute Letter of Credit or the provider of the Series 1991 Fixed Rate Credit Facility is (in the judgment of Institutional Agent) less creditworthy than the Issuing Bank, and (2) Borrower shall pay to each Secured Party all of such Secured Party’s administrative, legal and other costs and expenses associated with the transactions contemplated pursuant to this Section 3.2(c). -7- --------------------------------------------------------------------------------   Borrower agrees that it shall not be entitled to provide a Series 1993 Substitute Letter of Credit or a Series 1993 Fixed Rate Credit Facility for the Series 1993 Letter of Credit except (A) if the Bond L/C Issuing Bank shall have wrongfully dishonored a Series 1993 Drawing under the Series 1993 Letter of Credit and such wrongful dishonor shall be continuing or (B) if the Bond L/C Issuing Bank shall no longer be a Lender and no other Lender shall have issued a Series 1993 Substitute Letter of Credit or a Series 1993 Fixed Rate Credit Facility or (C) as otherwise provided below in this Section 3.2(c). After the Tranche B Conversion Date, to but not including the first anniversary of the Tranche B Conversion Date, Borrower shall be entitled to provide a Series 1993 Substitute Letter of Credit or a Series 1993 Fixed Rate Credit Facility with the prior written consent of the Bond L/C Issuing Bank and the Majority Lenders (including the Lenders and Institutional Lenders, and which consent shall be given or withheld in the sole discretion of the aforesaid parties) and upon payment to Agent for the account of the Lenders of an amount equal to 0.500% of the amount of the Series 1993 Letter of Credit then outstanding. If the Bond L/C Issuing Bank does not renew the Series 1993 Letter of Credit at the expiration thereof, and if no Lender shall replace the Bond L/C Issuing Bank as the issuer of the Series 1993 Letter of Credit should such replacement be necessary, then Borrower shall be entitled to provide a Series 1993 Substitute Letter of Credit or a Series 1993 Fixed Rate Credit Facility at any time on or after the expiration of the Series 1993 Letter of Credit (and whether or not there are any Tranche B Loans then outstanding pursuant to Section 3.2(d)(i)); provided that (1) Borrower must obtain (A) any consent required under the Series 1993 Bond Documents and (B) the prior written consent of Institutional Agent if the issuer of the Series 1993 Substitute Letter of Credit or the provider of the Series 1993 Fixed Rate Credit Facility is (in the judgment of Institutional Agent) less creditworthy than the Issuing Bank, (2) Borrower shall pay to each Secured Party all of such Secured Party’s administrative, legal and other costs and expenses associated with the transactions contemplated pursuant to this Section 3.2(c).”           (m)        Sections 3.3 is hereby amended and restated as follows: -8- --------------------------------------------------------------------------------   “Nature of Issuing Bank’s and Bond L/C Issuing Bank’s Duties. As among Borrower, the Issuing Bank, the Bond L/C Issuing Bank, the Lenders and Agent, Borrower hereby assumes all risks of the acts, omissions or misuse of any Letter of Credit by its beneficiary or any successor thereto. The Issuing Bank, the Bond L/C Issuing Bank, the Lenders and Agent shall not be responsible: (i) for the form, validity, sufficiency, accuracy, genuineness or legal effect of any document submitted by any party in connection with the application for and issuance of, or the making of any drawing under, any Letter of Credit, even if it should in fact prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent or forged, (ii) for the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign any Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason, (iii) for failure of any beneficiary to comply fully with the conditions required in order to effect a drawing, (iv) for errors, omissions, interruptions or delays in transmission or delivery of any messages, by mail, cable, telegraph, telex or otherwise, (v) for any loss or delay in the transmission or otherwise of any document or draft required in order to make any drawing and (vi) for any consequences arising from causes beyond the control of the Issuing Bank, or the Bond L/C Issuing Bank, the Lenders or Agent, except only that Borrower shall have a claim against the Issuing Bank or the Bond L/C Issuing Bank, as applicable, and the Issuing Bank or the Bond L/C Issuing Bank, as applicable, shall be liable to Borrower, to the extent, but only to the extent, of any direct, as opposed to consequential, damages suffered by Borrower which Borrower proves were caused by (A) the Issuing Bank’s or the Bond L/C Issuing Bank’s, as the case may be, willful misconduct or gross negligence in determining whether documents presented under a Letter of Credit comply with the terms of such Letter of Credit or (B) the Issuing Bank’s or the Bond L/C Issuing Bank’s, as the case may be, failure to pay under a Letter of Credit in accordance with its terms after the presentation to it by the beneficiary of a sight draft and certificate strictly complying with the terms and conditions of such Letter of Credit. In furtherance and not in limitation of the foregoing, the Issuing Bank and the Bond L/C Issuing Bank may accept documents that appear on their face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary. None of the above shall affect, impair, or prevent the vesting of any of the Issuing Bank’s or the Bond L/C Issuing Bank’s rights or powers hereunder.   In furtherance and extension and not in limitation of the specific provisions hereinabove set forth, any action taken or omitted by the Issuing Bank or the Bond L/C Issuing Bank, under or in connection with a Letter of Credit or any related certificates or other documents, if taken or omitted in good faith and without gross negligence, shall be binding upon Borrower and shall not put the Issuing Bank or the Bond L/C Issuing Bank under any resulting liability to Borrower.”           (n)        Section 3.4(a) is hereby amended by (i) inserting the number “(i)” immediately after the word “Appointment.” in the first line thereof, (ii) deleting the words “Letters of Credit” beginning in the third and seventeenth lines thereof and replacing such words with the words “each Virginia Power Letter of Credit and the Trade Letters of Credit”, and (iii) adding the following subsection as a new paragraph at the end of such section: -9- --------------------------------------------------------------------------------   “(ii) Each Lender hereby irrevocably designates and appoints the Bond L/C Issuing Bank as the Bond L/C Issuing Bank under this Agreement with respect to the Bond Letters of Credit, and each such Lender hereby irrevocably authorizes the Bond L/C Issuing Bank, as the Bond L/C Issuing Bank, to take such action under the provisions of this Agreement and to exercise such powers and perform such duties as are expressly delegated to the Bond L/C Issuing Bank by the terms of this Agreement, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere in this Agreement, the Bond L/C Issuing Bank shall not have any duties or responsibilities, except those expressly set forth herein, or any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or otherwise exist against the Bond L/C Issuing Bank; provided that nothing contained in this Section 3.4 shall be deemed to limit or impair the rights and obligations of the Bond L/C Issuing Bank under the Bond Letters of Credit.”           (o)        Section 3.4(b) is hereby amended by deleting the words “Neither the Issuing Bank nor any of its officers, directors, employees, agents, attorneys-in-fact shall be” in the first line thereof and replacing such words with the words “The Issuing Bank, the Bond L/C Issuing Bank and each of their officers, directors, employees, agents and attorneys-in-fact shall not be”.           (p)        Section 3.4(b)(ii) is hereby amended (i) by deleting the words “Issuing Bank” in the eleventh line thereof and replacing such words with the words “Issuing Bank or Bond L/C Issuing Bank” and (ii) deleting the words “the Issuing Bank shall not” in the seventeenth line thereof and replacing such words with the words “Neither the Issuing Bank or the Bond L/C Issuing Bank shall”.           (q)        Section 3.4(c) is hereby amended by (i) replacing the words “Letters of Credit” in the twelfth line thereof with the words “each Virginia Power Letter of Credit and the Trade Letters of Credit”, (ii) inserting the number “(i)” immediately before the words “Reliance by Issuing Bank.” in the first line thereof and (iii) inserting the following new subsection as a new paragraph at the end of such section: -10- --------------------------------------------------------------------------------   “(ii)  Reliance by Bond L/C Issuing Bank. The Bond L/C Issuing Bank shall be entitled to rely, and shall be fully protected in relying, upon any agreement (including this Agreement), note (including any Note), writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype message, statement, order or other document or telephone conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to Borrower), independent accountants and other experts selected by the Bond L/C Issuing Bank. Except for the issuance of the Bond Letters of Credit in accordance with the terms of this Agreement and the payment of drawings thereunder, the Bond L/C Issuing Bank shall be fully justified in failing or refusing to take any action under this Agreement unless the Bond L/C Issuing Bank shall first receive such advice or concurrence of the Majority Lenders as the Bond L/C Issuing Bank deems appropriate or the Bond L/C Issuing Bank shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Bond L/C Issuing Bank shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement and the Notes in accordance with a request of the Majority Lenders, and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders and all future holders of the Notes.”           (r)        Section 3.4(d) is hereby amended by (i) deleting the words “Issuing Bank in its capacity” in the second line thereof and replacing such words with the words “Issuing Bank and Bond L/C Issuing Bank in their capacity”, (ii) deleting the words “Issuing Bank” beginning in the twelfth and fifteenth lines thereof and replacing such words with the words “Issuing Bank or Bond L/C Issuing Bank”, and (iii) deleting the words “Issuing Bank’s” in the twentieth line thereof and replacing such words with the words “Issuing Bank’s or Bond L/C Issuing Bank’s”.           (s)        Section 3.4(e) is hereby amended by (i) inserting the number “(i)” immediately before the words “Issuing Bank in its Individual Capacity” in the first line thereof and (ii) inserting the following subsection as a new paragraph at the end of such section:   “(ii) Bond L/C Issuing Bank in Its Individual Capacity. The Bond L/C Issuing Bank and its affiliates may make loans to accept deposits from and generally engage in any kind of business with Borrower as though the Bond L/C Issuing Bank were not the Bond L/C Issuing Bank hereunder. With respect to Advances made or renewed by the Bond L/C Issuing Bank or on their behalf and any Note issued to the Bond L/C Issuing Bank or for its benefit, the Bond L/C Issuing Bank shall have the same rights and powers under this Agreement as any Lender and may exercise the same as though it were not the Bond L/C Issuing Bank, and the terms ‘Lender’ and ‘Lenders’ shall include the Bond L/C Issuing Bank in its individual capacity.” -11- --------------------------------------------------------------------------------           (t)        Section 3.5(a) is hereby amended by (i) deleting the words “Issuing Bank” beginning in the second, fifth, tenth, twelfth, thirty-second, thirty-fifth and thirty-ninth lines thereof and replacing such words with the words “Bond L/C Issuing Bank”, (ii) inserting the words (other than a Lender that has assigned any of its rights and obligations, including L/C Reimbursement Obligations, with respect to a Bond Letter of Credit pursuant to Section 9.2 of this Agreement and, then, only to the extent of such rights and obligations that it has assigned) immediately after the words “other Lenders” in the ninth line thereof and (iii) inserting the words “, the Bond L/C Issuing Bank,” immediately before the words “the Lenders” in the twenty-fifth line thereof.           (u)        Section 3.5(b) is hereby amended by deleting the words “Issuing Bank” in the eighth, nineteenth, twenty-seventh, thirty-second, thirty-seventh, forty-first, forty-fifth, forty-eighth, fifty-third and sixty-second lines thereof and replacing such words with the words “Bond L/C Issuing Bank” and (ii) inserting the words “, the Bond L/C Issuing Bank and any Lender that has assigned any of its rights and obligations, including L/C Reimbursement Obligations, with respect to a Bond Letter of Credit pursuant to Section 9.2 of this Agreement (to the extent of such rights and obligations that it has assigned)” immediately after the words “other than the Issuing Bank” in the thirteenth and twenty-sixth lines thereof.           (v)        Section 3.5(c) is hereby amended by deleting all references to “Issuing Bank” in the first and sixth lines thereof and replacing such references with the words “Bond L/C Issuing Bank”.           (w)        Section 3.5(d) is hereby amended by (i) deleting the words “Issuing Bank” in the sixth line thereof and replacing such words with the words “Bond L/C Issuing Bank”, and (ii) inserting after the words “Lenders” in the sixth line thereof the words “(other than a Lender that has assigned any of its rights and obligations, including L/C Reimbursement Obligations, with respect to a Bond Letter of Credit pursuant to Section 9.2 of this Agreement and, then, only to the extent of such rights and obligations that it has assigned)".           (x)        Section 3.5(e) is hereby amended by (i) deleting the words “Issuing Bank” in the first, third and eleventh lines thereof and replacing such words with the words “Bond L/C Issuing Bank” and (ii) inserting after the words “Each Lender” in the twelfth line thereof the words “(other than a Lender that has assigned any of its rights and obligations, including L/C Reimbursement Obligations, with respect to a Bond Letter of Credit pursuant to Section 9.2 of this Agreement and, then, only to the extent of such rights and obligations that it has assigned)".           (y)        Section 3.5(f) is hereby amended by inserting after the words “Each Lender” in the first line thereof the words “(other than a Lender that has assigned any of its rights and obligations, including L/C Reimbursement Obligations, with respect to a Bond Letter of Credit pursuant to Section 9.2 of this Agreement and, then, only to the extent of such rights and obligations that it has assigned)". -12- --------------------------------------------------------------------------------           (z)        Section 4.1(a)(i) is hereby amended by deleting the words “Rova I Letters of Credit” in the ninth line thereof and replacing such words with the words “Rova I Virginia Power Letter of Credit and the Rova I Trade Letter of Credit and the Bond L/C Issuing Bank commits to issue the Series 1991 Letter of Credit”.           (aa)        Section 4.1(a)(ii) is hereby amended by deleting the words “Rova II Letters of Credit” in the ninth line thereof and replacing such words with the words “Rova II Virginia Power Letter of Credit and the Rova II Trade Letter of Credit and the Bond L/C Issuing Bank commits to issue the Series 1993 Letter of Credit”.           (bb)        Section 4.2 is hereby amended by deleting the words “Rova II Letters of Credit” in the third line thereof and replacing such words with the words “initial Rova II Virginia Power Letter of Credit and the Rova II Trade Letter of Credit and the obligation of the Bond L/C Issuing Bank to Issue the Series 1993 Letter of Credit”.           (cc)        Section 4.3 is hereby amended by (i) inserting the words “and the Bond L/C Issuing Bank” immediately after the words “Issuing Bank” in the fourth line thereof, (ii) by replacing the reference to “any Letter of Credit” in the fourth, fifth and seventh lines thereof with “the initial Series 1991 Letter of Credit and initial Series 1993 Letter of Credit”, and (iii) by replacing the words “Rova II Letter of Credit” in the thirteenth line thereof with the words “any initial Rova II Letter of Credit”.           (dd)        Section 4.4 is hereby amended by (i) inserting the words “Bond L/C” immediately before the words “Issuing Bank” in the first line thereof and (ii) by replacing the words “the Series 1993 Letter of Credit” in the second and third lines thereof with the words “the initial Series 1993 Letter of Credit”.           (ee)        Section 4.4(a) is hereby amended by deleting the words “Issuing Bank” in the second and third lines of subsection (iii) thereof and in the second line of subsection (x) thereof and replacing such words with the words “Bond L/C Issuing Bank”.           (ff)        Section 4.5(a) is hereby amended by deleting the words “Issuing Bank” in the first and ninth lines thereof and replacing such words with the words “Bond L/C Issuing Bank”.           (gg)        Section 4.6 is hereby amended by deleting the words “Rova I Letters of Credit” in the third line thereof and replacing such words with the words “Rova I Virginia Power Letter of Credit and the Rova I Trade Letter of Credit and the obligation of the Bond L/C Issuer (in accordance with Article 3 hereof) to issue the Series 1991 Letter of Credit”.           (hh)        Section 4.7(a) is hereby amended by deleting the words “Rova II Letters of Credit” in the tenth line thereof and replacing such words with the words “Rova II Virginia Power Letter of Credit and the Rova II Trade Letter of Credit and the obligation of the Bond L/C Issuer (in accordance with Article 3 hereof) to issue the Series 1991 Letter of Credit”. -13- --------------------------------------------------------------------------------           (ii)        Section 4.8 is hereby amended by deleting the words “Rova II Letters of Credit” in the third line thereof and replacing such words with the words “Rova II Virginia Power Letter of Credit and the Rova II Trade Letter of Credit and the obligation of the Bond L/C Issuer (in accordance with Article 3 hereof) to issue the Series 1993 Letter of Credit”.           (jj)        Section 6.1(c)(xi) is hereby amended by inserting the words “, the Bond L/C Issuing Bank” immediately after the words “the Institutional Lenders” in the thirty-third line of the second paragraph thereof.           (kk)        Section 6.8(a) is hereby amended by inserting the words “, the Bond L/C Issuing Bank” immediately after the words “the Institutional Lenders” in the nineteenth line thereof.           (ll)        Section 6.8(c) is hereby amended by inserting the words “, the Bond L/C Issuing Bank” immediately after the words “the Institutional Lenders” in the seventh line thereof.           (mm)        Section 6.15 is hereby amended by inserting the words “, the Bond L/C Issuing Bank” immediately after the words “the Institutional Lenders” in the fifteenth line thereof.           (nn)        Section 6.25(a) is hereby amended by inserting the words “except during any period when the Bonds are held as Series 1991 Pledged Bonds or Series 1993 Pledged Bonds,” at the beginning of such Section before the word “Borrower.”           (oo)        Section 6.25(c) is hereby amended by inserting the words “the Bond L/C” immediately before the words “Issuing Bank” in the second and sixth lines thereof.           (pp)        Section 6.25(o) is hereby amended by deleting the word “At” at the beginning of such Section and replacing such word with the words “Unless the Interest Rate Period (as defined in the Series 1991 Indenture and Series 1993 Indenture) of the Bonds is a Term Interest Period (as defined in the Series 1991 Indenture and the Series 1993 Indenture) or the Bonds are held as Series 1991 Pledged Bonds or Series 1993 Pledged Bonds, at”.           (qq)        Section 7.1(s) is hereby amended by inserting the words “Bond L/C” immediately before the words “Issuing Bank” in the fifth line thereof.           (rr)        Section 7.2(a) is hereby amended by inserting the words “Bond L/C” immediately before the words “Issuing Bank” in the sixth line thereof. -14- --------------------------------------------------------------------------------           (ss)        Section 7.2(b)(ii)is hereby amended by inserting the words “, the L/C Bond Issuing Bank” immediately after the words “Issuing Bank” in the third line thereof.           (tt)        Section 7.2(c) is hereby amended by inserting the words “, the L/C Bond Issuing Bank” immediately after the word “Lenders” in the nineteenth line thereof.           (uu)        Section 8.1 is hereby amended by inserting the words “the Bond L/C Issuing Bank,” immediately after the words “each Institutional Lender,” in the first line thereof.           (vv)        Section 8.2 is hereby amended by inserting the words “, the Bond L/C Issuing Bank” immediately after the words “Institutional Agent” in the third line thereof.           (ww)        Section 8.4 is hereby amended by inserting the words “, the Bond L/C Issuing Bank” immediately after the words “Each of Agent” in the eighth line thereof.           (xx)        Section 8.5 is hereby amended by (i) inserting the words “Bond L/C Issuing Bank,” immediately after the words “as a Lender,” in the first line thereof, (ii) inserting the words “, the Bond L/C Issuing Bank” immediately after the words “Institutional Agent” in the fourth line thereof, and (iii) inserting the words “, Bond L/C Issuing Bank” immediately after the words “In addition, Agent” in the thirteenth line thereof.           (yy)        Section 9.1 is hereby amended by deleting the words “the Bond Letters of Credit,” beginning in the first line immediately after the Agent’s contact information for notices and by inserting the following language immediately after the Issuing Bank’s contact information for notices:   “If to the Bond L/C Issuing Bank (with respect to the Bond Letters of Credit):   So long as Credit Suisse First Boston is the Bond L/C Issuing Bank to:   [Credit Suisse First Boston Tower 49 12 E. 49th Street New York, New York 10017   Attention: Group Head, Portfolio Management    Project Finance, Telex: 420149 Telecopy: (212) 238-5390]           At such time, if any, as Credit Suisse First Boston is not the Bond L/C Issuing Bank, to such address as may be designated in writing by any Bond L/C Issuing Bank to the Agent, the Institutional Agent and the Borrower. -15- --------------------------------------------------------------------------------           (zz)        Section 9.2(a) is hereby amended by (i) deleting the words “a Letter of Credit” in the fifth line thereof and replacing such words with the words “either of the Bond Letters of Credit, the consent of the Bond L/C Issuing Bank, and with respect to a Virginia Power Letter of Credit or either of the Trade Letters of Credit” and (ii) inserting the words “the Bond L/C Issuing Bank or” immediately before the words “the Issuing Bank” in the eleventh line thereof.           (aaa)        Section 9.4 is hereby amended by (i) inserting the words “the Bond L/C Issuing Bank,” immediately after the words “Issuing Bank” in the second line of clause (iv) thereof and (ii) inserting the words “, the Bond L/C Issuing Bank” immediately after the words “Institutional Lenders” in the eighth and twelfth lines of clause (v) thereof.           (bbb)        Section 9.13(d) is hereby amended by inserting the words “THE BOND L/C ISSUING BANK,” immediately after the words “THE ISSUING BANK,” in the third line thereof.                4.       Conditions of Amendment. The amendment to Section 3.2(c) of the Credit Agreement contained in Section 3(l) of this Amendment, permitting the Borrower to provide a Series 1991 Substitute Letter of Credit and a Series 1993 Substitute Letter of Credit after the expiration of the Bond Letters of Credit is expressly conditioned upon the satisfaction of the condition that Borrower obtain a waiver, modification or amendment, in accordance with Section 11.9 of each of the Series 1991 Loan Agreement and the Series 1993 Loan Agreement and Section 6.04 of each Indenture, from the Series 1991 Trustee and the Series 1993 Trustee of the requirements set forth in Section 5.2 of the Series 1991 Loan Agreement and Series 1993 Loan Agreement (i) to the effect that a Letter of Credit (as defined in the Indenture) or Substitute Letter of Credit (as defined in the Indenture) is not required pursuant to Section 5.2(a) of the Series 1991 Loan Agreement or the Series 1993 Loan Agreement if the Bonds have been purchased pursuant to Section 8.15(c) of the applicable Indenture such that they are Series 1991 Pledged Bonds or Series 1993 Pledged Bonds, as applicable, (ii) to permit the delivery of a Series 1991 Substitute Letter of Credit and a Series 1993 Substitute Letter of Credit on any Business Day, and (iii) to change the 45-day notice period in Section 5.2(b) of the Series 1991 Loan Agreement and the Series 1993 Loan Agreement from forty-five (45) days to ten (10) days, if a Substitute Letter of Credit is being delivered while the Bonds are held as Series 1991 Pledged Bonds or Series 1993 Pledged Bonds, as applicable.                5.       Limitation. Except as expressly stated herein, all of the representations, warranties, terms, covenants and conditions of the Credit Agreement shall remain unamended and shall continue to be, and shall remain, in full force and effect in accordance with their respective terms. This Amendment shall be limited precisely as provided for herein, and shall not be deemed to be a waiver of, amendment of, consent to or modification of any other term or provision of the Credit Agreement.                6.       Credit Agreement References. On and after the effective date of this Amendment, each reference in the Credit Agreement to “this Agreement”, “hereunder”, “hereof” or words of like import, and each reference to the Credit Agreement by the words “thereunder”, “thereof” or words of like import in any Project Document, Loan Instrument or other document executed in connection with the Credit Agreement, shall mean and be a reference to the Credit Agreement, as amended or otherwise modified by this Amendment. -16- --------------------------------------------------------------------------------                7.       Governing Law. This Amendment shall for all purposes be considered a Loan Instrument and shall be governed by, construed and interpreted in accordance with, the laws of the State of New York without regard to principles of conflict of laws (except for Section 5-1401 of the General Obligations Law of the State of New York).                8.       Successors and Assigns. This Amendment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns and all future parties to the Credit Agreement.                9.       Counterparts. This Amendment may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all the counterparts shall together constitute one and the same instrument. A facsimile signature on a counterpart of this Amendment shall be binding to the same extent as an original signature by the signatory.                10.       Effectiveness. This Amendment shall be effective when executed by the Agent, the Borrower and the Majority Lenders. -17- --------------------------------------------------------------------------------                IN WITNESS WHEREOF, the parties hereto have executed this consent through their duly authorized representatives as of              , 2001.   WESTMORELAND-LG&E PARTNERS, as Borrower   By: WESTMORELAND-ROANOKE VALLEY, L.P. as general partner     By: WEI-ROANOKE VALLEY, INC., as general partner       By: /s/ Gregory S. Woods Name: Gregory S. Woods Title: Executive Vice President   By: LG&E ROANOKE VALLEY, L.P., as general partner     By: LG&E POWER 16 INCORPORATED, as general partner       By: /s/ Daniel K. Arbough Name: Daniel K. Arbough Title: Treasurer   CREDIT SUISSE FIRST BOSTON, as Agent, Co-Agent, Lender and Issuing Bank   By: /s/ p.p. Hughes Name: Stephen Hughes Title: Associate   By: /s/ p.p. Naval Name: Pilarcita V. Naval Title: Associate -18- --------------------------------------------------------------------------------   THE BANK OF NOVA SCOTIA, as Co-Agent and Lender   By: /s/ Brian Portis Name: Brian Portis Title: Director   SUMITOMO MITSUI BANKING CORPORATION (formerly known as THE SUMITOMO BANK, LIMITED), NEW YORK BRANCH, as Co-Agent and Lender   By: /s/ David A. Buck Name: David A. Buck Title: Senior Vice President   NIB CAPITAL BANK, N.V., as Co-Agent and Lender   By: /s/ Halbart Völker Name: Halbart Völker Title: Head of Energy and Environment   By: /s/ Dennis van Alphen Name: Dennis van Alphen Title: Vice President   UNION BANK OF CALIFORNIA, N.A., (AS SUCCESSOR IN INTEREST TO UNION BANK), as Lender   By: /s/ Susan K. Johnson Name: Susan K. Johnson Title: Vice President -19- --------------------------------------------------------------------------------   THE FUJI BANK LIMITED, LOS ANGELES AGENCY, as Lender   By: ________________________________ Name: Title:   CREDIT LYONNAIS, NEW YORK BRANCH, as Lender   By: /s/ James F. Guidera Name: James F. Guidera Title: SVP   CREDIT LYONNAIS, CAYMAN ISLAND BRANCH, as Lender   By: /s/ James F. Guidera Name: James F. Guidera Title: SVP   THE SANWA BANK LIMITED, as Lender   By: ________________________________ Name: Title:   LANDESBANK HESSEN THURINGEN GIROZENTRALE, as Lender   By: /s/ David A. Leech Name: David A. Leech Title: Vice President, Corporate Finance Division, Structure Finance Dept. -20- --------------------------------------------------------------------------------   By: /s/ Marc Bruening Name: Marc Bruening Title: Asst. Vice President, Corporate Finance Division, Structured Finance Dept.   THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, as Institutional Agent and Institutional Lender   By: /s/ [illegible] Name: Title: -21- --------------------------------------------------------------------------------

Exhibit 10.1   [g39981kki001.jpg] Executive Bonus Plan (EBP) Amended as of January 1, 2006     1 --------------------------------------------------------------------------------   1.             PLAN OBJECTIVE   The Executive Bonus Plan (“EBP” or “the Plan”) has been designed to reward and incent the efforts of certain key employees of CB Richard Ellis (“CBRE” or “the Company”) to successfully attain the Company’s goals by directly tying the Participant’s compensation to Company and individual results.   The EBP is also designed to:   (a)           provide competitive compensation opportunities for key executive employees; and   (b)           assist in retaining and attracting key employees for CBRE.   2.             EFFECTIVE DATE AND PLAN YEAR   This amended Plan shall be effective January 1, 2006 and supersedes and replaces, in total, all prior versions of this Plan or any other bonus guarantees.   A “Plan Year” starts on January 1 and ends December 31 of the same year.   3.             PLAN ADMINISTRATION   Human Resources will administer the Plan, including participation, eligibility criteria and payment of Awards, subject to final review and approval by the Chief Executive Officer and the Board of Directors.  The Board of Directors may delegate any of its duties hereunder in its discretion to its Compensation Committee.   4.             ELIGIBILITY   4.1           Eligible employees (“Participants”) must be specifically designated and approved by the Chief Executive Officer each year.   Eligibility for participation in the EBP and receipt of bonus awards pursuant to the terms and conditions of the Plan (“Awards”) will be limited to those employees whose position affords the opportunity to materially affect the Company’s overall profitability.  Unless otherwise specifically approved by the Chief Executive Officer, employees who participate in any other Company bonus plan, including without limitation the PRP or the SMBP plan, and employees who are paid on a commission basis or participate in the bonus plan for commissioned salespersons, are not eligible to participate in the EBP.   4.2           Participation for a Participant begins the first day of employment or the designated effective date of an employee’s eligibility to participate in the EBP.   Eligibility for the Plan does not guarantee payment of an Award , since payment is dependent upon earning the Award and the other provisions of the EBP, including both individual and Company performance.   4.3           Participants who are newly hired, transfer to a new position or become eligible to participate during a Plan Year are eligible to earn an Award as follows:   2 --------------------------------------------------------------------------------   (a)           Newly-hired participants will be eligible for a pro-rated award based on the number of full calendar weeks worked in the eligible position from the first date of employment or the designated effective date during the Plan Year.   (b)           Employees who transfer to a new position that is not currently eligible for the Plan will be eligible for a prorated Award based on the number of full calendar weeks worked in the eligible position during the Plan Year.   (c)           Employees who transfer or are promoted to another position and remain eligible for another bonus plan, will be eligible to earn a prorated Award for each position based on the number of full weeks worked in each position during the Plan Year.  Eligibility to earn Awards will be based on the number of full weeks an employee worked in each position and the applicable Target Awards and/or ratings for each position.   4.4           If the employment status of a Participant changes prior to the Payment Date (defined below), eligibility for an Award will depend on the reason for the status change:   (a)           Resignation or termination for any reason:  Eligibility for Awards is forfeited on resignation or termination for cause before the Payment Date.   (b)           Retirement: If a Participant retires under the Company retirement plan (currently age 55 or older with at least 15 years of service or 65 years of age with at least 10 years of service) and participated in the Plan for at least six months of the Plan Year, eligibility for an Award may be prorated based on the number of full weeks of participation in the Plan Year.  A prorated Award will be paid at the time Awards are paid to all Participants.  If participation in the Plan is less then six months during the Plan Year, the employee is not eligible for an Award for that Plan Year.   (c)           Death or disability:  Eligibility to earn an Award for Participants who dies or becomes disabled during a Plan Year will be prorated based on the number of full weeks of participation in the Plan Year.  Any Award will be paid at the time other Awards and bonuses are paid to all Participants.  A Participant will be considered “disabled” if the Participant is disabled as defined under the provisions of the Company’s Long-Term Disability Plan then in effect.  For a Participant who dies prior to the Payment Date, the Award will be paid to the Participant’s beneficiary as designated in the Participant’s group term life insurance at the time of death.   5.             DISCRETIONARY COMPANY THRESHOLDS   Awards may not be paid to any Participant if the Company fails to achieve one or more minimum financial performance targets (the “Discretionary Company Thresholds”) as   3 --------------------------------------------------------------------------------   determined and set by the Company in its sole discretion.  The Discretionary Company Thresholds may be set and/or amended by the Company at its sole discretion at any time during the Plan Year and up to the date of payment of the Awards under the Plan.  The Company will communicate the Discretionary Company Thresholds to Participants from time to time, but no later than the date on which the Awards are paid.   6.             TIMING OF CALCULATIONS, PAYMENTS   6.1           Awards are earned by performance during the Plan Year and by remaining employed by the Company through the date Awards are paid (“Payment Date”).   6.2           Subject to final approval by the Chief Executive Officer and the Board of Directors, the Payment Date will be on or before March 15 following the end of the fiscal year, but not before the completion of the audit of the Company’s financial statements.   6.3           If a Participant’s employment terminates prior to the Payment Date, the award is forfeited, unless the termination is caused by retirement, death or disability, in which case payment is governed by Section 4.4 above.   6.4           It is intended that all Awards earned will be paid in cash.  However, the Company reserves the right to distribute common stock in the Company or other non-cash forms of compensation in lieu of cash in the event economic circumstances dictate such action.   6.5           Federal and state income taxes and other required taxes will be withheld from bonuses under applicable law.   7.             MAXIMUM ANNUAL BONUSES   The maximum Award to be received by any Participant shall not exceed 200% of the Target Award (as defined below), inclusive of CEO Awards.   8.             CEO AWARDS   The Company reserves the right to award Participants in cases of exceptional and exceedingly deserving circumstances through a supplemental discretionary bonus award to be determined in the Chief Executive Officer’s sole discretion (subject, in the case of Section 16 officers to the ratification by the Compensation Committee), referred to as a “CEO’s Award.”   9.             AWARD CALCULATION   9.1           Employees are eligible for an Award each Plan Year, based on (a) financial measures (“Financial Performance Targets”) for the Company, business unit or line of business and (b) individual achievement of important Company or individual   4 --------------------------------------------------------------------------------   objectives in each Participant’s area of responsibility (“Strategic Performance Measures”).   9.2           Target Awards:   (a)           Each Participant will be assigned a “Target Award” by the Company in its sole discretion (generally based on a Participant’s position and that position’s potential contribution to the Company) by March 1 of each Plan Year.  For new hires or newly eligible Participants (whether by transfer or promotion), the Target Award will be set within sixty (60) days of eligibility for the Plan.   (b)           Target Awards will be weighted based on achievement of Financial Performance Targets and Strategic Performance Measures established at or near the beginning of a Plan Year for each Participant.  As between Financial Performance Targets and Strategic Performance Measures, Awards will be weighted as follows:   1.     Awards for the Chief Executive Officer, the President of a Global Region or a line of business leader, will be weighted 80% on Financial Performance Targets (of the Company for the Chief Executive Officer, the region for the regional President and LOB for the line of business leader) and 20% on individual achievement of Strategic Performance Measures.   2.     Awards for Participants who serve in Executive Staff positions (e.g., CFO, Controller and General Counsel) will be weighted 60% on Financial Performance Targets and 40% on individual achievement of Strategic Performance Measures.   (c)           In the event that a Target Award amount is changed during a Plan Year, the payment of that year’s bonus award will be pro-rated based on the number of full weeks that each respective Target was in force, unless other written agreements supersede this provision.   9.3           Financial Performance Targets:   Financial Performance Targets are approved by the Chief Executive Officer and the Board of Directors at or near the beginning of each Plan Year.  For the 2006 Plan Year, EBITDA will be the metric utilized to set Financial Performance Targets for the Company, regions, business units and lines of business.  The Company reserves the right to change the Financial Performance Target metric each year.   5 --------------------------------------------------------------------------------   9.4           Strategic Performance Measures:   (a)           Participants must have a minimum of three and a maximum of six measurable Strategic Performance Measures set by the Company in writing by March 1 of each Plan Year.   (b)           For new hires or newly eligible Participants (whether by transfer or promotion), the Strategic Performance Measures must be set within sixty (60) days of eligibility for the Plan.   (c)           Non-submission of Strategic Performance Measures to the Chief Executive Officer (or in the case of the Chief Executive Officer’s and other Section 16 officers’ Strategic Performance Measures, the Board of Directors) will make the Participant ineligible for an Award.   (d)           Each Strategic Performance Measure will be assigned a weight by the Participant’s Manager, subject to the approval of the Chief Executive Officer. The weighted Strategic Performance Measures for the Chief Executive Officer and other Section 16 officers will be approved by the Board of Directors. The aggregate weightings of all Strategic Performance Measures must equal 100%.   9.5           Calculation of Awards:  At the conclusion of the Plan Year, assuming the Discretionary Company Thresholds are satisfied, Awards are calculated by adding the Financial Performance Award (as calculated and defined in Section 9.5(a) below) and the Strategic Performance Measure Award (as calculated and defined in Section 9.5(b) below).   (a)           Financial Performance Award:  Actual financial performance is compared to the Financial Performance Targets and an Adjustment Factor is determined as follows: Achievement Against Financial Performance Target   Adjustment Factor   Example 0 – 70%   0   0% Adjustment Factor 70% - 100%   3.3x for every 1% over 70% up to 100%   90% of target = 66% Adjustment Factor (20% x 3.3) 100% - 200%   100% plus 3.3x for every 1% over 100% up to an additional 100%   120% of target = 166% Adjustment Factor (100% + 3.3 x 20%)   The Adjustment Factor is then multiplied by the dollar amount of the Target Award allocated to Financial Performance Targets (i.e., 80% of the Target Award for the Chief Executive Officer, the Presidents of a Global Region or line of business leaders, or 60% for the Executive Staff positions).  This amount equals the “Financial Performance Award.”   6 --------------------------------------------------------------------------------   (b)           Strategic Performance Measure Award: Performance against each Strategic Performance Measure will be rated on a scorecard using a scale of 1 through 5, with 1 being “far below expectations” or its equivalent and 5 being “far exceeds expectations” or its equivalent.  The scorecard will also contain space for qualitative comments regarding the Participant’s performance (e.g., describing special circumstances).  The information on the scorecard, taken as a whole, is then used to determine the amount of the Strategic Performance Measure Award, from zero to a maximum of 150% of the dollar amount of the Target Award allocated to Strategic Performance Measures (i.e., 20% of the Target Award for the Chief Executive Officer, the Presidents of a Global Region or line of business leaders, or 40% for the Executive Staff positions).  The final Strategic Performance Measure Award payout recommendation will be made by the Participant’s Manager, subject to the approval of the Chief Executive Officer, or in the case of the Chief Executive Officer and the other Section 16 officers, the Board of Directors.   (c)           Notwithstanding the foregoing, if Discretionary Company Thresholds are not met, no Award will be paid.   10.          SUSPENSION, AMENDMENT OR TERMINATION OF THE PLAN   The Company reserves the right at any time prior to payment of the Awards to review, interpret, alter, amend, or terminate (discontinue) – with or without notice – the Executive Bonus Plan, including, without limitation, the calculation and method of and eligibility for Award payments.  This Plan does not constitute a contract of employment (express or implied) and cannot be relied upon as such.  This Plan does not alter the at will employment relationship between the Company and the Plan Participants.   7 --------------------------------------------------------------------------------

EXHIBIT 10.1     Principal $1,000,000.00 Loan Date 10-07-2005 Maturity 04-07-2007 Loan No. 1673921 Call/Coll 1 Account Officer GSS Initials References in the shaded area are for lenders use only and do not limit applicability of this document to any particular loan or item. Any item above containing “***” has been omitted due to text length limitations. Borrower:    Stationers, Inc.   Lender:   First Sentry Bank   P.O. Box 2167     P.O. Box 2107   Huntington, WV 25701     823 8th Street         Huntington, WV 25721   Principal Amount: $1,000,000.00 Initial Rate: 7.00% Date of Note: October 7, 2005 PROMISE TO PAY. Stationers, Inc. (“Borrower”) promises to pay to FIRST SENTRY BANK (“Lender”), or order, in lawful money of the United States of America, the principal amount of One Million & 00/100 Dollars ($1,000,000.00) or so much as may be outstanding, together with interest on the unpaid outstanding principal balance of each advance. Interest shall be calculated from the date of each advance until repayment of each advance. PAYMENT. Borrower will pay this loan in one payment of all outstanding principal plus all accrued unpaid interest on April 7, 2007. In addition, Borrower will pay regular monthly payments of all accrued unpaid interest due as of each payment date, beginning November 7, 2005, with all subsequent interest payments to be due on this same day of each month after that. Unless otherwise agreed or required by applicable law, payments will be applied first to any unpaid collection costs; then to any late charges; then to any accrued unpaid interest; and then to principal. The annual interest rate for this Note is computed on a 365/360 basis; that is, by applying the ratio of the annual interest rate over a year of 360 days, multiplied by the outstanding principal balance, multiplied by the actual number of days the principal balance is outstanding. Borrower will pay Lender at Lender’s address shown above or at such other place as Lender may designate in writing. VARIABLE INTEREST RATE. The interest rate on this Note is subject to change from time to time based on changes in an independent index which is the prime rate as published in the Wall Street Journal (the “Index”). The index is not necessarily the lowest rate charged by Lender on its loans. If the index becomes unavailable during the term of this loan, Lender may designate a substitute index after notice to Borrower. Lender will tell Borrower the current index rate upon Borrower’s request. The interest rate change will not occur more often than each day. Borrower understands that Lender may make loans based on other rates as well. The index currently is 7.00% per annum. The interest rate to be applied to the unpaid principal balance of this Note will be at a rate equal to the index, resulting in an initial rate of 7.00% per annum. A NOTICE: Under no circumstances will the interest rate on this note be more than the maximum rate allowed by applicable law. PREPAYMENT. Borrower may pay without penalty all or a portion of the amount owed earlier than it is due. Early payments will not, unless agreed to by Lender in writing, relieve Borrower or Borrowers obligation to continue to make payments of accrued unpaid interest. Rather, early payments will reduce the principal balance due. Borrower agrees not to send Lender payments marked “paid in full”, “without recourse”, or similar language. If Borrower sends such a payment, Lender may accept it without losing any of Lender’s rights under this Note, and Borrower will remain obligated to pay any further amount owed to Lender. All written communications concerning disputed amounts, including any check or other payment instrument that indicates that the payment constitutes “payment in full” of the amount owed or that is tendered with other conditions or limitations or as full satisfaction of a disputed amount must be mailed or delivered to: FIRST SENTRY BANK, P.O. BOX 2107 HUNTINGTON, WV 25721. LATE CHARGE. If a payment is 10 days or more late, Borrower will be charged $25.00. INTEREST AFTER DEFAULT. Upon default, including failure to pay upon final maturity, the total sum due under this Note will bear interest from the date of acceleration or maturity at the variable interest rate on this Note. The interest rate will exceed the maximum rate permitted by applicable law. DEFAULT. Each of the following shall constitute an event of default (“Event of Default”) under this Note: Payment Default. Borrower fails to make any payment when due under this Note. Other Defaults. Borrower fails to comply with or to perform any other term, obligation, covenant or condition contained in this Note or in any of the related documents or to comply with or to perform any term, obligation, covenant or condition contained in any other agreement between Lender and Borrower. False Statements. Any warranty, representation, or statement made or furnished to Lender by Borrower or on Borrower’s behalf under this Note or the related documents is false or misleading in any material respect, either now or at the time made or furnished or becomes false or misleading at any time thereafter. Insolvency. The dissolution or termination of Borrower’s existence as a going business, the insolvency of Borrower, the appointment of a receiver for any part of Borrower’s property, any assignment for the benefit of creditors, any type of creditor workout, or the commencement of any proceeding under any bankruptcy or insolvency laws by or against Borrower. Creditor or Forfeiture Proceedings. Commencement of foreclosure or forfeiture proceedings, whether by judicial proceeding, self-help, repossession or any other method, by any creditor of Borrower or by any governmental agency against any collateral securing the loan. This includes a garnishment of any of Borrower’s accounts, including deposit accounts, with Lender. However, this Event of Default shall not apply if there is a good faith dispute by Borrower as to the validity or reasonableness of the claim which is the basis of the creditor or forfeiture proceeding and if Borrower gives Lender written notice of the creditor or forfeiture proceeding and deposits with Lender monies or a surety bond for the creditor or forfeiture proceeding, in an amount determined by Lender, in its sole discretion, as being an adequate reserve or bond for the dispute. Events Affecting Guarantor. Any of the preceding events occurs with respect to any guarantor, endorser, surety, or accommodation party of any of the indebtedness or any guarantor, endorser, surety, or accommodation party dies or becomes incompetent, or revokes or disputes the validity of, or liability under, any guaranty of the indebtedness evidenced by this Note. In the event of a death, Lender, at its option, may, but shall not be required to, permit the guarantor’s estate to assume unconditionally the obligations arising under the guaranty in a manner satisfactory to Lender, and, in doing so, cure any Event of Default. Change In Ownership. Any change in ownership of twenty-five percent (25%) or more of the common stock of Borrower. Adverse Change. A material adverse change occurs in Borrower’s financial condition, or Lender believes the prospect of payment or performance of this Note is impaired. Cure Provisions. If any default, other than a default in payment is curable and if Borrower has not been given a notice of a breach of the same provision of this Note within the preceding twelve (12) months, it may be cured if Borrower, after receiving written notice from Lender demanding cure of such default: (1) cures the default within ten (10) days; or (2) if the cure requires more than ten (10) days, immediately initiates steps which Lender deems in Lender’s sole discretion to be sufficient to cure the default and thereafter continues and completes all reasonable and necessary steps sufficient to produce compliance as soon as reasonably practical. LENDER’S RIGHTS. Upon default, Lender may declare the entire unpaid principal balance on this Note and all accrued unpaid interest immediately due, and then Borrower will pay that amount. ATTORNEYS’ FEES; EXPENSES. Lender may hire or pay someone else to help collect this Note if Borrower does not pay. Borrower will pay lender that amount. This includes, subject to any limits under applicable law, Lender’s attorneys’ fees and Lender’s legal expenses, whether or not there is a lawsuit, including attorney’s fees, expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), and appeals. If not prohibited by applicable law, Borrower also will pay any court costs, in addition to all other sums provided by law. GOVERNING LAW. This Note will be governed by federal law applicable to Lender and, to the extent not preempted by federal law, the laws of the State of West Virginia without regard to its conflicts of law provisions. This Note has been accepted by Lender in the State of West Virginia. CHOICE OF VENUE. If there is a lawsuit, Borrower agrees upon Lender’s request to submit to the jurisdiction of the courts of CABELL County, State of West Virginia. RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a right of setoff in all Borrower’s accounts with Lender (whether checking, savings, or some other account). This includes all accounts Borrower holds jointly with someone else and all accounts Borrower may open in the future. However, this does not include any IRA or Keogh accounts, or any trust accounts for which setoff would be prohibited by law. Borrower authorizes Lender, to the extent permitted by applicable law, to charge or setoff all sums owing on the debt against any and all such accounts. LINE OF CREDIT. This Note evidences a revolving line of credit. Advances under this Note may be requested either orally or in writing by Borrower or as provided in this paragraph. Lender may, but need not, require that all oral requests be confirmed in writing. All communications, instructions, or directions by telephone or otherwise to Lender are to be directed to Lender’s office shown above. The following person currently is authorized to request advances and authorize payments under the line of credit until Lender receives from Borrower, at Lender’s address shown above, written notice of revocation of his or her authority: J. MAC ALDRIDGE, Chairman of the Board of Stationers, Inc. Borrower agrees to be liable for all sums either: (A) advanced in accordance with the instructions of an authorized person or (B) credited to any of Borrower’s accounts with Lender. The unpaid principal balance owing on this Note at any time may be evidenced by endorsements on this Note or by Lender’s internal records, including daily computer print-outs. Lender will have no obligation to advance funds under this Note if: (A) Borrower or any guarantor is in default under the terms of this Note or any agreement that Borrower or any guarantor has with Lender, including any agreement made in connection with the signing of this Note; (B) Borrower or any guarantor ceases doing business or is insolvent; (C) any guarantor seeks, claims or otherwise attempts to limit, modify or revoke such guarantor’s guarantee of this Note or any other loan with Lender; or (D) Borrower has applied funds provided pursuant to this Note for purposes other than those authorized by Lender.   PRIOR NOTE. THIS NOTE REPRESENTS THE RENEWAL AND EXTENSION OF THAT CERTAIN PROMISSORY NOTE DATED 12/06/99. THE NOTE WAS RENEWED AND EXTENDED ON 10/17/00, 4/06/01, 10/7/02 AND 4/7/04. ALL TERMS AND CONDITIONS OF THE ORIGINAL NOTE, INCLUDING PROVISIONS FOR COLLATERAL AND PERSONAL GUARANTEES, SHALL REMAIN IN FULL FORCE AND EFFECT… SUCCESSOR INTERESTS. The terms of this Note shall be binding upon Borrower, and upon Borrower’s heirs, personal representatives, successors and assigns, and shall inure to the benefit of Lender and its successors and assigns. NOTIFY US OF INACCURATE INFORMATION WE REPORT TO CONSUMER REPORTING AGENCIES. Please notify us if we report any inaccurate information about your account(s) to a consumer reporting agency. Your written notice describing the specific inaccuracy(ies) should be sent to us at the following address: FIRST SENTRY BANK P.O. BOX 2107 HUNTINGTON, WV 25721. GENERAL PROVISIONS. Lender may delay or forgo enforcing any of its rights or remedies under this Note without losing them. Borrower and any other person who signs, guarantees or endorses this Note, to the extent allowed by law, waive presentment, demand for payment, and notice of dishonor. Upon any change in the terms of this Note, and unless otherwise expressly stated in writing, no party who signs this Note, whether as maker, guarantor, accommodation maker or endorser, shall be released from liability. All such parties agree that Lender may renew or extend (repeatedly and for any length of time) this loan or release any party or guarantor or collateral; or impair, fail to realize upon or perfect Lender’s security interest in the collateral; and take any other action deemed necessary by Lender without the consent of or notice to anyone. All such parties also agree that Lender may modify this loan without the consent of or notice to anyone other than the party with whom the modification is made. The obligations under this Note are joint and several. PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO THE TERMS OF THE NOTE. BORROWER ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS PROMISSORY NOTE. BORROWER: STATIONERS, INC. BY: COPY______________________________________________________  J. MAC ALDRIDGE, CHAIRMAN OF THE BOARD OF STATIONERS, INC.

  Exhibit 10.1 FIRST BANCORP SENIOR MANAGEMENT SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN Effective January 1, 1993     -------------------------------------------------------------------------------- TABLE OF CONTENTS       Page     ARTICLE 1 - DEFINITIONS 2     ARTICLE 2 - ELIGIBILITY 5     ARTICLE 3 - EARLY RETIREMENT 6     ARTICLE 4 - NORMAL RETIREMENT 7     ARTICLE 5 - DELAYED RETIREMENT 9     ARTICLE 6 - DISABILITY RETIREMENT 10     ARTICLE 7 - SURVIVOR BENEFITS 13     ARTICLE 8 - TERMINATION OF EMPLOYMENT 15     ARTICLE 9 - PAYMENT OF RETIREMENT BENEFITS 17     ARTICLE 10 - PENSION RETIREMENT COMMITTEE 18     ARTICLE 11 - CLAIM PROCEDURE 19     ARTICLE 12 - UNFUNDED PLAN 21     ARTICLE 13 - SPENDTHRIFT 22     ARTICLE 14 - AMENDMENT AND TERMINATION 23     ARTICLE 15 - MISCELLANEOUS PROVISIONS 242424     -i- -------------------------------------------------------------------------------- FIRST BANCORP SENIOR MANAGEMENT SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN EFFECTIVE January 1, 1993 the Employer establishes the First Bancorp Senior Management Supplemental Executive Retirement Plan. WHEREAS, it is the intention of the Employer to establish an unfunded, nonqualified, supplemental pension plan for the benefit of members of management and highly compensated employees, as selected by the Employer's Board of Directors. WHEREAS, the Plan embodied herein has been duly approved and authorized by the Board of Directors of said Employer. NOW, THEREFORE, THIS AGREEMENT, CREATION AND NAME This Plan is effective January 1, 1993. The name of the Plan shall be the First Bancorp Senior Management Supplemental Executive Retirement Plan, hereafter referred to as "Plan". -------------------------------------------------------------------------------- ARTICLE 1 DEFINITIONS The following terms shall have the meanings indicated when capitalized throughout this document, unless the context clearly indicates otherwise.   1.1 Accrued Benefit shall mean a Participant's benefit determined on any given date and will be an allocable portion of the benefit to which he will be entitled at Normal Retirement Date. The Accrued Benefit is determined as follows: The reference to Section 4.2 herein, using expected Years of Credited Service as of a Participant's Normal Retirement Date, and using Final Average compensation as of the accrual date, multiplied by the ratio (not to exceed 1) of (a) over (b) where (a) is the number of Years of Credited Service completed by an Employee and (b) is the number of Years of Credited Service an Employee would have completed if he had continued until his Normal Retirement Date.   1.2 Actuarial (or Actuarially) Equivalent shall mean a benefit of equivalent value to the Normal Annuity Form determined by generally accepted actuarial principles, using the interest and mortality rates set forth for this purpose in the First Bancorp Employees' Pension Plan.   1.3 Board shall mean the Board of Directors of the Employer.   1.4 Code shall mean the Internal Revenue Code of 1986 and amendments thereto.   1.5 Committee shall mean the Pension Retirement Committee appointed by the Board to administer the Plan (also known as the Pension Committee or the Retirement Committee).   1.6 Compensation - An Employee's Compensation for any Plan Year shall mean his wages within the meaning of Code Section 3401(a) and all other payments to the Employee by the Employer (in the course of the Employer's trade or business) for which the Employer is required to furnish the Employee a written statement under Code Section 6041(d) and 6051(a)(3), reduced by all of the following (even if includable in gross income): Reimbursements or other expense allowances, fringe benefits (cash and noncash), moving expenses, deferred compensation and welfare benefits. Compensation shall also include elective contributions that are made by the Employer on behalf of the Employee that are not included in gross income under Code Section 125, 402(a)(8) or 402(h). As of any Anniversary Date, an Employee's Compensation shall be the Compensation (as defined in the preceding paragraph) paid for the prior calendar year. 2 --------------------------------------------------------------------------------   1.7 Dates:   (a) The Effective Date of the Plan is January 1, 1993.   (b) Anniversary Date is January 1, 1993, and thereafter the Anniversary Date shall be the first day of each Plan Year.   (c) Plan Year: The Plan Year shall begin each January 1 and end the following December 31.   (d) Entry Date shall mean the date specified by the Board on which an Employee's participation shall begin.   1.8 Eligible Spouse shall mean the spouse to whom a Participant is married on the date the Participant's benefits under this Plan are to commence or on the Participant's date of death.   1.9 Employee shall mean any person on the payroll of the Employer who is subject to withholding for purposes of Federal income taxes and for purposes of the Federal Insurance Contributions Act.   1.10 Employer or Company shall mean First Bancorp and any successor of First Bancorp.   1.11 Gender and Number - The masculine pronoun shall include the feminine and the singular shall include the plural.   1.12 Normal Retirement Age shall be a Participant's 65th birthday.   1.13 Normal Retirement Date for a Participant shall be the first day of the month coinciding with or next following the Participant's 65th birthday.   1.14 Participant shall mean any Employee or former Employee (or Beneficiary thereof) who has become a Participant pursuant to the provisions of Section 2.1 and whose benefits under the Plan have not been paid in full.   1.15 Plan shall mean the "First Bancorp Senior Management Supplemental Executive Retirement Plan" as embodied in this instrument, any and all supporting documents, and all subsequent amendments and supplements thereto. 3 --------------------------------------------------------------------------------   1.16 Plan Administrator shall mean the Employer, unless otherwise designated by the Board.   1.17 Service (a) Years of Credited Service shall mean a Participant's "Years of Credited Service" as defined in the First Bancorp Employees' Pension Plan. (b) Years of Service shall mean a Participant's "Years of Service" as defined in the First Bancorp Employees' Pension Plan. 4 -------------------------------------------------------------------------------- ARTICLE 2 ELIGIBILITY   2.1 Requirements for Participation - An Eligible Employee shall participate in the Plan on January 1, 1993 or any subsequent Entry Date coinciding with or next following the date he is designated by the Board as a Participant in the Plan. 5 -------------------------------------------------------------------------------- ARTICLE 3 EARLY RETIREMENT   3.1 Early Retirement Benefit - If a Participant shall cease to be an Employee following his 55th birthday but prior to his Normal Retirement Date, this shall be considered as an Early Retirement, provided the Participant shall have completed 15 Years of Service in the employ of the Employer. Monthly benefit payments shall start on the date the Participant's retirement benefits under the First Bancorp Employees' Pension Plan start, and the amount of such benefit shall be determined as follows:   (a) If the payment of benefits commences at Normal Retirement Date, the amount of the benefit shall be the Participant's Accrued Benefit determined as of his Early Retirement Date.   (b) If the payment of benefits commences prior to Normal Retirement Date, the amount of the benefit shall be the Participant's Accrued Benefit determined as of his Early Retirement Date, reduced as follows: The Accrued Benefit shall be reduced by 1/180 for each of the first 60 months, and 1/360 for each of the next 60 months, by which payments commence prior to Normal Retirement Date.   3.2 The Early Retirement Date of a Participant who ceases to be an Employee shall be the first day of the month coinciding with or next following the date such Participant meets the requirements stated in Section 3.1.   3.3 The Accrued Benefit of a Participant shall be 100% vested and nonforfeitable on his Early Retirement Date. 6 -------------------------------------------------------------------------------- ARTICLE 4 NORMAL RETIREMENT    4.1 At Normal Retirement Age each Participant shall have a 100% vested and nonforfeitable right to his Normal Retirement Benefit.   4.2 Amount of Normal Retirement Benefit - The amount of the monthly Normal Retirement Benefit, payable as a straight life annuity, shall be determined as follows:   (a) Determination of Normal Retirement Benefit - Each Participant shall be entitled to receive a monthly retirement benefit commencing at Normal Retirement Date in an amount equal to (1), minus (2) minus (3) below:   (1) 3.0% of the Participant's Final Average Monthly Compensation multiplied by his number of Years of Credited Service subject to a maximum of 20 years (maximum 60%). The maximum benefit is increased to 65% of Final Average Compensation for James H. Garner and gives credit to Mr. Garner for up to 22 Years of Credited Service in the calculation of his benefit; less   (2) 50% of the Participant's monthly primary Social Security benefit payable at his Social Security retirement age, less   (3) the amount of the Participant's monthly Normal Retirement Benefit as determined under Section 4.2 of First Bancorp Employees' Pension Plan. If a Participant retires or dies on a date other than his Normal Retirement Date, the amount determined for purposes of this Section 4.2(a)(3) shall be his "Accrued Benefit" determined under the First Bancorp Employees' Pension Plan as of such date.   (b) The Normal Retirement Benefit shall be equal to the greater of a Participant's Early Retirement Benefit or his Normal Retirement Benefit at Normal Retirement Age.   (c) Final Average Monthly Compensation - A Participant's "Final Average Monthly Compensation" is one-twelfth of:   (1) his average annual Compensation for those five consecutive Plan Years during all of which he worked as an Employee, within the last ten Plan Years during all of which he worked as an Employee, that produce the highest average, or 7 --------------------------------------------------------------------------------   (2) his average annual Compensation for all Plan Years during all of which he worked as an Employee if five or less years. However, the Compensation corresponding to a Plan Year during which he did not work throughout the entire year shall be used as one of the five consecutive years if the result is a higher average than as determined under (1) and/or (2) above. The five consecutive Plan Years used in making the computation may not necessarily be five "consecutive" Plan Years, or Plan Years during all of which the Participant worked as an Employee may be interspersed with Plan Years during all or part of which he did not work as an Employee. In the latter event, all Plan Years during which he did not work as an Employee for all of such year shall be ignored, and the remaining Plan Years shall be deemed to be consecutive, provided that any Compensation ignored as a result of the application of this paragraph shall not be ignored if using such Compensation would result in a higher average. If there are no Plan Years during all of which the Participant worked as an Employee, his Final Average Compensation shall be his average adjusted Compensation corresponding to the last five Plan Years (or all Plan Years if less than five during any part of which he is an Employee). Adjusted Compensation is determined by annualizing his Compensation which corresponds to such Plan Year or Plan Years to reflect what Compensation would have been if he had worked as an Employee for the entire Plan Year. Such Compensation shall be annualized by multiplying such partial Compensation by a ratio, the numerator of which is 365, and the denominator of which is the number of days of the Plan Year for which he was paid as an Employee. 8 -------------------------------------------------------------------------------- ARTICLE 5 DELAYED RETIREMENT 5.1 A Participant may retire later than his Normal Retirement Date. In such event:   (a) A Participant's Delayed Retirement Date shall be the first day of the month coincident with or next following his last day of employment. The amount of benefit to which the Participant shall be entitled as of the date payments actually commence shall be equal to his Accrued Benefit calculated as of his Delayed Retirement Date, considering his Final Average Compensation through his Delayed Retirement Date and his Years of Credited Service, subject to a maximum of 20 years, as of such date. Notwithstanding the above, the maximum Years of Credited Service of James H. Garner shall be 22 years with a maximum Delayed Retirement Benefit of 65% of his Final Average Compensation offset by the benefits described in Section 4.2(a)(2) and Section 4.2(a)(3).   (b) The benefit so determined in 5.1(a) above shall be payable as a straight life annuity. 9 -------------------------------------------------------------------------------- ARTICLE 6   DISABILITY RETIREMENT   6.1 Eligibility for Disability Retirement Benefits   (a) A Participant who is not yet eligible for Early Retirement under Article 3 or Normal Retirement under Article 4, and who ceases to be an Employee due to disability shall be eligible to receive a Disability Retirement Benefit if the Participant qualifies for disability benefits under a long-term disability insurance plan sponsored by the Employer.   (b) The Disability Retirement Date of a Participant shall be the first day of the month coinciding with or next following the date a Participant meets the requirements of Section 6.1(a) above. However, benefit payment shall be deferred until the date such long-term disability insurance benefit shall terminate, whereupon the Participant shall be eligible to receive his disability retirement benefit, reduced as provided in Section 6.2(b)(4) if payment commences before his Normal Retirement Date.   6.2 Determination of Disability Benefit   (a) Disability benefit payments shall be payable commencing on the first day of any month on or after his Disability Retirement Date and before his Normal Retirement Date, but not before long-term disability benefit payments stop, as elected by the Participant, provided, however, that any such benefit shall cease upon the first to occur of the following dates: (1) the date the Participant is deemed to be no longer disabled for purposes of the long-term disability insurance plan, (2) the date of the Participant's death, unless the option elected by the Participant pursuant to Article 9 provides for the continuation of payments to an Eligible Spouse or other Beneficiary, or (3) the date the Participant attains his Normal Retirement Age, at which time such Participant shall be deemed to be a retired Participant no longer required to furnish proof of disability. Any benefit being paid to a disabled Participant who reaches Normal Retirement Age shall continue as if the Participant had elected such benefit at his Normal Retirement Date. 10 --------------------------------------------------------------------------------   (b) The amount of such benefit shall be determined as follows: (1) Once a Participant is determined to be totally and permanently disabled, his Accrued Benefit shall become 100% vested and nonforfeitable.   (2) Crediting of Service - For purposes of benefit accrual, a Participant shall continue to receive credit for Hours of Service until his Disability Retirement Date equal to the Hours of Service for which he would have normally received credit if he had been actively employed until such date.   (3) If the payment of benefits commences at Normal Retirement Date, the amount of the benefit shall be the Participant's Accrued Benefit as of his Disability Retirement Date.   (4) If the payment of benefits commences prior to Normal Retirement Date, the amount of the benefit shall be the Participant's Accrued Benefit as of his Disability Retirement Date, reduced as follows: The Accrued Benefit shall be reduced by 1/180 for each of the first 60 months and 1/360 for each of the next 60 months by which the starting date of the benefit precedes Normal Retirement Date, and reduced actuarially in accordance with Section 1.2(c) herein for each month thereafter.   6.3 Cash-out of Small Benefits - The provisions of Section 6.2 notwithstanding, if the Actuarially Equivalent lump sum present value of the disability benefit determined for any disabled Participant shall be $5,000 or less, then such lump sum shall be paid directly to such disabled Participant.   6.4 Recovery from Disability - If a Participant is deemed to be no longer disabled for purposes of the long-term disability insurance plan prior to his Normal Retirement Date, he shall be considered recovered from his disability. If such Participant returns to the service of the Employer within 30 days of such recovery, then he shall be deemed not to have incurred a Break in Service as a result of his permanent and total disability, but the number of years and fractions 11 -------------------------------------------------------------------------------- thereof during which he received payments pursuant to this Article shall not be counted in determining his Years of Credited Service and Years of Service for any purpose under the Plan. If the Participant does not return to the service of the Employer within 30 days of such recovery, then he shall be deemed to have separated from the service of the Employer as of his Disability Retirement Date, and no further benefits shall be payable to him under the Plan. 12 -------------------------------------------------------------------------------- ARTICLE 7   SURVIVOR BENEFITS   7.1 Determination of Survivor Benefits   (a) The Eligible Spouse of a Participant who has completed less than five Years of Service with the Employer shall receive no death benefits from this Plan.   (b) If a Participant who has completed five or more Years of Service shall die before the Earliest Retirement Age, his surviving Eligible Spouse, if any, shall receive a "Preretirement Survivor Annuity" commencing at the Earliest Retirement Age under the Plan, and subject to all relevant early retirement reductions under the Plan.   (c) If a Participant who has completed five or more Years of Service shall die after the Earliest Retirement Age, his surviving Eligible Spouse, if any, shall receive a "Preretirement Survivor Annuity" commencing immediately (with appropriate early retirement reductions) unless such surviving Eligible Spouse elects a later date under the terms of the First Bancorp Employees' Pension Plan.   7.2 Determination of Survivor Benefits   (a) For a Participant who meets the requirements of Section 7.1(b) above, a Preretirement Survivor Annuity shall be determined as follows: The Participant's surviving Eligible Spouse, if any, will receive the same benefit that would be payable if the Participant had:   (1) separated from service on the date of death;   (2) survived to the Earliest Retirement Age;   (3) retired at the Earliest Retirement Age with an immediate joint and 50% survivor annuity with his Eligible Spouse as the contingent annuitant; and   (4) died on the day after the Earliest Retirement Age. 13 --------------------------------------------------------------------------------     (b) For a Participant who meets the requirements of Section 7.1(c) above, a Preretirement Survivor Annuity shall be determined as follows: The Participant's surviving Eligible Spouse, if any, will receive the same benefit that would be payable if the Participant had retired on the day prior to his death with an immediate joint and 100% survivor annuity, with his Eligible Spouse as the contingent annuitant.   (c) Notwithstanding the provisions of Section 7.2(a) and (b) above, if the Actuarially Equivalent present value of the survivor's benefit is $5,000 or less, such lump sum present value shall be paid as soon as practical to the surviving Eligible Spouse.   (d) The Earliest Retirement Age shall mean the earliest date under the Plan on which a Participant could elect to receive retirement benefits. For this purpose, if a Participant dies prior to meeting the service requirement for eligibility for early retirement, then his Earliest Retirement Age shall be his Normal Retirement Age.   7.3 Death Distribution Provisions for Retired Participants - Upon the death of a Participant who has retired, death benefits, if any, shall be determined under the optional form, if any, under which his retirement benefits were being paid.   7.4 Beneficiary - The beneficiary under any optional form of benefit payment being received by a Participant shall be determined under the terms of the First Bancorp Employees' Pension Plan. 14 -------------------------------------------------------------------------------- ARTICLE 8 TERMINATION OF EMPLOYMENT   8.1 Nonforfeitable Rights - Notwithstanding any other provisions of this Article, a Participant's Accrued Benefit shall be 100% vested and nonforfeitable upon such Participant's attaining Normal Retirement Age or, if earlier, upon his Early Retirement Date or disability pursuant to Article 6 herein, or upon his death after completing five Years of Service.   8.2 Terminated Participant - A terminated Participant shall only be vested (100%) in his Accrued Benefit under this Plan upon the date the Participant qualifies for either Early Retirement (Section 3.1) or Normal Retirement (Section 1.22) or in the event of his death or Disability (as defined in Article 6). Furthermore, a Participant will become 100% vested in his Accrued Benefit in the event of a “Change in Control” (see Section 8.3(b)).     A Participant who terminates his/her employment with the Employer or any of its Affiliated Companies for any reason, other than those listed in the preceding paragraph shall not be entitled to any benefit under this Plan.   8.3 Change in Control   (a) In the event of a Change in Control of the Company (as defined below), each Participant who is actively employed on the date of such Change in Control as of the date of such Change in Control shall become fully vested in his Accrued Benefit under this Plan as of the date of such Change in Control. Payment of such Accrued Benefit may commence on the earlier of his Early Retirement Date of Normal Retirement Date in accordance with the provisions of Article 9.         (b) The term “Change in Control” as used herein shall mean the power, directly or indirectly, to direct the management or policies of the Corporation or to vote forty (40%) or more of any class of voting securities of the Corporation, except that any merger, consolidation or corporate reorganization in which the owners of the capital stock entitled to vote (“Voting Stock”) in the election of directors of the Corporation prior to said combination own sixty-one percent (61%) or more of the resulting entity’s Voting Stock shall not be considered a Change in Control; provided, however, that a Change in Control shall be deemed to have occurred if: (i) any “person” (as that term is used in Sections 13 (d) and 14 (d)(2) of the Securities Exchange Act of 1934), other than a trustee or other fiduciary holding securities under an employee benefit plan of the Corporation, is or becomes the beneficial owner (as the term is used in Section 13(d) of the Securities exchange act of 1934), directly or indirectly, of thirty-three (33%) or more of the Voting Stock of the Corporation or its successors; (ii) during any period of two consecutive years individuals who at the beginning of such period constituted the Board of Directors of the Corporation or its successors (the “Incumbent Board”) cease for any reason to constitute at least a majority thereof; provided, that any person who becomes a director of the Corporation after the beginning of such 15 -------------------------------------------------------------------------------- period whose election was approved by a vote of at least three-quarters of the directors comprising the Incumbent Board shall be considered a member of the Incumbent Board; or (iii) there occurs the sale of all or substantially all of the assets of the Corporation.         (c) The benefits payable under this section in the event of a Change in Control shall be the Accrued Benefit to which an eligible Participant is entitled under the Plan. If the benefits to which a Participant become entitled under the Plan in the event of his Early Retirement or Normal Retirement are greater than the benefits provided under this section, then such other benefits shall be the benefit payable to the Participant (or the beneficiary) under the Plan.   8.4 Facts Concerning the Termination of a Participant’s Employment   (a) The facts concerning the termination of a Participant’s employment shall be transmitted to the Committee by written statement from the Employer, and the Committee may accept such statement as true. The Committee shall not incur any liability by reason of any action taken or omitted on the strength of such statement. 16 -------------------------------------------------------------------------------- ARTICLE 9 PAYMENT OF RETIREMENT BENEFITS   9.1 At a Participant's Disability, Early, Normal or Delayed Retirement Date, retirement benefits shall be paid in the form elected by the Participant in accordance with the terms of the First Bancorp Employees' Pension Plan. Retirement benefits payable in any form other than a straight life annuity shall be the Actuarial Equivalent of the Participant's Accrued Benefit payable as a straight life annuity. 17 -------------------------------------------------------------------------------- ARTICLE 10 PENSION RETIREMENT COMMITTEE   10.1 The Retirement Committee shall have full responsibility, discretion and authority to interpret and administer the Plan, including the power to promulgate rules of Plan administration, to settle any disputes as to rights or benefits arising from the Plan, to appoint agents and delegate its duties, and to make decisions or take such actions as the Retirement Committee, in its sole discretion, deems necessary or advisable to aid in the proper administration of the Plan. Actions and determinations by the Retirement Committee shall be final, binding and conclusive for all purposes of the Plan. The members of the Committee shall be indemnified and held harmless by the Employer against and from any and all loss, cost, liability or expense that may be imposed upon or reasonably incurred by them in connection with or resulting from any claim, action, suit or proceeding to which they may be party or in which they may be involved by reason of any action or failure to act under this Plan, and against and from any and all amounts paid by them in settlement (with the Employer's written approval) or paid by them in satisfaction of a judgment in any such action, suit or proceeding. The foregoing provision shall not apply to any person if the loss, cost, liability or expense is due to such person's gross negligence or willful misconduct. 18 -------------------------------------------------------------------------------- ARTICLE 11 CLAIM PROCEDURE   11.1 Filing a Claim for Benefits - Any claim for a Plan benefit hereunder shall be filed by a Participant or beneficiary (claimant) with the Pension Committee.   11.2 Denial of Claim     (a) If a claim for a Plan benefit is wholly or partially denied, notice of the decision shall be furnished to the claimant by the Committee within a reasonable period of time after receipt of the claim by the Committee.   (b) Any claimant who is denied a claim for benefit shall be furnished written notice setting forth:   (1) The specific reason or reasons for the denial;   (2) Specific reference to the pertinent Plan provisions upon which the denial is based;   (3) A description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary; and   (4) An explanation of the Plan's claim review procedure.   11.3 Claims Review Procedure           (a) In order that a claimant may appeal a denial of a claim, a claimant or his duly authorized representative:   (1) May request a review by written application to the Committee not later than 60 days after receipt by the claimant of written notification of denial of a claim;   (2) May review pertinent documents; and   (3) May submit issues and comments in writing. 19 --------------------------------------------------------------------------------     (b) A decision on review of a denied claim shall be made not later than 60 days after receipt of a request for review, unless special circumstances require an extension of time for processing, in which case a decision shall be rendered within a reasonable period of time, but not later than 120 days after receipt of a request for review.   (c) The decision on review shall be in writing and shall include the specific reasons for the decision and the specific references to the pertinent Plan provisions on which the decision is based. 20 -------------------------------------------------------------------------------- ARTICLE 12 UNFUNDED PLAN   12.1 The Employer's obligations under this Plan shall be an unfunded and unsecured promise to pay. The Employer shall not be obligated under any circumstances to fund its financial obligations under this Plan. Benefit payments shall be made solely from the Employer's general assets. Any assets which the Employer may acquire or set aside to help cover its financial liabilities are and must remain general assets of the Employer subject to the claims of its creditors. Neither the Employer nor the Plan gives any Participant any beneficial ownership interest in any assets of the Employer. All rights of ownership in any such assets are and remain in the Employer. The expenses of administering the Plan shall be borne by the Employer. 21 -------------------------------------------------------------------------------- ARTICLE 13 SPENDTHRIFT   13.1 No benefit under the Plan shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or charge, and any attempt to anticipate, alienate, sell, transfer, assign, pledge, encumber or charge any such benefit shall be void. Prior to the receipt thereof, no such benefit shall in any manner be liable for or subject to the recipient's debts, contracts, liabilities, engagements or torts. 22 -------------------------------------------------------------------------------- ARTICLE 14 AMENDMENT AND TERMINATION   14.1 This Plan may be amended, suspended or terminated at any time by the Employer by a written instrument executed in the name of the Employer under its corporate seal by officers duly authorized to execute such instrument, provided that no such amendment, suspension or termination shall materially adversely affect the rights of any Participant to Accrued Benefits previously earned by such Participant and not yet paid. 23 -------------------------------------------------------------------------------- ARTICLE 15 MISCELLANEOUS PROVISIONS   15.1 Headings - The headings of the Plan have been inserted for convenience of reference only and are to be ignored in any construction of the provisions hereof.   15.2 Plan not Contract of Employment - This Plan shall not be construed as creating or changing any contract of employment between the Employer and its Employees, whether Participants or not, and the Employer retains the right to deal with its Employees, whether Participants or not, and to terminate their respective employment at any time, to the same extent as though this Plan had not been created.   15.3 Invalidity of Certain Provisions - If any provisions of this Plan shall be held invalid or unenforceable, such invalidity or unenforceability shall not affect any other provisions, and this Plan shall be construed and enforced as if such provisions had not been included.   15.4 Law Governing - This Plan shall be construed and enforced according to the laws of the State of North Carolina.   15.5 General Undertaking - All parties to this Plan and all persons claiming any interest whatsoever hereunder agree to perform any and all acts and execute any and all documents and papers which may be necessary or desirable for the carrying out of this Plan or any of its provisions.   15.6 Agreement to Bind - This Plan shall be binding upon the Employer, its assigns, and any successor to substantially all of the Employer's assets and business through merger, acquisition or consolidation, and upon a Participant and his beneficiaries, assigns, heirs, executors and administrators.   15.7 Action by Employer - Whenever under the terms of the Plan the Employer is permitted or required to take some action, such action may be taken by any officer of the Employer who has been duly authorized by the Board of Directors of the Employer.   15.8 The Company shall deduct from the amount of any payments hereunder all taxes required by applicable laws to be withheld. 24

Exhibit 10.1 DOMINION HOMES, INC. AMENDED AND RESTATED INCENTIVE GROWTH PLAN NOTICE OF ELIGIBILITY AND PARTICIPATION AGREEMENT - 2006   To:   Douglas G. Borror From:   Dominion Homes, Inc., Compensation Committee Re:   Dominion Homes, Inc. Incentive Growth Plan The Compensation Committee has designated you as a participant in the Dominion Homes, Inc. Incentive Growth Plan (“Plan”). Our shareholders adopted the Plan [1] to provide incentive compensation to our most senior officers and [2] to ensure that the Company may deduct that incentive compensation when calculating its taxable income. To achieve these objectives, both you, as a Plan participant, and the Company must comply with procedures imposed by the IRS. This Notice describes those procedures. Please read this Notice carefully to ensure that you completely understand what must happen if you are to earn incentive compensation for 2006 and when this compensation, if earned, will be paid. Note: As a condition of eligibility, you must return a signed copy of this form (see Section 3.00) to the Company’s Compensation Committee at the address shown in Section 3.00. 1.00 Your incentive compensation will be paid if certain conditions are met . . . The Plan (and the IRS) require that the Compensation Committee establish:     •   The conditions that must be met if you are to receive incentive compensation under the Plan (“Performance Criteria”);     •   The period over which the Performance Criteria are to be met (“Performance Cycle”); and     •   The amount you will receive if the Performance Criteria are met. 1.01 The Company must achieve certain financial goals Your incentive compensation for 2006 will depend on the Company’s corporate net income, corporate debt management, and customer satisfaction for the 2006 Performance Cycle. As described in Section 1.03, your incentive compensation has been allocated between each of these three elements. -------------------------------------------------------------------------------- 1.02 And, these goals must be met during a limited period of time . . . The Performance Cycle will be the Company’s 2006 fiscal year. 1.03 If these conditions are met, you will receive incentive compensation . . . If the Performance Criteria described in Section 1.03[1] are met at any time during the 2006 Performance Cycle (see Section 1.02), you will receive the incentive compensation described in this section, subject to forfeiture as described in Section 1.03[4]. If the Performance Criteria described in Section 1.03[2] are met at the end of the 2006 Performance Cycle (see Section 1.02), you will receive the incentive compensation described in this section. If the Performance Criteria described in Section 1.03[3] are met at the end of the 2006 Performance Cycle (see Section 1.02), you will receive the incentive compensation described in this section. [1] Net Income Performance Criteria If the Net Income Performance Criteria is met, you will receive incentive compensation in the following amount:   Category   Net Income Achieved   Incentive Compensation Paid   Target   $ 78,000   Stretch   $ 195,000   Exceptional   $ 325,000 [2] Corporate Debt Management If the Corporate Debt Management Performance Criteria is met, you will receive incentive compensation in the following amount:   Category   Corporate Debt Level   Incentive Compensation Paid Target   100% of Target Debt Reduction   $ 78,000 Stretch   133% of Target Debt Reduction   $ 195,000 Exceptional   166% of Target Debt Reduction   $ 325,000   -2- -------------------------------------------------------------------------------- [3] Customer Satisfaction Performance Criteria If the Customer Satisfaction Performance Criteria (as measured by affirmative customer survey responses to the question “Would you recommend us to a friend?”) is met at the end of the Performance Cycle, you will receive incentive compensation in the following amount:   Category   Customer Satisfaction Achieved     Incentive Compensation Paid Target   94 %   $ 39,000 Stretch   95 %   $ 97,500 Exceptional   96 %   $ 162,500 [3] Limitation If the Company’s net income, corporate debt level, or customer satisfaction fall between the levels specified in Section 1.03[1] or [2], you will receive the amount associated with the next lowest stated increment (no incremental bonus amounts will be paid). [4] Forfeiture If, after you have been paid your incentive compensation for 2006, the Company restates its net income such that the Net Income Performance Criteria specified in Section 1.03[1] was not met during the Performance Period (or the Compensation Committee otherwise determines that the Net Income Performance Criteria was not met during the Performance Period), you must repay to the Company the incentive compensation you received pursuant to Section 1.03[1] within 30 days of the restatement or the Compensation Committee’s determination. 2.00 There are a few other rules . . . The Plan imposes a few additional rules that may affect your incentive compensation:     •   If you die, Retire (i.e., terminate employment after age 55) or become disabled (as defined in the Company’s disability plan) during the 2006 Performance Cycle, you may receive Plan incentive compensation but only to the extent the Performance Criteria described in Section 1.03[1] are met at any time during the 2006 Performance Cycle. In this case, you (or your beneficiary) will receive the amount described in Section 1.03[1] reduced to reflect the number of whole months that you worked during the 2006 Performance Cycle (e.g., if you worked only 50 percent of the 2006 Performance Cycle, you (or your beneficiary) would receive only 50 percent of the amount described in Section 1.03[1]).   -3- --------------------------------------------------------------------------------   •   If you die, Retire (i.e., terminate employment after age 55) or become disabled (as defined in the Company’s disability plan) during the 2006 Performance Cycle, you may receive Plan incentive compensation but only to the extent the Performance Criteria described in Section 1.03[2] are met at the end of the 2006 Performance Cycle. In this case, you (or your beneficiary) will receive the amount described in Section 1.03[2] reduced to reflect the number of whole months that you worked during the 2006 Performance Cycle (e.g., if you worked only 50 percent of the 2006 Performance Cycle, you (or your beneficiary) would receive only 50 percent of the amount described in Section 1.03[2]).     •   If you die, Retire (i.e., terminate employment after age 55) or become disabled (as defined in the Company’s disability plan) during the 2006 Performance Cycle, you may receive Plan incentive compensation but only to the extent the Performance Criteria described in Section 1.03[3] are met at the end of the 2006 Performance Cycle. In this case, you (or your beneficiary) will receive the amount described in Section 1.03[3] reduced to reflect the number of whole months that you worked during the 2006 Performance Cycle (e.g., if you worked only 50 percent of the 2006 Performance Cycle, you (or your beneficiary) would receive only 50 percent of the amount described in Section 1.03[2]).     •   If you terminate employment before the end of the 2006 Performance Cycle for any reason other than death, retirement or disability, you will not receive any incentive compensation for the 2006 Performance Cycle, even if the Performance Criteria described in Section 1.03 are met.     •   If a “change in control” (as defined in the Plan) occurs during the 2006 Performance Cycle, you will receive 100 percent of your Stretch bonus amount regardless of whether (1) the Performance Criteria for the 2006 Performance Cycle have been met and (2) the 2006 Performance Cycle has been completed.     •   As of the end of the 2006 Performance Cycle, the Compensation Committee will review the extent to which Performance Criteria have been met and whether (and how much) incentive compensation is due under the Plan. The Compensation Committee will certify its conclusions to the Board.     •   Any incentive compensation you earn for 2006 will be paid in a lump sum no later than 90 days after the end of the 2006 Performance Cycle. However, if there is a change in control during the 2006 Performance Cycle, 100 percent of your Stretch bonus amount will be paid no later than 60 days after the change in control occurs.     •   You may designate a beneficiary to receive any Plan incentive compensation that becomes due after your death. This can be done by completing the attached beneficiary designation form. If you do not complete this form, any Plan incentive compensation due at your death will be paid to your surviving spouse or, if you leave no surviving spouse, to your estate.   -4- -------------------------------------------------------------------------------- 3.00 You must sign this form . . . Note: You will not receive any Plan incentive compensation unless you return a signed copy of this Notice to the Compensation Committee, c/o Christine A. Murry, Vice President, Corporate Counsel and Secretary of the Company, at the Company’s corporate offices, 5000 Tuttle Crossing Boulevard, Dublin, Ohio no later than March 31, 2006. By signing below, I acknowledge that I understand the terms of the Dominion Homes, Inc. Incentive Growth Plan and the conditions that must be met before I can receive any incentive compensation from that plan. EMPLOYEE:           Douglas G. Borror     (Date) RECEIVED BY:             (Authorized Dominion Homes, Inc. representative)     (Date)       Print Name       -5- -------------------------------------------------------------------------------- ATTACHMENT TO DOMINION HOMES, INC. INCENTIVE GROWTH PLAN NOTICE OF PARTICIPATION AND ELGIBILITY Beneficiary Designation Primary Beneficiary Designation. I designate the following persons as my Primary Beneficiary or Beneficiaries to receive any amounts payable on my death under this Agreement. This benefit will be paid, in the proportion specified, to:   100    % to    the then acting trustee of the trust agreement executed by Douglas G. Borror as grantor and as trustee, on June 18, 2001, as amended.       (Name)    (Relationship)       % to                   (Name)    (Relationship) Address:                         % to                   (Name)    (Relationship) Address:                         % to                   (Name)    (Relationship) Address:                   Note: You are not required to name more than one Primary Beneficiary but if you do, the sum of these percentages may not be larger than 100 percent.   -6- -------------------------------------------------------------------------------- Contingent Beneficiary Designation. If one or more of my Primary Beneficiaries dies before I die, I direct that any amounts payable on my death under this Agreement benefit that might otherwise have been paid to that Beneficiary:        Be paid to my other named Primary Beneficiaries in proportion to the allocation given above (ignoring the interest allocated to the deceased Primary Beneficiary); or      Be distributed among the following Contingent Beneficiaries.      % to               (Name)   (Relationship) Address:                     % to               (Name)   (Relationship) Address:                     % to               (Name)   (Relationship) Address:                Note: You are not required to name more than one Contingent Beneficiary but if you do, the sum of these percentages may not be larger than 100 percent.     (Signature)     (Date) Douglas G. Borror     (Print Name)         (Address)     RECEIVED BY:         (Authorized Dominion Homes, Inc. representative)     (Date)

Exhibit 10.1   AMENDMENT N0. 1 TO EMPLOYMENT AGREEMENT   This Amendment is made and entered into this 1st day of March, 2006 between SoftBrands, Inc. (the “Company”) and David G. Latzke (“Executive”).   WHEREAS, Executive and the Company are parties to that certain Employment Agreement dated as of January 1, 2002 (the “Employment Agreement”);   WHEREAS, Executive has been Senior Vice President, Chief Financial Officer, and Secretary of the Company since its formation and has been instrumental in the success of separating the Company from its predecessor corporation and its problems, establishing financing for the Company in a manner adequate to support its operations and its growth, and establishing controls and financial reporting systems at the Company that allowed it to regain public reporting and listing status;   WHEREAS, Executive served as Chief Financial Officer of Fourth Shift Corporation, a company whose operations constitute approximately 80% of the Company’s current operations, from 1994 until its acquisition by the Company’s predecessor;   WHEREAS, Executive is an extremely valued and integral member of the Company’s senior management team;   WHEREAS, Executive has indicated his desire to pursue other ventures that maximize his abilities, but has indicated his willingness to assist the Company in transition to a new financial executive;   WHEREAS, the Company wishes to secure Executive’s continued assistance and to provide Executive with the severance benefits to which he is entitled.   NOW, THEREFORE,  in consideration of the foregoing recitals, and for other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged. the parties agree as follows:   1.  Continued Assistance.  Executive agrees to continue to serve as Senior Vice President, Chief Financial Officer and Secretary of the Company until the earlier to occur of (1) June 30, 2006, (2) thirty days after notice from Executive that he is terminating such position to pursue an alternative position, or (3) thirty days after the Company has notified Executive that it has found a replacement financial officer (the earlier of such three dates being hereafter referred to as the “Termination Date”).  In addition to his regular duties, Executive agrees to work with the Company through the Termination Date to find a suitable replacement to Executive, and to provide assistance to the Company and to such replacement in transitioning his duties.  The Company acknowledges and agrees that Executive shall nevertheless be allowed, after the date of this Amendment and through the Termination Date, to pursue engagement in an alternative   1 --------------------------------------------------------------------------------   position or positions, including devoting such time during regular working hours as does not materially detract from the continued performance of his duties.   2.   Resignation as of Termination Date.  Executive agrees that he shall have resigned all positions as an officer of the Company, and as an officer or director or both of any direct or indirect subsidiary of the Company, as of the Termination Date.   3.  Effect on, and Amendment to, Employment Agreement.  In consideration of Executive’s commitment pursuant to paragraph 1, for all purposes of the Employment Agreement, Executive shall be deemed to have been terminated without cause by the Company as of the Termination Date, and shall be entitled to the benefits set forth in Section 4.5 of the Employment Agreement commencing on and as of the Termination Date; provided, however, that any such benefits that relate to periods after March 15, 2007 shall be paid in lump sum prior to March 15, 2007.  For purposes of clarification, in addition to Options, all stock based benefits, including stock appreciation rights and restricted stock units, shall vest on the Termination Date, but restricted stock units shall be paid out immediately, and stock appreciation rights shall remain exercisable until five years from the date of grant of the same.   4.  Effect of Pending Change of Control.  In the event that prior to the Termination Date the Company executes an agreement, or a letter of intent, that relates to a transaction that, if consummated would constitute a change of control (as defined in Section 4.6 of the Employment Agreement), and actually consummates such a change of control within one hundred and twenty days (120) of the Termination Date, then Executive’s termination on the Termination Date shall, notwithstanding paragraph 3 above, be deemed a Change of Control Termination (as defined in the Employment Agreement) and Executive shall be entitled to an additional payment, as of the date of consummation of such change of control, equal to the difference between any payments actually made pursuant to Section 4.5 of the Employment Agreement and any payments that would have been due under Section 4.6 of the Employment Agreement.  The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise), as a result of any such change of control, by agreement in form and substance satisfactory to Executive, to expressly assume and agree to perform the obligations under this paragraph 4 and under Section 4.6 of the Employment Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place.  Failure of the Company to obtain such agreement prior to the effectiveness of any such succession shall be a breach of this Amendment and shall entitle Executive to compensation from the Company in the same amount and on the same terms as Executive would be entitled hereunder.  As used in herein, “Company” shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which executes and delivers the agreement provided for in this paragraph 4 or which otherwise becomes bound by all the terms and provisions of this Amendment by operation of law.   5.  Continuation.  Except as set forth herein, the Employment Agreement shall continue in effect without alteration or amendment.   SOFTBRANDS, INC. EXECUTIVE:     By: /s/ RANDAL TOFTELAND      /s/ DAVID G. LATZKE   Randal Tofteland, Chief Executive Officer David G. Latzke     2 --------------------------------------------------------------------------------

  Exhibit 10.1 Penford Corporation First Amendment to Amended and Restated Credit Agreement      This First Amendment to Amended and Restated Credit Agreement (herein, the “Amendment”) is entered into as of July 7, 2006, by and among Penford Corporation, a Washington corporation (the “Borrower”), the direct and indirect Subsidiaries of the Borrower from time to time party to the Credit Agreement, as Guarantors, the several financial institutions from time to time party to this Agreement, as Lenders, and Harris N.A., successor by merger to Harris Trust and Savings Bank, as Administrative Agent as provided herein. Preliminary Statements      A. The Borrower, the Guarantors, the Lenders and the Administrative Agent are parties to that certain Amended and Restated Credit Agreement dated as of August 22, 2005 (the “Credit Agreement”). All capitalized terms used herein without definition shall have the same meanings herein as such terms have in the Credit Agreement.      B. The Borrower and the Lenders have agreed to make certain amendments to the Credit Agreement, in each case under the terms and conditions set forth in this Amendment.      Now, Therefore, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: Section 1. Amendments to the Credit Agreement.      Subject to the satisfaction of the conditions precedent set forth in Section 2 hereof, the Credit Agreement shall be and hereby is amended as follows:      1.1. The definition of the term “Indebtedness for Borrowed Money” appearing in Section 5.1 of the Credit Agreement shall be amended to read as follows:      “Indebtedness for Borrowed Money” means for any Person (without duplication) (a) all indebtedness of such Person for borrowed money, whether current or funded, or secured or unsecured, (b) all indebtedness for the deferred purchase price of Property or services, (c) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to Property acquired by such Person (even though the rights and remedies of the seller or Lender under such agreement in the event of a default are limited to repossession or sale of such Property), (d) all indebtedness secured by a purchase money mortgage or other Lien to secure all or part of the purchase price of Property subject to such mortgage or Lien, (e) all obligations under leases which shall have been or must be, in accordance with GAAP, recorded as Capital Leases in respect of   --------------------------------------------------------------------------------   which such Person is liable as lessee, (f) any counter-indemnity obligation in respect of a guarantee, indemnity, bond, standby or documentary letter of credit or any other instrument issued by a bank or financial institution, (g) any indebtedness, whether or not assumed, secured by Liens on Property acquired by such Person at the time of acquisition thereof, (h) any shares which are expressed to be redeemable and (i) any liability in respect of any guarantee or indemnity for any of the items referred to above, and (j) all indebtedness secured by any Lien upon Property of such Person, whether or not such Person has assumed or become liable for the payment of such indebtedness; it being understood that the term “Indebtedness for Borrowed Money” shall not include trade payables arising in the ordinary course of business.      1.2. Section 8.22(d) of the Credit Agreement shall be amended to read as follows:      (d) Capital Expenditures. The Borrower shall not, nor shall it permit any of its Subsidiaries to, incur Capital Expenditures (but excluding Capital Expenditures made with the Net Cash Proceeds of any Event of Loss as permitted by Section 1.9(b)(i) hereof and Capital Expenditures made with the proceeds of grants from governmental entities) in an amount in excess of:      (i) $20,000,000 (or the Australian Dollar Equivalent or NZ Dollar Equivalent) in the aggregate during the fiscal year ending August 31, 2006;      (ii) $48,000,000 (or the Australian Dollar Equivalent or NZ Dollar Equivalent with respect to not more than $20,000,000) during the fiscal year ending August 31, 2007, of which not more than $20,000,000 (or the Australian Dollar Equivalent or NZ Dollar Equivalent) shall be for Capital Expenditures that are unrelated to the construction (including the acquisition and installation of equipment) of an ethanol production facility in Cedar Rapids, Iowa; and      (iii) $20,000,000 (or the Australian Dollar Equivalent or NZ Dollar Equivalent) in the aggregate during any fiscal year thereafter; provided, however, for any fiscal year when Total Senior Funded Debt/EBITDA Ratio is less than 2.0 to 1.0 for each fiscal quarter of such fiscal year, Capital Expenditures for such year (or in the case of the fiscal year ending August 31, 2007, Capital Expenditures that are unrelated to the construction (including the acquisition and installation of equipment) of an ethanol production facility in Cedar Rapids, Iowa) shall not exceed $25,000,000 (or the Australian Dollar Equivalent or NZ Dollar Equivalent) for such fiscal year.      1.3. The Required Lenders hereby agree that the construction and operation of an ethanol production facility in Cedar Rapids, Iowa shall not be a violation of Section 8.18 of the Credit Agreement. -2- --------------------------------------------------------------------------------   Section 2. Conditions Precedent.      The effectiveness of this Amendment is subject to the satisfaction of all of the following conditions precedent:      2.1. The Borrower, the Guarantors, and the Required Lenders shall have executed and delivered this Amendment.      2.2. Each of the representations and warranties set forth in Section 6 of the Credit Agreement shall be true and correct in all material respects, except that the representations and warranties made under Section 6.5 shall be deemed to refer to the most recent financial statements of the Borrower delivered to the Lenders.      2.3. Upon giving effect to this Amendment, (a) the Borrower shall be in full compliance with all of the terms and conditions of the Loan Documents and (b) no Default or Event of Default shall have occurred and be continuing thereunder or shall result after giving effect to this Amendment. Section 3. Representations.      In order to induce the Required Lenders to execute and deliver this Amendment, the Borrower hereby represents to the Lenders that as of the date hereof, and after giving effect to the amendments called for hereby, the representations and warranties set forth in Section 6 of the Credit Agreement are and shall be and remain true and correct in all material respects (except that for purposes of this paragraph the representations contained in Section 6.5 shall be deemed to refer to the most recent financial statements of the Borrower delivered to the Lenders) and after giving effect to this Amendment (a) the Borrower is in compliance with all of the terms and conditions of the Loan Documents and (b) no Default or Event of Default exists under the Credit Agreement or shall result after giving effect to this Amendment. Section 4. Miscellaneous.      4.1. The Borrower and the Guarantors heretofore executed and delivered to the Agent and the Lenders the Collateral Documents to which it is a party. Each of the Borrower and the Guarantors hereby acknowledges and agrees that the Liens created and provided for by the Collateral Documents to which it is a party continue to secure, among other things, the indebtedness, obligations and liabilities described therein; and the Collateral Documents to which it is a party and the rights and remedies of the Agents and the Lenders thereunder, the obligations of the Borrower and the Guarantors thereunder, and the Liens created and provided for thereunder remain in full force and effect and shall not be affected, impaired or discharged hereby. Nothing herein contained shall in any manner affect or impair the priority of the Liens created and provided for by the Collateral Documents to which it is a party as to the indebtedness, obligations and liabilities which would be secured thereby prior to giving effect to this Amendment.      4.2. Except as specifically amended herein or waived hereby, the Credit Agreement shall continue in full force and effect in accordance with its original terms. Reference to this -3- --------------------------------------------------------------------------------   specific Amendment need not be made in the Credit Agreement, the other Loan Documents, or any other instrument or document executed in connection therewith, or in any certificate, letter or communication issued or made pursuant to or with respect to the Credit Agreement, any reference in any of such items to the Credit Agreement being sufficient to refer to the Credit Agreement as amended hereby.      4.3. This Amendment may be executed in any number of counterparts, and by the different parties on different counterpart signature pages, all of which taken together shall constitute one and the same agreement. Any of the parties hereto may execute this Amendment by signing any such counterpart and each of such counterparts shall for all purposes be deemed to be an original. This Amendment shall be governed by the internal laws of the State of Illinois.      4.4. The Borrower agrees to pay all reasonable out-of-pocket costs and expenses incurred by the Administrative Agent in connection with the credit facilities and the preparation, execution and delivery of this Amendment, and the documents and transactions contemplated hereby, including the reasonable fees and expenses of counsel for the Administrative Agent with respect to the foregoing. [Remainder of Page Intentionally Left Blank] -4- --------------------------------------------------------------------------------             This First Amendment to Amended and Restated Credit Agreement is entered into as of the date and year first above written.                       “Borrower”                           Penford Corporation                           By                                   Name                                   Title                                                 “Guarantors”                           Penford Products Co.                           By                                   Name                                   Title                           Penford Corporation Signature Page to First Amendment to Amended and Restated Credit Agreement   --------------------------------------------------------------------------------             Accepted and agreed to as of the date and year last above written.                       “Lenders”                           Harris N.A., in its individual capacity as a Lender, as L/C Issuer, and as Administrative Agent                           By                                   Name                                   Title                                                 Wells Fargo Bank, N.A.                           By                                   Name                                   Title                                                 U.S. Bank National Association                           By                                   Name                                   Title                                                 LaSalle Bank National Association                           By                                   Name                                   Title                           Penford Corporation Signature Page to First Amendment to Amended and Restated Credit Agreement   --------------------------------------------------------------------------------                         Cooperative Centrale Raiffeisen-Boerenleenbank B.A., “Rabobank Nederland,” New York Branch                           By                                   Name                                   Title                                                 By                                   Name                                   Title                                                 Australia and New Zealand Banking Group       Limited                           By                                   Name                                   Title                           Penford Corporation Signature Page to First Amendment to Amended and Restated Credit Agreement  

Exhibit 10.6   SECURITY AGREEMENT   This Security Agreement (the “Agreement”) is entered into on January 13, 2006, (the “Effective Date”) by and between Dyneco Corporation, a Minnesota corporation (“Dyneco”), and MMA Capital, LLC, a Delaware Limited Liability Company, or its assigns (the “Secured Party”) and is attached to that certain Secured Convertible Promissory Note of even date between the parties as Exhibit D and is incorporated therein by reference. Any capitalized terms that are not defined in this Agreement are ascribed the meaning given them in such Convertible Promissory Note.   1.            Grant of Security Interest. Dyneco in consideration of the indebtedness described in this Agreement grants and conveys to the Secured Party a security interest in all of Dyneco’s existing and future right, title and interest in, to and under the Collateral as defined in Section 2 of this Agreement. This security interest is granted to the Secured Party to: (a) secure the payment of the indebtedness evidenced by a Convertible Promissory Note, dated as of even date herewith in the principal sum of Two Million Dollars ($2,000,000.00), with interest thereon as stated in such Convertible Promissory Note (the “Note”), and all renewals, extensions, and modifications of the Note; (b) ensure the payment of all other sums, with interest thereon, advanced under the terms of this Agreement; and (c) ensure the performance of the agreements and warranties of Dyneco contained in this Agreement, the Note, or any of the Note Documents (as defined in the Note) or incorporated in any of the foregoing agreements by reference.   2. Property subject to the Security Interest.     2.1        Collateral. The property subject to the security interest (the “Collateral”) is as follows:   (a)         All goods and equipment now owned and hereinafter acquired, including, without limitation, all machinery, fixtures, vehicles (including motor vehicles and trailers), and any interest in any of the foregoing, and all attachments, accessories, accessions, replacements, substitutions, additions, and improvements to any of the foregoing, wherever located;   (b)         All inventory now owned and hereinafter acquired, including, without limitation, all merchandise, raw materials, parts, supplies, packing and shipping materials, work in process and finished products including such inventory as is temporarily out of Dyneco’s custody or possession or in transit and including any returns upon any accounts or other proceeds, including insurance proceeds, resulting from the sale or disposition of any of the foregoing and any documents of title representing any of the above;   1   --------------------------------------------------------------------------------     (c)         All contract rights and general intangibles now owned and hereinafter acquired, including, without limitation, goodwill, trademarks, servicemarks, trade styles, trade names, patents, patent applications, leases, license agreements, franchise agreements, blueprints, drawings, purchase orders, customer lists, route lists, infringements, legal claims, computer programs, computer discs, computer tapes, literature, reports, catalogs, design rights, income tax refunds, payments of insurance and rights to payment of any kind, whether actual or contingent;   (d)         All now existing and hereinafter acquired accounts, contract rights, royalties, license rights and all other forms of obligations owing to Dyneco arising out of the sale or lease of goods, the licensing of technology or the rendering of services by Dyneco, whether or not earned by performance, and any and all credit insurance, guaranties, and other security therefor, as well as all merchandise returned to or reclaimed by Dyneco;   (e)         All documents, cash, deposit accounts, securities, securities entitlements, securities accounts, investment property, financial assets, letters of credit, certificates of deposit, instruments and chattel paper now owned and Dyneco’s books relating to the foregoing;   (f)          All intellectual property rights, copyright rights, copyright applications, copyright registrations and like protections in each work of authorship and derivative work thereof, whether published or unpublished, now owned; all trade secret rights, including all rights to unpatented inventions, know-how, operating manuals, license rights and agreements and confidential information, now owned; all claims for damages by way of any past, present and future infringement of any of the foregoing; and,   (g)         Any and all claims, rights and interests in any of the above and all substitutions for, additions and accessions to and proceeds thereof.   2.2 Exceptions to Collateral.     (a)         After the Effective Date, Dyneco intends to acquire selected travel companies (individually, a “Target Company” and collectively, the “Target Companies”) whose key assets include contracts with airlines for the discounted purchase of airline seats (“Air Contracts”). Dyneco intends to complete the Target Company acquisitions using a combination of cash, Dyneco securities and promissory notes (“Target Notes”). Dyneco and MMA understand and agree that all of the assets of acquired Target Companies, including the Air Contracts, will be included in the Collateral under this Note, provided, however, that the security interest granted to MMA hereunder in any Target Company assets will be subordinated to any perfected security interest of a holder of a Target Note, but only up to the amount of such Target Note.     2   --------------------------------------------------------------------------------     (b)         In addition, notwithstanding anything to the contrary in this Agreement, the term “Collateral” shall not include any contract right or licenses to the extent that any such contract or license prohibits the granting of a security interest therein, and the granting of a security interest in such contract or license would cause Dyneco to lose its rights thereunder.   3.            Removal of Collateral Prohibited. Dyneco shall not permanently remove the Collateral from its premises without the written consent of the Secured Party, except that Dyneco may dispose of Collateral in the ordinary course of business.   4.            Protection of Secured Party’s Security. If an Event of Default occurs under any of the Note Documents (other than the Note) or Dyneco commits a material breach of this Agreement, then the Secured Party shall provide written Notice of Default to Dyneco at the address listed below or such other address as Dyneco shall hereafter provide to the Secured Party. The Notice of Default provided to Dyneco shall specify the default(s) identified by the Secured Party and shall state that Dyneco shall have ten (10) days within which to cure said default. Should Dyneco not cure the specified default(s) within said ten-day period, then the Secured Party may avail itself of any remedies permitted under the Note and may also make such court appearance, disburse such sums and take such action as the Secured Party deems necessary, in its sole discretion, to protect the Secured Party’s interest, including but not limited to: (i) disbursement of attorneys’ fees; (ii) entry upon Dyneco’s property, upon reasonable notice, to make repairs to the Collateral; and (iii) procurement of satisfactory insurance. Any amounts disbursed by Secured Party pursuant to this Section 4, with interest thereon, shall become additional indebtedness of Dyneco secured by this Agreement. Unless Dyneco and the Secured Party agree to other terms of payment, such amounts shall be immediately due and payable and shall bear interest from the date of disbursement at the Default Rate stated in the Note. Nothing contained in this Section shall require the Secured Party to incur any expense or take any action.   5.            Forbearance by Secured Party Not a Waiver. Any forbearance by the Secured Party in exercising any right or remedy hereunder, or otherwise afforded by applicable law, shall not be a waiver of, or preclude the exercise of, any right or remedy. The acceptance by the Secured Party of payment of any sum secured by this Agreement after the due date of such payment shall not be a waiver of the Secured Party’s right to either require prompt payment when due of all other sums so secured or to declare a default for failure to make prompt payment. No action taken by the Secured Party shall waive the Secured Party’s right to accelerate the indebtedness secured by this Agreement and seek such other remedies as are provided by this Agreement, the Note Documents and/or applicable law.   3   --------------------------------------------------------------------------------     6.            Uniform Commercial Code Security Agreement. This Agreement is intended to be a security agreement pursuant to the Uniform Commercial Code for any of the items specified above as part of the Collateral which, under applicable law, may be subject to a security interest pursuant to the Uniform Commercial Code of Delaware or any applicable jurisdiction where the Collateral may be located (“UCC”), and Dyneco hereby grants the Secured Party a security interest in said items, commencing as of the Effective Date. Dyneco agrees that the Secured Party may file any appropriate document(s) in the appropriate jurisdiction(s) as a financing statement for any of the Collateral, at Dyneco’s expense. In addition, Dyneco agrees to execute and deliver to the Secured Party, upon request, any financing statements, as well as extensions, renewals and amendments thereof, and reproductions of this Agreement and/or the Note in such form as the Secured Party may require to perfect a security interest with respect to said Collateral. Dyneco shall pay all costs of filing such financing statements and any extensions, renewals, amendments and releases thereof, and shall pay all reasonable costs and expenses of any record searches for financing statements the Secured Party may reasonably require. Without the prior written consent of the Secured Party, on and after the Effective Date, Dyneco shall not create or suffer to be created pursuant to the UCC any other security interest in the Collateral, including replacements and additions thereto, except liens expressly permitted hereunder. Upon the occurrence of an Event of Default under the Note or a material breach of this Agreement, the Secured Party shall have the remedies under the UCC and, at the Secured Party’s option, may also invoke the other remedies provided in this Agreement and/or the Note as to such items. In exercising any of said remedies, the Secured Party may proceed against any or all of the Collateral separately or together and in any order whatsoever, without in any way affecting the availability of the Secured Party’s remedies under the UCC or of the other remedies provided in this Agreement and/or the Note.   7. Rights of Secured Party.   7.1        Upon the occurrence of an Event of Default, delivery of a Notice of Default by the Secured Party to Dyneco to the extent required herein, and upon Dyneco’s failure to cure the stated default(s), the Secured Party may require Dyneco to assemble the Collateral and make it available to the Secured Party upon reasonable notice at the place to be designated by the Secured Party which is reasonably convenient to both parties. The Secured Party may sell all or any part of the Collateral as a whole or in parcels either by public auction, private sale or other method of disposition pursuant to the UCC. The Secured Party may bid at any public sale on all or any portion of the Collateral. The Secured Party shall give Dyneco reasonable notice of the time and place of any public sale or of the time after which any private sale or other disposition of the Collateral is to be made, and notice given at least ten (10) days before the time of the sale or other disposition shall be conclusively presumed to be reasonable.   4   --------------------------------------------------------------------------------     7.2        Notwithstanding any provision of this Agreement, the Secured Party shall be under no obligation to offer to sell the Collateral or to offer Dyneco a right of redemption. If the Secured Party offers to sell the Collateral, the Secured Party will be under no obligation to consummate a sale of the Collateral if, in its reasonable business judgment, none of the offers received by it reasonably approximates the fair value of the Collateral.   7.3        If the Secured Party elects not to sell the Collateral, the Secured Party may elect to follow the procedures set forth in the UCC for retaining the Collateral in satisfaction of Dyneco’s obligation, subject to Dyneco’s rights under such procedures, except a right of redemption, if any, which Dyncaco expressly waives.   8.            Remedies Cumulative. Each remedy provided in this Agreement and/or the Note is distinct and cumulative to all other rights or remedies under this Agreement and/or the Note or afforded by law or equity, and may be exercised concurrently, independently or successively, in any order whatsoever.   9.            Costs and Expenses. Dyneco agrees to pay on demand all costs and expenses, including attorneys’ fees and court costs, of the Secured Party in connection with any actions taken under this Agreement to perfect its security interest or enforce this Agreement (whether suit is commenced or not); provided, however, that Dyneco shall not be responsible for any costs or expenses of the Secured Party for improperly or incorrectly identifying an Event of Default or improperly delivering a Notice of Default, where no Event of Default has occurred.   10.          Notices. All notices, requests, consents and other communications hereunder to any party shall be deemed to be sufficient if contained in a written instrument delivered in person, sent by facsimile transmission, or duly sent by first class registered or certified mail, return receipt requested, postage prepaid, addressed to the other party. All such notices, advises and communications shall he deemed to have been received: (a) in the case of personal delivery, on the date of such delivery; (b) in the case of facsimile transmission, on the date of transmission; and (c) in the case of mailing, on the third day after the posting thereof.   5   --------------------------------------------------------------------------------     11.          Entire Agreement, Savings Clause, Assigns and Governing Law. This Agreement contains the entire understanding between the parties and supersedes any prior understandings and agreements among them respecting the subject matter of this Agreement. If any provision of this Agreement, or the application of such provision to any person or circumstance, shall be held invalid, the remainder of this Agreement, or the application of such provision to persons or circumstances other than those as to which it is held invalid, shall not be affected thereby. This Agreement shall be binding upon the heirs, executors, administrators, successors and assigns of the parties hereto. This Agreement shall be governed by and construed in accordance with the laws of the State of California.     [signature page follows]       6   --------------------------------------------------------------------------------     IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the date first above written.   DEBTOR PARTY:   Dyneco Corporation, a Minnesota corporation   /s/ Daniel G. Brandano By: Daniel G. Brandano   Its: President   Address:   ___________________________   ___________________________   SECURED PARTY:   MMA Capital, LLC, a Delaware Limited Liability Company   /s/ Gary Armitage By: Gary Armitage   Its: Managing Member   Address:   456 Montgomery Street Suite 2200 San Francisco, CA 94104         7   --------------------------------------------------------------------------------

-------------------------------------------------------------------------------- EXECUTION COPY AMENDMENT NO. 2 AMENDMENT NO. 2 dated as of May 5, 2006 between MCC IOWA LLC, a limited liability company duly organized and validly existing under the laws of the State of Delaware (“MCC Iowa”); MCC ILLINOIS LLC, a limited liability company duly organized and validly existing under the laws of the State of Delaware (“MCC Illinois”); MCC GEORGIA LLC, a limited liability company duly organized and validly existing under the laws of the State of Delaware (“MCC Georgia”); and MCC MISSOURI LLC, a limited liability company duly organized and validly existing under the laws of the State of Delaware (“MCC Missouri”, and, together with MCC Iowa, MCC Illinois and MCC Georgia, the “Borrowers”); and JPMORGAN CHASE BANK, N.A., in its capacity as Administrative Agent (the “Administrative Agent”) pursuant to authority granted by the Majority Lenders pursuant to Section 11.04 of the Amendment and Restatement referred to below. The Borrowers, the lenders party thereto, and the Administrative Agent are parties to a Amendment and Restatement dated as of December 16, 2004 of the Credit Agreement dated as of July 18, 2001 (as modified and supplemented and in effect from time to time, the “Amendment and Restatement”), providing, subject to the terms and conditions thereof, for extensions of credit (by means of loans and letters of credit) to be made by said lenders to the Borrowers in an aggregate principal or face amount not exceeding $1,450,505,440.24 (which may, in circumstances therein provided, be increased to $1,950,505,440.24). The Borrowers and the Administrative Agent, pursuant to authority granted by, and having obtained the consent of Lenders party to the Amendment and Restatement constituting the Majority Lenders wish now to amend the Amendment and Restatement in certain respects, and accordingly, the parties hereto hereby agree as follows: Section 1. Definitions. Except as otherwise defined in this Amendment No. 2, terms defined in the Amendment and Restatement are used herein as defined therein. Section 2. Amendments. Subject to the satisfaction of the conditions precedent specified in Section 4 below, but effective as of the date hereof, the Amendment and Restatement shall be amended as follows: 2.01. References Generally. References in the Amendment and Restatement (including references to the Amendment and Restatement as amended hereby) to “this Agreement” (and indirect references such as “hereunder”, “hereby”, “herein” and “hereof”) shall be deemed to be references to the Amendment and Restatement as amended hereby. Amendment No. 2 -------------------------------------------------------------------------------- - 2 - 2.02. Definitions.  Section 1.01 of the Amendment and Restatement shall be amended by amending the following definitions (to the extent already included in said Section 1.01) and adding the following definitions in the appropriate alphabetical location (to the extent not already included in said Section 1.01): “Affiliate Subordinated Indebtedness” shall mean Indebtedness to an Affiliate (i) for which a Borrower is directly and primarily liable, (ii) in respect of which none of its Subsidiaries is contingently or otherwise obligated, (iii) that is subordinated to the obligations of the Borrowers to pay principal of and interest on the Loans, Reimbursement Obligations, fees and other amounts payable hereunder and under the other Loan Documents pursuant to an Affiliate Subordinated Indebtedness Subordination Agreement, (iv) that does not mature prior to January 31, 2016, and that is issued pursuant to documentation containing terms (including interest, covenants and events of default) in form and substance satisfactory to the Majority Lenders, (v) that states by its terms that principal and interest in respect thereof shall only be payable to the extent permitted under Section 8.09 hereof and (vi) that is pledged by the respective holder thereof to the Administrative Agent in a manner that creates a first priority perfected security interest in favor of the Administrative Agent, as collateral security for the obligations of the Borrowers hereunder, pursuant to (in the case of Mediacom Broadband) the Guarantee and Pledge Agreement and (in the case of any other holder) a security document in form and substance satisfactory to the Administrative Agent. “Majority Lenders” shall mean, subject to the last paragraph of Section 11.04 hereof, Lenders having more than 50% of the sum of (a) the aggregate outstanding principal amount of the Tranche A Term Loans or, if the Tranche A Term Loans shall not have been made, the aggregate outstanding principal amount of the Tranche A Term Loan Commitments plus (b) the aggregate outstanding principal amount of the Tranche D Term Loans or, if the Tranche D Term Loans shall not have been made, the aggregate principal amount of the Tranche D Term Loan Commitments, as the case may be, plus (c) the aggregate outstanding principal amount of the Incremental Facility Term Loans of each Series or, if the Incremental Facility Term Loans of such Series shall not have been made, the aggregate outstanding principal amount of the Incremental Facility Commitments of such Series plus (d) the sum of (i) the aggregate unused amount, if any, of the Incremental Facility Revolving Credit Commitments of each Series at such time plus (ii) the aggregate amount of Letter of Credit Liabilities in respect of Incremental Facility Letters of Credit of each Series at such time plus (iii) the aggregate outstanding principal amount of the Incremental Facility Revolving Credit Loans of each Series at such time plus (e) the sum of (i) the aggregate unused amount, if any, of the Revolving Credit Commitments at such time plus (ii) the aggregate amount of Letter of Credit Liabilities in respect of Revolving Credit Letters of Credit at such time plus (iii) the aggregate outstanding principal amount of the Revolving Credit Loans at such time.   Amendment No. 2 -------------------------------------------------------------------------------- - 3 - The “Majority Lenders” of a particular Class of Loans shall mean Lenders having outstanding Loans, Letter of Credit Liabilities, Commitments or unused Commitments (as applicable, and determined in the manner provided above) of such Class representing more than 50% of the total outstanding Loans, Letter of Credit Liabilities, Commitments or unused Commitments of such Class at such time.   Notwithstanding any of the foregoing, (i) for purposes of modifying, waiving or making any determination (including taking any action under the last paragraph of Section 9.01) with respect to Section 8.10(a), (b) or (c), the “Majority Lenders” shall mean the Lenders having outstanding Loans, Letter of Credit Liabilities, Commitments or unused Commitments (other than the Tranche D Term Loans and Tranche D Term Loan Commitments) representing more than 50% of the total outstanding Loans, Letter of Credit Liabilities, Commitments or unused Commitments (other than the Tranche D Term Loans and Tranche D Term Loan Commitments) and (ii) for purposes of modifying, waiving or making any determination (including taking any action under the last paragraph of Section 9.01) with respect to Section 8.10(d), the “Majority Lenders” shall mean Lenders having outstanding Tranche D Term Loans representing more than 50% of the total outstanding Tranche D Term Loans.   “System Cash Flow” shall mean, for any period, the sum, for the Borrowers and their Subsidiaries (determined on a combined basis without duplication in accordance with GAAP), of the following: (a) gross operating revenues (not including extraordinary or unusual items but including business interruption insurance (to the extent it represents lost revenue for such period)) for such period minus (b) all operating expenses (not including extraordinary or unusual items) for such period, including, without limitation, technical, programming and selling, general and administrative expenses, but excluding (to the extent included in operating expenses) income taxes, Management Fees, depreciation, amortization, interest expense (including, without limitation, all items included in Interest Expense) and any extraordinary or unusual items plus (c) any compensation received for management services provided by the Borrowers during any such period in respect of any Franchises retained by the seller pursuant to any agreement for the purchase of such Franchises by the Borrowers during any such period plus (d) non-cash operating expenses, including, without limitation, any non-cash compensation expense realized from grants of equity instruments or other rights (including, without limitation, stock options, stock appreciation or other rights, restricted stock, restricted stock units, deferred stock and deferred stock units) to officers, directors and employees of the Borrowers and their Subsidiaries. For the purposes of determining System Cash Flow, gross operating revenues will include revenues received in cash in respect of investments, so long as such investments are recurring (i.e. reasonably expected to continue for four or more fiscal quarters) and do not for any period exceed 20% of gross operating revenues for such period (not including (i) extraordinary or unusual items and (ii) such investment revenues).   Amendment No. 2 -------------------------------------------------------------------------------- - 4 - Notwithstanding the foregoing, if during any period for which System Cash Flow is being determined the Borrowers or any of their Subsidiaries shall have consummated any acquisition of any CATV System or other business, or consummated any Disposition, then, for all purposes of this Agreement (other than for purposes of the definition of Excess Cash Flow), System Cash Flow shall be determined on a pro forma basis as if such acquisition or Disposition had been made or consummated on the first day of such period.   “Tranche D Term Loan Commitment” means, with respect to each Tranche D Term Loan Lender, the commitment of such Lender to make Tranche D Term Loans under the Tranche D Term Loan Incremental Facility Agreement.   “Tranche D Term Loan Lender” has the meaning specified in the Tranche D Term Loan Incremental Facility Agreement.   “Tranche D Term Loan” means an Incremental Term Loan made pursuant to the Tranche D Term Loan Incremental Facility Agreement.   “Tranche D Term Loan Incremental Facility Agreement” means the Incremental Facility Agreement (Tranche D Term Loans) dated as of May 5, 2006 between the Borrowers, the lenders party thereto and the Administrative Agent.   2.03.         Certain Financial Covenants. Section 8.10 of the Amendment and Restatement is hereby amended to read in its entirety as follows: “8.10        Certain Financial Covenants. (a)    Total Leverage Ratio. As to all the Lenders (other than the Tranche D Term Loan Lenders), the Borrowers will not permit the Total Leverage Ratio to exceed the following respective ratios at any time during the following respective periods:     Total Period   Leverage Ratio       From April 1, 2006     through March 31, 2007   5.75 to 1       From April 1, 2007     through March 31, 2008   5.50 to 1       From April 1, 2008     through March 31, 2009   4.75 to 1       From April 1, 2009     and at all times thereafter   4.50 to 1   Amendment No. 2 -------------------------------------------------------------------------------- - 5 -   (b)    Interest Coverage Ratio. As to all the Lenders (other than the Tranche D Term Loan Lenders), the Borrowers will not permit the Interest Coverage Ratio to be less than the following respective ratios as at the last day of any fiscal quarter ending during the following respective periods: Period   Ratio       From April 1, 2006     through March 31, 2007   1.60 to 1       From April 1, 2007     through March 31, 2008   1.70 to 1       From April 1, 2008     through March 31, 2009   1.90 to 1       From April 1, 2009     and at all times thereafter   2.00 to 1 (c)    Debt Service Coverage Ratio. As to all the Lenders (other than the Tranche D Term Loan Lenders), the Borrowers will not permit the Debt Service Coverage Ratio to be less than 1.10 to 1 as at any time. (d)    Tranche D Term Loan Total Leverage Ratio. As to the Tranche D Term Loan Lenders, the Borrowers will not permit the Total Leverage Ratio to exceed 6.00 to 1 at any time.” Section 3. Representations and Warranties. Each Obligor represents and warrants to the Lenders and the Administrative Agent, as to itself and each of its subsidiaries, that (a) the representations and warranties set forth in Section 7 (as hereby amended) of the Amendment and Restatement, and in each of the other Loan Documents, are true and complete on the date hereof as if made on and as of the date hereof (or, if any such representation or warranty is expressly stated to have been made as of a specific date, such representation or warranty shall be true and correct as of such specific date), and as if each reference in said Section 7 to “this Agreement” included reference to this Amendment No. 2 and (b) no Default or Event of Default has occurred and is continuing. Section 4. Conditions Precedent. The amendments set forth in Section 2 hereof shall become effective, as of the date hereof, upon the execution and delivery of this Amendment No. 2 by the Borrowers and the Administrative Agent. Section 5. Miscellaneous. Except as herein provided, the Amendment and Restatement shall remain unchanged and in full force and effect. This Amendment No. 2 may be executed in any number of counterparts, all of which taken together shall constitute one and the same amendatory instrument and any of the parties hereto may execute this Amendment No. 2 by signing any such counterpart. This Amendment No. 2 Amendment No. 2 -------------------------------------------------------------------------------- - 6 - shall be governed by, and construed in accordance with, the law of the State of New York. Section 6. Confirmation of Security Documents. Each of the Borrowers hereby confirms and ratifies all of its obligations under the Loan Documents to which it is a party. By its execution on the respective signature lines provided below, each of the Obligors hereby confirms and ratifies all of its obligations and the Liens granted by it under the Security Documents to which it is a party, represents and warrants that the representations and warranties set forth in such Security Documents are complete and correct on the date hereof as if made on and as of such date and confirms that all references in such Security Documents to the “Credit Agreement” (or words of similar import) refer to the Amendment and Restatement as amended hereby without impairing any such obligations or Liens in any respect.   Amendment No. 2 -------------------------------------------------------------------------------- - 7 - IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 2 to Amendment and Restatement to be duly executed and delivered as of the day and year first above written. BORROWERS   MCC GEORGIA LLC     MCC ILLINOIS LLC     MCC IOWA LLC     MCC MISSOURI LLC             By Mediacom Broadband LLC, a Member     By Mediacom Communications       Corporation, a Member             By: /s/       Name:       Title:             MEDIACOM BROADBAND LLC     By Mediacom Communications Corporation, a     Member             By: /s/       Name:       Title:             MEDIACOM COMMUNICATIONS     CORPORATION                     By: /s/       Name:       Title:     Amendment No. 2 -------------------------------------------------------------------------------- - 8 - ADMINISTRATIVE AGENT   JPMORGAN CHASE BANK, N.A.,     as Administrative Agent                     By: /s/       Name:       Title:     Amendment No. 2 --------------------------------------------------------------------------------

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Exhibit 10.1 FORM OF LOEWS CORPORATION AWARD CERTIFICATE STOCK APPRECIATION RIGHT (for grants to officers and employees)                  THIS CERTIFICATE, dated as of the ___ day of _______ 200_, evidences the grant of the Award set forth below by Loews Corporation, a Delaware corporation (the “Company”) to (First Name) (Last Name) (the “Participant”).                      1.          Grant of Award.                    Subject to the provisions of this Certificate and the Loews Corporation 2000 Stock Option Plan, as amended and restated, effective as of January 1, 2005 (the “Plan”), the Company hereby grants to the Participant as of _____________ 200_ (the “Grant Date”) (Amount) Stock Appreciation Rights having an Exercise Price of $____ per Stock Appreciation Right (such grant being herein called the “Award”). Each Stock Appreciation Right represents the right to receive an amount, payable in shares of Stock as provided in Paragraph 3 below, equal in value to the excess, if any, on the date of exercise of the Fair Market Value of a share of Stock over the Exercise Price of the Stock Appreciation Right. The Stock Appreciation Rights granted hereby are Free-Standing Stock Appreciation Rights and are not granted in conjunction with an Option. Unless earlier terminated pursuant to the terms of this Certificate, the Award shall expire on the tenth anniversary of the date hereof. Capitalized terms not defined herein shall have the meanings set forth in the Plan.                      2.          Exercisability of the Award.                            The Award shall become vested and exercisable with respect to one-quarter (1/4) of the Stock Appreciation Rights granted hereby on (Date1) and as to an additional one-quarter (1/4) of such shares on each of the next three anniversaries of that date, subject to the prior termination of the Option.                      3.          Method of Exercise of the Award.   (a)              An Award may be exercised at any time after the Award with respect to those Stock Appreciation Rights vests and before the expiration of the Award Term. To exercise an Award, the Participant shall give written notice to the Company stating the number of shares with respect to which the Award is being exercised. (b)              Upon the exercise of a Stock Appreciation Right, the Participant shall be entitled to receive an amount, equal to the product of (i) the excess of the Fair Market Value of one share of Stock on the date of exercise over the Exercise Price of the applicable Stock Appreciation Right, multiplied by (ii) the number of shares of Stock in respect of which the Stock Appreciation Right has been exercised. Except as otherwise determined by the Committee on not less than thirty (30) days’ prior written notice to the Participant, the payment shall be made in shares of Stock based upon the Fair Market Value on the date of exercise. Fractional shares shall be settled by payment in cash based upon the Fair Market Value on such date.                      4.          Award Term.                          Except as otherwise determined by the Committee after the date of this Certificate, the Award Term shall end on the earliest of (1) the date on which the Award has been exercised in full, (2) the date on which the Participant experiences a Termination for Cause or a voluntary Termination, (3) the one-year anniversary of the date on which the Participant experiences a Termination due to death or Disability, (4) the three-year anniversary of the date on which the Participant experiences a Termination due to the Participant’s Retirement, and (5) the 90th day after the Participant experiences a Termination for any other reason; provided, that in no event may the Award Term extend beyond ten years from the date on which the Award is granted. Upon the occurrence of a Termination of Participant for any reason, the Award Term shall thereupon end with respect to any portion of the Award that is unvested as of the date of such Termination and such unvested portion shall be forfeited immediately.   --------------------------------------------------------------------------------                        5.           Nontransferability of the Award.                   The Award is not transferable except (i) as designated by the Participant by will or by the laws of descent and distribution or (ii) as otherwise expressly permitted by the Committee including, if so permitted, pursuant to a transfer to such Participant’s immediate family, whether directly or indirectly or by means of a trust or partnership or otherwise. If any rights exercisable by the Participant or benefits deliverable to the Participant under this Certificate have not been exercised or delivered, at the time of the Participant’s death, such rights shall be exercisable by the Designated Beneficiary, and such benefits shall be delivered to the Designated Beneficiary, in accordance with the provisions of this Certificate and the Plan.                      6.          Taxes and Withholdings.                  No later than the date of exercise of the Award granted hereunder, the Participant shall pay to the Company or make arrangements satisfactory to the Committee regarding payment of any federal, state or local taxes of any kind required by law to be withheld upon the exercise of such Award and the Company shall, to the extent permitted or required by law, have the right to deduct from any payment of any kind otherwise due to the Participant, federal, state and local taxes of any kind required by law to be withheld upon the exercise of the Award granted hereunder, as provided in Section 4.4 of the Plan. In this regard the Participant may elect to pay any tax withholding upon the exercise of an Award by irrevocably authorizing a third party to sell shares of Stock (or a sufficient portion of the shares) acquired upon exercise of the Award and remit to the Company a sufficient portion of the sale proceeds to pay such tax withholding.                      7.          Notices.                             All notices and other communications under this Certificate shall be in writing and shall be given by hand delivery to the other party or overnight courier, or by postage paid first class mail, addressed as follows:                 If to the Participant:             (FirstName1) (LastName1)             (Address1)             (City,) (State) (PostalCode)                   If to the Company:                         Loews Corporation             667 Madison Avenue             New York, NY 10021-8087             Attention: Corporate Secretary             Facsimile: (212) 521-2997 or to such other address as any party shall have furnished to the other in writing in accordance with this Paragraph 7. Notice and communications shall be effective when actually received by the addressee, if given by hand delivery, when deposited with a courier service, if given by overnight courier, or two (2) business days following mailing, if delivered by first class mail.                      8.          Effect of Certificate.                  Except as otherwise provided hereunder, this Certificate shall be binding upon and shall inure to the benefit of any successor or successors of the Company, and to any transferee or successor of the Participant pursuant to Paragraph 5.                    9.          Conflicts and Interpretation.                   The Award is subject to the provisions of the Plan, which are hereby incorporated by reference. In the event of any conflict between this Certificate and the Plan, the Plan shall control. In the event of any ambiguity in this Certificate, any term which is not defined in this Certificate, or any matters as to which this Certificate is silent, the Plan shall govern including, without limitation, the provisions thereof pursuant to which the Committee has the power, among others, to (i) interpret the Plan, (ii) prescribe, amend and rescind rules and regulations relating to the Plan and (iii) make all other determinations deemed necessary or advisable for the administration of the Plan.   --------------------------------------------------------------------------------                    10.          Headings.                 The headings of paragraphs herein are included solely for convenience of reference and shall not affect the meaning or interpretation of any of the provisions of this Certificate.                    11.         Amendment.                          This Certificate may not be modified, amended or waived except by an instrument in writing signed by the Company. The waiver by either party of compliance with any provision of this Certificate shall not operate or be construed as a waiver of any other provision of this Certificate, or of any subsequent breach by such party of a provision of this Certificate.                IN WITNESS WHEREOF, as of the date first above written, the Company has caused this Certificate to be executed on its behalf by a duly authorized officer.   LOEWS CORPORATION                       By:       Gary W. Garson     Senior Vice President   --------------------------------------------------------------------------------

FIRST AMENDMENT TO SECURED LOAN AGREEMENT   This First Amendment (this “Amendment”) to the Secured Loan Agreement referenced below is entered into as of December __, 2005, among Leaf Fund II, LLC, a Delaware limited liability company, as Borrower (the “Borrower”), Leaf Funding, Inc., a Delaware corporation, as Originator (the “Originator”), Lease Equity Appreciation Fund II, L.P., a Delaware limited partnership, as Seller (the “Seller”), Leaf Financial Corporation, a Delaware corporation, as Servicer (the “Servicer”), U.S. Bank National Association, a national banking association, as Collateral Agent (in such capacity, the “Collateral Agent”) and as Securities Intermediary (in such capacity, the “Securities Intermediary”) and WestLB AG, New York Branch, as Lender (the “Lender”).   R E C I T A L S:   WHEREAS, the Borrower, the Originator, the Seller, the Servicer, the Collateral Agent, the Securities Intermediary and the Lender are parties to the Secured Loan Agreement, dated as of June 1, 2005 (as amended, supplemented and otherwise modified from time to time, the “Secured Loan Agreement”);   WHEREAS, the parties hereto desire to amend the Secured Loan Agreement pursuant to Section 14.04 thereof to make certain amendments thereto as further described in this Amendment;   NOW, THEREFORE, in consideration of the mutual covenants and undertakings herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:   Section 1. Amendments to the Secured Loan Agreement. Effective as of the execution and delivery of this Amendment by all parties hereto:   (a)  The definition of “Interest Coverage Ratio” in Appendix A to the Secured Loan Agreement is hereby deleted.   (b)  Section 7.02(jj) of the Secured Loan Agreement is hereby amended and restated in its entirety as follows:   “(jj) As of the last day of each fiscal quarter commencing December 31, 2006, LEAF shall maintain “partners equity” (as reflected in its financial statements) of no less than 75% of “partners equity” as of the last day of its offering period pursuant to its Prospectus dated December 22, 2004 as reported in its financial statements for December 31, 2006.”   (c)  Section 8.01(ff) of the Secured Loan Agreement is hereby amended and restated in its entirety as follows:   “(i) LEAF shall have failed to maintain a Senior Leverage Ratio no greater than 7.5:1.0 or (ii) the Servicer shall have failed to maintain a (a) “Minimum Tangible Net Worth” (defined as stockholders’ equity plus subordinated debt less intangibles) of $7,500,000 or (b) minimum stockholders’ equity of $1,000,000 or (iii) LEAF shall have defaulted (after giving effect to any and all notice, grace and cure periods) in respect of any material Indebtedness for borrowed money.”   -------------------------------------------------------------------------------- Section 2. Representations and Warranties. Each of the Borrower, the Seller, the Servicer and the Originator hereby represents and warrants that (i) it has the power and is duly authorized to execute and deliver this Amendment, (ii) this Amendment has been duly authorized, executed and delivered, (iii) it is and will continue to be duly authorized to perform its respective obligations under the Loan Documents and this Amendment, (iv) the execution, delivery and performance by it of this Amendment shall not (1) result in the breach of, or constitute (alone or with notice or with the lapse of time or both) a default under, any material agreement or instrument to which it is a party, (2) violate (A) any provision of law, statute, rule or regulation, or organizational documents or other constitutive documents, (B) any order of any Governmental Authority or (C) any provision of any material indenture, agreement or other instrument to which it is a party or by which it or any of its property is or may be bound, or (3) result in the creation or imposition of any Lien upon or with respect to any property or assets now owned or hereafter acquired by the Borrower other than pursuant to the Loan Documents, (v) this Amendment and each of the Loan Documents to which it is a party or by which it or its assets may be or is bound constitutes its legal, valid and binding obligations, enforceable against it (subject, as to the enforcement of remedies, to applicable bankruptcy, reorganization, insolvency, moratorium and similar laws affecting creditors’ rights generally and to general principles of equity), (vi) except as publicly disclosed, there are no actions, suits, investigations (civil or criminal) or proceedings at law or in equity or by or before any Governmental Authority pending or, to its knowledge, threatened against or affecting it or any of its business, property or rights (1) which involve any Loan Documents or (2) which would be materially likely to result in a Material Adverse Effect, (vii) it is not in default or violation with respect to any law, rule or regulation, judgment, writ, injunction or decree order of any court, governmental authority, regulatory agency or arbitration board or tribunal and, with respect to the Originator, the effect of which would have a material adverse effect on its business, assets, operations or financial condition and (viii) no Facility Termination Event, Default or Event of Default has occurred or is continuing. Except as expressly amended by the terms of this Amendment, all terms and conditions of the Secured Loan Agreement shall remain in full force and effect and are hereby ratified in all respects.   Section 3. Defined Terms; Headings. All capitalized terms used herein, unless otherwise defined herein, have the same meanings provided herein or in Appendix A to the Secured Loan Agreement. The headings of the various Sections of this Amendment have been inserted for convenience of reference only and shall not be deemed to be part of this Amendment.   Section 4. Limited Amendment. This Amendment is limited precisely as written and shall not be deemed to (a) be a consent to a waiver or any other term or condition of the Secured Loan Agreement, the other Loan Documents or any of the documents referred to therein or executed in connection therewith or (b) prejudice any right or rights the Lender or the Hedge Counterparties may now have or may have in the future under or in connection with the Secured Loan Agreement, the other Loan Documents or any documents referred to therein or executed in connection therewith. Whenever the Secured Loan Agreement is referred to in the Secured Loan Agreement or any of the instruments, agreements or other documents or papers executed and delivered in connection therewith, it shall be deemed to mean the Secured Loan Agreement, as the case may be, as modified by this Amendment. Except as hereby amended, no other term, condition or provision of the Secured Loan Agreement shall be deemed modified or amended, and this Amendment shall not be considered a novation.   -------------------------------------------------------------------------------- Section 5. Construction; Severability. This Amendment is a document executed pursuant to the Secured Loan Agreement and shall (unless otherwise expressly indicated therein) be construed, administered or applied in accordance with the terms and provisions thereof. If any one or more of the covenants, agreements, provisions or terms of this Amendment shall be held invalid in a jurisdiction for any reason whatsoever, then, in such jurisdiction, such covenants, agreements, provisions or terms shall be deemed severable from the remaining covenants, agreements, provisions or terms of this Amendment and shall in no way affect the validity or enforceability of the other covenants, agreements, provisions or terms of this Amendment.   Section 6. Counterparts; Facsimile Signature. This Amendment may be executed by the parties hereto in several counterparts, each of which shall be deemed to be an original and all of which shall constitute together but one and the same agreement. The parties may execute facsimile copies of this Amendment and the facsimile signature of any such party shall be deemed an original and fully binding on said party.   Section 7. Governing Law. This Amendment shall be governed and construed in accordance with the applicable terms and provisions of Section 14.09 (Governing Law) of the Secured Loan Agreement, which terms and provisions are incorporated herein by reference.   Section 8. Successor and Assigns. This Amendment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.       --------------------------------------------------------------------------------   IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to the Secured Loan Agreement to be duly executed by their respective authorized officers as of the day and year first written above.   BORROWER:                             LEAF FUND II, LLC                                           By:                                                         Name:         Title:   ORIGINATOR:  LEAF FUNDING, INC.                   By:                                         Name:         Title:   SELLER:                              LEASE EQUITY APPRECIATION FUND II, L.P.                                       By: LEAF FINANCIAL CORPORATION,                                                 as General Partner           By:                                                     Name:        Title:   SERVICER:                             LEAF FINANCIAL CORPORATION                         By:                                           Name:       Title:   LENDER:                               WESTLB AG, NEW YORK BRANCH                         By:                                      Name:       Title:                        By:                                              Name:      Title:   COLLATERAL AGENT/ SECURITIES INTERMEDIARY:                 U.S. BANK NATIONAL ASSOCIATION                      By:                                          Name:    Title:      

Exhibit 10.2 AMENDMENT to EMPLOYMENT AGREEMENT This Amendment to Employment Agreement (“Amendment”) is dated as of July 1, 2006, and is made by and between Joseph M. Molina, M.D. (the “Executive), and Molina Healthcare, Inc., a Delaware corporation (the “Company”). WHEREAS, the parties have previously entered into an Employment Agreement dated as of January 2, 2002 (the “Agreement”); WHEREAS, the parties wish to amend and supersede certain provisions of the Agreement; NOW, THEREFORE, the Executive and the Company agree as follows: 1. Terms used in this Amendment, unless otherwise defined herein, are used as defined in the Agreement. 2. Section 3 of the Agreement is hereby amended to read in its entirety as follows: (a) BASE SALARY. Executive’s Base Salary shall be at a rate of not less than $775,000 on an annual basis (“Executive’s Base Salary”), commencing as of March 20, 2006, and paid in accordance with the Company’s regular payroll practices. The Company’s Compensation Committee shall review at least annually Executive’s Base Salary for possible increase and may, in its sole discretion and in accordance with applicable rules and regulations of the Securities and Exchange Commission and the New York Stock Exchange, periodically adjust Executive’s Base Salary. (b) BONUS. For the Company’s fiscal year 2006, Executive shall be eligible to earn discrete performance bonuses under the Company’s 2005 Incentive Compensation Plan upon the separate and independent satisfaction of the following objective performance benchmarks previously established by the Company’s Compensation Committee: (i) a bonus in the amount of $193,750 if the Company achieves earnings per fully diluted share of at least $1.94; (ii) a bonus in the amount of $193,750 if the Company achieves a return on equity of at least fourteen percent (14%); and (iii) a bonus in the amount of $193,750 if the Company achieves gross premium revenues of at least $1,832,000,000. In order to receive any of the three specified bonus amounts, the Compensation Committee of the Board of Directors must first certify in   1 -------------------------------------------------------------------------------- accordance with the 2005 Incentive Compensation Plan and the applicable rules and regulations of the Internal Revenue Code that the relevant objective performance benchmark has been achieved. (iv) In addition to the above-identified bonus amounts under the 2005 Incentive Compensation Plan, the Executive shall also be eligible to receive a separate, general bonus amount of up to $193,750 in the sole discretion of the Compensation Committee. 3. Section 4(e)(ii) of the Agreement, the original inclusion of which in the Agreement is acknowledged by the parties to have been a typographical error and which provision ab initio is without force or effect, is deleted in its entirety. 4. The Addendum to the Agreement is deleted in its entirety and shall be without force or effect. 5. Except as provided herein, the Agreement remains in full force and effect without amendment. References in the Agreement to the Agreement mean the Agreement as amended by this Amendment. [signature page follows]   2 -------------------------------------------------------------------------------- 6. This Amendment may be executed in two or more counterparts, each of which shall be deemed an original, and all of which together shall constitute one and the same instrument. IN WITNESS WHEREOF, the Company and the Employee have caused this Amendment to be signed as of the date that appears in its first paragraph.   MOLINA HEALTHCARE, INC. /s/ John P. Szabo, Jr. By:   John P. Szabo, Jr. Title:   Director, Chairman of Compensation Committee EMPLOYEE /s/ Joseph M. Molina By:   Joseph M. Molina, M.D.   3

Exhibit 10.13   INDEMNITY AGREEMENT   THIS INDEMNITY AGREEMENT (this “Agreement”) dated as of                 , 2006, is made by and between TorreyPines Therapeutics, Inc. a Delaware corporation (the “Company”), and                                   (“Indemnitee”).   R E C I T A L S:   A.                                   The Company desires to attract and retain the services of highly qualified individuals as directors, officers, employees and agents.   B.                                     The Company’s bylaws (the “Bylaws”) require that the Company indemnify its directors and executive officers, and allow the Company to indemnify its other officers, employees and agents, as authorized by the Delaware General Corporation Law, as amended (the “Code”), under which the Company is organized and such Bylaws expressly provide that the indemnification provided therein is not exclusive and contemplates that the Company may enter into separate agreements with its directors, officers and other persons to set forth specific indemnification provisions.   C.                                     Indemnitee does not regard the protection currently provided by applicable law, the Company’s governing documents and available insurance as adequate under the present circumstances, and the Company has determined that Indemnitee and other directors, officers, employees and agents of the Company may not be willing to serve or continue to serve in such capacities without additional protection.   D.                                    The Company desires and has requested Indemnitee to serve or continue to serve as a director, officer, employee or agent of the Company, as the case may be, and has proferred this Agreement to Indemnitee as an additional inducement to serve in such capacity.   E.                                      Indemnitee is willing to serve, or to continue to serve, as a director, officer, employee or agent of the Company, as the case may be, if Indemnitee is furnished the indemnity provided for herein by the Company.   A G R E E M E N T :   NOW THEREFORE, in consideration of the mutual covenants and agreements set forth herein, the parties hereto, intending to be legally bound, hereby agree as follows:   1.                                      Definitions.   (a)                                  Agent. For purposes of this Agreement, the term “agent” of the Company means any person who:  (i) is or was a director, officer, employee or other fiduciary of the Company or a subsidiary of the Company; or (ii) is or was serving at the request or for the convenience of, or representing the interests of, the Company or a subsidiary of the Company, as a director, officer, employee or other fiduciary of a foreign or domestic corporation, partnership,  joint venture, trust or other enterprise.   --------------------------------------------------------------------------------   (b)                                  Expenses. For purposes of this Agreement, the term “expenses” shall be broadly construed and shall include, without limitation, all direct and indirect costs of any type or nature whatsoever (including, without limitation, all attorneys’, witness, or other professional fees and related disbursements, and other out-of-pocket costs of whatever nature), actually and reasonably incurred by Indemnitee in connection with the investigation, defense or appeal of a proceeding or establishing or enforcing a right to indemnification under this Agreement, the Code or otherwise, and amounts paid in settlement by or on behalf of Indemnitee, but shall not include any judgments, fines or penalties actually levied against Indemnitee for such individual’s violations of law. The term “expenses” shall also include reasonable compensation for time spent by Indemnitee for which he is not compensated by the Company or any subsidiary or third party (i) for any period during which Indemnitee is not an agent, in the employment of, or providing services for compensation to, the Company or any subsidiary; and (ii) if the rate of compensation and estimated time involved is approved by the directors of the Company who are not parties to any action with respect to which expenses are incurred, for Indemnitee while an agent of, employed by, or providing services for compensation to, the Company or any subsidiary.   (c)                                  Proceedings. For purposes of this Agreement, the term “proceeding” shall be broadly construed and shall include, without limitation, any threatened, pending, or completed action, suit, arbitration, alternate dispute resolution mechanism, investigation, inquiry, administrative hearing or any other actual, threatened or completed proceeding, whether brought in the right of the Company or otherwise and whether of a civil, criminal, administrative or investigative nature, and whether formal or informal in any case, in which Indemnitee was, is or will be involved as a party or otherwise by reason of:  (i) the fact that Indemnitee is or was a director or officer of the Company; (ii) the fact that any action taken by Indemnitee or of any action on Indemnitee’s part while acting as director, officer, employee or agent of the Company; or (iii) the fact that Indemnitee is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, and in any such case described above, whether or not serving in any such capacity at the time any liability or expense is incurred for which indemnification, reimbursement, or advancement of expenses may be provided under this Agreement.   (d)                                  Subsidiary. For purposes of this Agreement, the term “subsidiary” means any corporation or limited liability company of which more than 50% of the outstanding voting securities or equity interests are owned, directly or indirectly, by the Company and one or more of its subsidiaries, and any other corporation, limited liability company, partnership, joint venture, trust, employee benefit plan or other enterprise of which Indemnitee is or was serving at the request of the Company as a director, officer, employee, agent or fiduciary.   (e)                                  Independent Counsel. For purposes of this Agreement, the term “independent counsel” means a law firm, or a partner (or, if applicable, member) of such a law firm, that is experienced in matters of corporation law and neither presently is, nor in the past five (5) years has been, retained to represent: (i) the Company or Indemnitee in any matter material to either such party, or (ii) any other party to the proceeding giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing, the term “independent counsel” shall   2 --------------------------------------------------------------------------------   not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee’s rights under this Agreement.   2.                                      Agreement to Serve. Indemnitee will serve, or continue to serve, as a director, officer, employee or agent of the Company or any subsidiary, as the case may be, faithfully and to the best of his or her ability, at the will of such corporation (or under separate agreement, if such agreement exists), in the capacity Indemnitee currently serves as an agent of such corporation, so long as Indemnitee is duly appointed or elected and qualified in accordance with the applicable provisions of the bylaws or other applicable charter documents of such corporation, or until such time as Indemnitee tenders his or her resignation in writing; provided, however, that nothing contained in this Agreement is intended as an employment agreement between Indemnitee and the Company or any of its subsidiaries or to create any right to continued employment of Indemnitee with the Company or any of its subsidiaries in any capacity.   The Company acknowledges that it has entered into this Agreement and assumes the obligations imposed on it hereby, in addition to and separate from its obligations to Indemnitee under the Bylaws, to induce Indemnitee to serve, or continue to serve, as a director, officer, employee or agent of the Company, and the Company acknowledges that Indemnitee is relying upon this Agreement in serving as a director, officer, employee or agent of the Company.   3.                                      Indemnification.   (a)                                  Indemnification in Third Party Proceedings. Subject to Section 10 below, the Company shall indemnify Indemnitee to the fullest extent permitted by the Code, as the same may be amended from time to time (but, only to the extent that such amendment permits Indemnitee to broader indemnification rights than the Code permitted prior to adoption of such amendment), if Indemnitee is a party to or threatened to be made a party to or otherwise involved in any proceeding, for any and all expenses, actually and reasonably incurred by Indemnitee in connection with the investigation, defense, settlement or appeal of such proceeding.   (b)                                  Indemnification in Derivative Actions and Direct Actions by the Company. Subject to Section 10 below, the Company shall indemnify Indemnitee to the fullest extent permitted by the Code, as the same may be amended from time to time (but, only to the extent that such amendment permits Indemnitee to broader indemnification rights than the Code permitted prior to adoption of such amendment), if Indemnitee is a party to or threatened to be made a party to or otherwise involved in any proceeding by or in the right of the Company to procure a judgment in its favor, against any and all expenses actually and reasonably incurred by Indemnitee in connection with the investigation, defense, settlement, or appeal of such proceedings.   4.                                      Indemnification of Expenses of Successful Party. Notwithstanding any other provision of this Agreement, to the extent that Indemnitee has been successful on the merits or otherwise in defense of any proceeding or in defense of any claim, issue or matter therein, including the dismissal of any action without prejudice, the Company shall indemnify   3 --------------------------------------------------------------------------------   Indemnitee against all expenses actually and reasonably incurred in connection with the investigation, defense or appeal of such proceeding.   5.                                      Partial Indemnification. If Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of any expenses actually and reasonably incurred by Indemnitee in the investigation, defense, settlement or appeal of a proceeding, but is precluded by applicable law or the specific terms of this Agreement to indemnification for the total amount thereof, the Company shall nevertheless indemnify Indemnitee for the portion thereof to which Indemnitee is entitled.   6.                                      Advancement of Expenses. To the extent not prohibited by law, the Company shall advance the expenses incurred by Indemnitee in connection with any proceeding, and such advancement shall be made within twenty (20) days after the receipt by the Company of a statement or statements requesting such advances (which shall include invoices received by Indemnitee in connection with such expenses but, in the case of invoices in connection with legal services, any references to legal work performed or to expenditures made that would cause Indemnitee to waive any privilege accorded by applicable law shall not be included with the invoice) and upon request of the Company, an undertaking to repay the advancement of expenses if and to the extent that it is ultimately determined by a court of competent jurisdiction in a final judgment, not subject to appeal, that Indemnitee is not entitled to be indemnified by the Company. Advances shall be unsecured, interest free and without regard to Indemnitee’s ability to repay the expenses. Advances shall include any and all expenses actually and reasonably incurred by Indemnitee pursuing an action to enforce Indemnitee’s right to indemnification under this Agreement, or otherwise and this right of advancement, including expenses incurred preparing and forwarding statements to the Company to support the advances claimed. Indemnitee acknowledges that the execution and delivery of this Agreement shall constitute an undertaking providing that Indemnitee shall, to the fullest extent required by law, repay the advance if and to the extent that it is ultimately determined by a court of competent jurisdiction in a final judgment, not subject to appeal, that Indemnitee is not entitled to be indemnified by the Company. The right to advances under this Section shall continue until final disposition of any proceeding, including any appeal therein. This Section 6 shall not apply to any claim made by Indemnitee for which indemnity is excluded pursuant to Section 10(b).   7.                                      Notice and Other Indemnification Procedures.   (a)                                  Notification of Proceeding. Indemnitee will notify the Company in writing promptly upon being served with any summons, citation, subpoena, complaint, indictment, information or other document relating to any proceeding or matter which may be subject to indemnification or advancement of expenses covered hereunder. The failure of Indemnitee to so notify the Company shall not relieve the Company of any obligation which it may have to Indemnitee under this Agreement or otherwise.   (b)                                  Request for Indemnification and Indemnification Payments. Indemnitee shall notify the Company promptly in writing upon receiving notice of any demand, judgment or other requirement for payment that Indemnitee reasonably believes to be subject to indemnification under the terms of this Agreement, and shall request payment thereof by the Company. Indemnification payments requested by Indemnitee under Section 3 hereof shall be   4 --------------------------------------------------------------------------------   made by the Company no later than sixty (60) days after receipt of the written request of Indemnitee. Claims for advancement of expenses shall be made under the provisions of Section 6 herein.   (c)                                  Application for Enforcement. In the event the Company fails to make timely payments as set forth in Sections 6 or 7(b) above, Indemnitee shall have the right to apply to any court of competent jurisdiction for the purpose of enforcing Indemnitee’s right to indemnification or advancement of expenses pursuant to this Agreement. In such an enforcement hearing or proceeding, the burden of proof shall be on the Company to prove by that indemnification or advancement of expenses to Indemnitee is not required under this Agreement or permitted by applicable law. Any determination by the Company (including its Board of Directors, stockholders or independent counsel) that Indemnitee is not entitled to indemnification hereunder, shall not be a defense by the Company to the action nor create any presumption that Indemnitee is not entitled to indemnification or advancement of expenses hereunder.   (d)                                  Indemnification of Certain Expenses. The Company shall indemnify Indemnitee against all expenses incurred in connection with any hearing or proceeding under this Section 7 unless the Company prevails in such hearing or proceeding on the merits in all material respects.   8.                                      Assumption of Defense. In the event the Company shall be requested by Indemnitee to pay the expenses of any proceeding, the Company, if appropriate, shall be entitled to assume the defense of such proceeding, or to participate to the extent permissible in such proceeding, with counsel reasonably acceptable to Indemnitee. Upon assumption of the defense by the Company and the retention of such counsel by the Company, the Company shall not be liable to Indemnitee under this Agreement for any fees of counsel subsequently incurred by Indemnitee with respect to the same proceeding, provided that Indemnitee shall have the right to employ separate counsel in such proceeding at Indemnitee’s sole cost and expense. Notwithstanding the foregoing, if Indemnitee’s counsel delivers a written notice to the Company stating that such counsel has reasonably concluded that there may be a conflict of interest between the Company and Indemnitee in the conduct of any such defense or the Company shall not, in fact, have employed counsel or otherwise actively pursued the defense of such proceeding within a reasonable time, then in any such event the fees and expenses of Indemnitee’s counsel to defend such proceeding shall be subject to the indemnification and advancement of expenses provisions of this Agreement.   9.                                      Insurance. To the extent that the Company maintains an insurance policy or policies providing liability insurance for directors, officers, employees, or agents of the Company or of any subsidiary (“D&O Insurance”), Indemnitee shall be covered by such policy or policies in accordance with its or their terms to the maximum extent of the coverage available for any such director, officer, employee or agent under such policy or policies. If, at the time of the receipt of a notice of a claim pursuant to the terms hereof, the Company has D&O Insurance in effect, the Company shall give prompt notice of the commencement of such proceeding to the insurers in accordance with the procedures set forth in the respective policies. The Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of   5 --------------------------------------------------------------------------------   Indemnitee, all amounts payable as a result of such proceeding in accordance with the terms of such policies.   10.                               Exceptions.   (a)                                  Certain Matters. Any provision herein to the contrary notwithstanding, the Company shall not be obligated pursuant to the terms of this Agreement to indemnify Indemnitee on account of any proceeding with respect to (i) remuneration paid to Indemnitee if it is determined by final judgment or other final adjudication that such remuneration was in violation of law (and, in this respect, both the Company and Indemnitee have been advised that the Securities and Exchange Commission believes that indemnification for liabilities arising under the federal securities laws is against public policy and is, therefore, unenforceable and that claims for indemnification should be submitted to appropriate courts for adjudication, as indicated in Section 10(d) below); (ii) a final judgment rendered against Indemnitee for an accounting, disgorgement or repayment of profits made from the purchase or sale by Indemnitee of securities of the Company or in connection with a settlement by or on behalf of Indemnitee to the extent it is acknowledged by Indemnitee and the Company that such amount paid in settlement resulted from Indemnitee’s conduct from which Indemnitee received monetary personal profit, pursuant to the provisions of Section 16(b) of the Securities Exchange Act of 1934, as amended, or other provisions of any federal, state or local statute or rules and regulations thereunder; (iii) a final judgment or other final adjudication that Indemnitee’s conduct was in bad faith, knowingly fraudulent or deliberately dishonest or constituted willful misconduct (but only to the extent of such specific determination); or (iv) on account of conduct that is established by a final judgment as constituting a breach of Indemnitee’s duty of loyalty to the Company or resulting in any personal profit or advantage to which Indemnitee is not legally entitled. For purposes of the foregoing sentence, a final judgment or other adjudication may be reached in either the underlying proceeding or action in connection with which indemnification is sought or a separate proceeding or action to establish rights and liabilities under this Agreement.   (b)                                  Claims Initiated by Indemnitee. Any provision herein to the contrary notwithstanding, the Company shall not be obligated to indemnify or advance expenses to Indemnitee with respect to proceedings or claims initiated or brought by Indemnitee against the Company or its directors, officers, employees or other agents and not by way of defense, except (i) with respect to proceedings brought to establish or enforce a right to indemnification under this Agreement or under any other agreement, provision in the Bylaws or Certificate of Incorporation or applicable law, or (ii) with respect to any other proceeding initiated by Indemnitee that is either approved by the Board of Directors or Indemnitee’s participation is required by applicable law. However, indemnification or advancement of expenses may be provided by the Company in specific cases if the Board of Directors determines it to be appropriate.   (c)                                  Unauthorized Settlements. Any provision herein to the contrary notwithstanding, the Company shall not be obligated pursuant to the terms of this Agreement to indemnify Indemnitee under this Agreement for any amounts paid in settlement of a proceeding effected without the Company’s written consent. Neither the Company nor Indemnitee shall unreasonably withhold consent to any proposed settlement; provided, however, that the   6 --------------------------------------------------------------------------------   Company may in any event decline to consent to (or to otherwise admit or agree to any liability for indemnification hereunder in respect of) any proposed settlement if the Company is also a party in such proceeding and determines in good faith that such settlement is not in the best interests of the Company and its stockholders.   (d)                                  Securities Act Liabilities. Any provision herein to the contrary notwithstanding, the Company shall not be obligated pursuant to the terms of this Agreement to indemnify Indemnitee or otherwise act in violation of any undertaking appearing in and required by the rules and regulations promulgated under the Securities Act of 1933, as amended (the “Act”), or in any registration statement filed with the SEC under the Act. Indemnitee acknowledges that paragraph (h) of Item 512 of Regulation S-K currently generally requires the Company to undertake in connection with any registration statement filed under the Act to submit the issue of the enforceability of Indemnitee’s rights under this Agreement in connection with any liability under the Act on public policy grounds to a court of appropriate jurisdiction and to be governed by any final adjudication of such issue. Indemnitee specifically agrees that any such undertaking shall supersede the provisions of this Agreement and to be bound by any such undertaking.   11.                               Nonexclusivity and Survival of Rights. The provisions for indemnification and advancement of expenses set forth in this Agreement shall not be deemed exclusive of any other rights which Indemnitee may at any time be entitled under any provision of applicable law, the Company’s Certificate of Incorporation, Bylaws or other agreements, both as to action in Indemnitee’s official capacity and Indemnitee’s action as an agent of the Company, in any court in which a proceeding is brought, and Indemnitee’s rights hereunder shall continue after Indemnitee has ceased acting as an agent of the Company and shall inure to the benefit of the heirs, executors, administrators and assigns of Indemnitee. The obligations and duties of the Company to Indemnitee under this Agreement shall be binding on the Company and its successors and assigns until terminated in accordance with its terms. The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place.   No amendment, alteration or repeal of this Agreement or of any provision hereof shall limit or restrict any right of Indemnitee under this Agreement in respect of any action taken or omitted by such Indemnitee in his or her corporate status prior to such amendment, alteration or repeal. To the extent that a change in the Code, whether by statute or judicial decision, permits greater indemnification or advancement of expenses than would be afforded currently under the Company’s Certificate of Incorporation, Bylaws and this Agreement, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change. No right or remedy herein conferred is intended to be exclusive of any other right or remedy, and every other right and remedy shall be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, by Indemnitee shall not prevent the concurrent assertion or employment of any other right or remedy by Indemnitee.   7 --------------------------------------------------------------------------------   12.                               Term. This Agreement shall continue until and terminate upon the later of: (a) five (5) years after the date that Indemnitee shall have ceased to serve as a director or and/or officer, employee or agent of the Company; or (b) one (1) year after the final termination of any proceeding, including any appeal then pending, in respect to which Indemnitee was granted rights of indemnification or advancement of expenses hereunder.   No legal action shall be brought and no cause of action shall be asserted by or in the right of the Company against an Indemnitee or an Indemnitee’s estate, spouse, heirs, executors or personal or legal representatives after the expiration of five (5) years from the date of accrual of such cause of action, and any claim or cause of action of the Company shall be extinguished and deemed released unless asserted by the timely filing of a legal action within such five-year period; provided, however, that if any shorter period of limitations is otherwise applicable to such cause of action, such shorter period shall govern.   13.                               Subrogation. In the event of payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who, at the request and expense of the Company, shall execute all papers required and shall do everything that may be reasonably necessary to secure such rights, including the execution of such documents necessary to enable the Company effectively to bring suit to enforce such rights.   14.                               Interpretation of Agreement. It is understood that the parties hereto intend this Agreement to be interpreted and enforced so as to provide indemnification to Indemnitee to the fullest extent now or hereafter permitted by law.   15.                               Severability. If any provision of this Agreement shall be held to be invalid, illegal or unenforceable for any reason whatsoever, (a) the validity, legality and enforceability of the remaining provisions of the Agreement (including without limitation, all portions of any paragraphs of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that are not themselves invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby; and (b) to the fullest extent possible, the provisions of this Agreement (including, without limitation, all portions of any paragraph of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that are not themselves invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable and to give effect to Section 14 hereof.   16.                               Amendment and Waiver. No supplement, modification, amendment, or cancellation of this Agreement shall be binding unless executed in writing by the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provision hereof (whether or not similar) nor shall such waiver constitute a continuing waiver.   17.                               Notice. Except as otherwise provided herein, any notice or demand which, by the provisions hereof, is required or which may be given to or served upon the parties hereto shall be in writing and, if by telegram, telecopy or telex, shall be deemed to have been validly served, given or delivered when sent, if by overnight delivery, courier or personal delivery, shall be deemed to have been validly served, given or delivered upon actual delivery and, if mailed, shall be deemed to have been validly served, given or delivered three (3) business days after deposit in   8 --------------------------------------------------------------------------------   the United States mail, as registered or certified mail, with proper postage prepaid and addressed to the party or parties to be notified at the addresses set forth on the signature page of this Agreement (or such other address(es) as a party may designate for itself by like notice). If to the Company, notices and demands shall be delivered to the attention of the Secretary of the Company.   18.                               Governing Law. This Agreement shall be governed exclusively by and construed according to the laws of the State of Delaware, as applied to contracts between Delaware residents entered into and to be performed entirely within Delaware.   19.                               Counterparts. This Agreement may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original but all of which together shall constitute but one and the same Agreement. Only one such counterpart need be produced to evidence the existence of this Agreement.   20.                               Headings. The headings of the sections of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction hereof.   21.                               Entire Agreement. This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreements, understandings and negotiations, written and oral, between the parties with respect to the subject matter of this Agreement; provided, however, that this Agreement is a supplement to and in furtherance of the Company’s Certificate of Incorporation, Bylaws, the Code and any other applicable law, and shall not be deemed a substitute therefor, and does not diminish or abrogate any rights of Indemnitee thereunder.   9 --------------------------------------------------------------------------------   IN WITNESS WHEREOF, the parties hereto have entered into this Agreement effective as of the date first above written.     COMPANY             TorreyPines Therapeutics, Inc., a Delaware   corporation               By:       Name:       Title:                 INDEMNITEE           Signature of Indemnitee           Print or Type Name of Indemnitee   10 --------------------------------------------------------------------------------

Exhibit 10.1 October 30, 2006 Robert Hargadon 4327 Lake Washington Blvd. #6208 Kirkland, WA 98033 Dear Robert: We are delighted to extend you an offer to be Vice President, Human Resources at drugstore.com* starting on 11/13/2006. We are offering you an annual salary of $220,000, which will be paid every two weeks in accordance with the Company’s standard payroll policies. You will be eligible to receive an annual target bonus of 25% of your annual salary, based on both company and individual performance. Depending on the level of company and individual performance, you may receive between 0% and 140% of this target amount. Executive bonus compensation for subsequent years will be determined by the Board of Directors and CEO. Your compensation package will be reviewed annually. Other company-provided benefits, for which you are eligible, including health and welfare benefits, will be reviewed with you in detail on your first day of employment. At the start of your employment, you will be eligible for an option (the “Option”) to purchase 225,000 shares of drugstore.com, inc. common stock (the “Option Shares”). Your Option will be granted by a committee of the board of directors as soon as practicable after you commence employment. Your vesting commencement date will be your first day of employment. The exercise price of the Option Shares will be determined by the committee and will be based on fair market value on the Friday after you commence employment. The vesting schedule will be no less generous than that offered to new employees today (20% vest at 6 months and the remaining vesting quarterly for the 3.5 years following the initial vesting date). The Option will be subject to the terms of the Company’s 1998 Stock Option Plan and the related Stock Option Agreement between you and drugstore.com*. In appreciation for your decision to join us, we will pay you a signing bonus of $8,000. This bonus will be payable in accordance with our standard payroll policies and subject to applicable withholding taxes. If your employment with drugstore.com* is terminated for any reason prior to the second anniversary of your start date, you will be responsible for reimbursing the Company for the $8,000 signing bonus, on a pro-rated monthly basis. This bonus will be paid at the first payroll after you commence employment with the company. -------------------------------------------------------------------------------- This offer is contingent on your completion of our standard form Confidentiality and Inventions Agreement and employment application prior to commencing employment, copies of which are enclosed with this letter. If you have any questions about this agreement, please call us. This offer is also contingent on the successful completion of a background check. The results must be reviewed and accepted by drugstore.com* in accordance with our guidelines prior to your start date as stated in this offer letter. If the results are unacceptable, this offer will be rescinded. Throughout your employment with drugstore.com*, you will be an at-will employee. This means that you may terminate your employment with drugstore.com* at any time with or without cause, and with or without notice. Similarly, drugstore.com* may terminate your employment at any time, with or without cause, and with or without notice. Your at-will employment status may not be orally altered by any drugstore.com* employee, and may be altered in writing only by the CEO of the Company. Congratulations! All of us at drugstore.com* are very excited that you’re joining the team and look forward to a beneficial and rewarding relationship. Kindly indicate your consent to the terms in this offer letter by signing and returning a copy to us at your earliest convenience.   Sincerely, /s/ Dawn Lepore Dawn Lepore President, CEO and Chairman Agreed and Accepted:    /s/ Robert Hargadon     Date:   11/2/2006   Robert Hargadon         * drugstore.com and/or its affiliates and subsidiaries

(QUEST DIAGNOSTICS LOGO) [questcolorlogo.jpg] Exhibit 10.8 QUEST DIAGNOSTICS INCORPORATED PERFORMANCE SHARE AWARD AGREEMENT (2006 – 2008 Performance Period) This Performance Share Award Agreement (the “Share Agreement”) dated as of Grant Date (the “Grant Date”) is by and between Quest Diagnostics Incorporated, 1290 Wall Street West, Lyndhurst, NJ 07071 (the “Company”) and ________________________ (the “Employee”).     1. Conditions. This Share Agreement is subject in all respects to the Company’s Amended and Restated Employee Long-Term Incentive Plan (the “Plan”), the applicable terms of which are incorporated herein by reference. Terms not defined in this Share Agreement shall have the meaning ascribed in the Plan. The Employee acknowledges that he/she has read the terms of the Plan. This Share Agreement shall become void and the underlying grant will be revoked unless this document is executed by the Employee and returned by mail to the Executive Compensation Department to the attention of Lisa Zajac (1290 Wall Street West – 5th Floor, Lyndhurst, NJ 07071) within thirty (30) days from the date of transmittal to the Employee.     2. Calculation of Potential Award. The Employee shall be eligible to vest in shares of the Company’s stock as provided in this section (shares that have so vested, “Vested Shares”).       Employee’s Target Performance Shares: ____________________       Performance will be measured over the Performance Period using Baseline Year results and Final Year results for the Company as well as for the companies in the Comparator Peer Group (see Appendix A for these defined terms). After the Final Year of the Performance Period, the results of each company in the Comparator Peer Group will be arrayed from highest to lowest. The Company’s results will then be compared to that of the Comparator Peer Group and, based on the Company’s relative position in this array; Vested Shares will be awarded based upon the following formula:             -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- --------------------------------------------------------------------------------   Performance Relative to Peers *   “Earnings Multiple”* multiplied by Target Performance Shares = Vested Shares   -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- --------------------------------------------------------------------------------   Greater Than or Equal to 85th%ile   2 x Target Performance Shares = Vested Shares   Equal to 55th %ile   1 x Target Performance Shares = Vested Shares   Less Than or Equal to 25th %ile   0 x Target Performance Shares = 0 Shares   -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- --------------------------------------------------------------------------------     *Intermediate Performance and resulting Earnings Multiple will be interpolated.         For example, if the Company’s EPS Compound Annual Growth Rate (CAGR) from fiscal year 2005 to fiscal year 2007 is at the 70th %ile relative to the companies in the S&P500 Healthcare Index, an Earnings Multiple of 1.5 will be applied to the Target Performance Shares to calculate the Vested Shares.     3. Adjustments to Target Performance Shares: The Target Performance Shares will only be adjusted on a pro rata basis in the event either of the following occur:       (a) the Employee’s employment with the Company ends prior to the end of the Performance Period, except if for death, disability (as defined in Section 22(e)(3) of the Internal Revenue Code), or retirement (defined as termination after the Employee attains age sixty and with the consent of the Company). In that event, the Target Performance Shares will be pro-rated by dividing the number of full months served by the Employee during the Performance Period by the number of 1 of 4 --------------------------------------------------------------------------------       2006 Incentive Stock Agreement           months in the Performance Period (“Pro Ration Factor”). At the end of the Performance Period, the Vested Shares will be calculated based on the product of the Target Performance Shares, the Pro Ration Factor and the Earnings Multiple; or         (b) the Employee’s employment with the Company ends prior to the end of the Performance Period as a result of a separation which would entitle the Employee to severance benefits under the Company’s Severance Policy or an employment agreement between such Employee and the Company. In that event, the Target Performance Shares will be pro-rated by adding the number of full months served by the Employee during the Performance Period plus twelve (but not to exceed the number of months remaining in the Performance Period) and then dividing that total by the number of months in the Performance Period (“Severance Pro Ration Factor”). At the end of the Performance Period, the Vested Shares will be calculated based on the product of the Target Performance Shares, the Severance Pro Ration Factor and the Earnings Multiple.         (c) If prior to the end of the Performance Period, the Employee’s employment status in the Company is changed such that the Employee will no longer be eligible to receive performance shares pursuant to the Equity Award Eligibility Policy of the Company as in effect on the date hereof and attached as Appendix B to this Agreement and such changed status continues for a consecutive 90-day period, then, notwithstanding any other provision in this Agreement to the contrary, the Target Performance Shares will be pro-rated by dividing (x) the number of full months served by the Employee during the Performance Period through such 90th day (not to exceed 36) by (y) the number of months in the Performance Period (“Pro Ration Factor”). At the end of the Performance Period, the Vested Shares will be calculated based on the product of the Target Performance Shares, the Pro Ration Factor and the Earnings Multiple. The balance of the Target Performance Shares will be forfeited.       4. Vesting and Exceptions to Vesting:         Subject to the exception enumerated at the end of this Section 4, the Employee will vest at the end of the Performance Period. Vested Shares, net of required tax withholding as described in Section 8 below, will be transferred into the Employee’s account at the Company’s dedicated broker by March 15 after the Performance Period ends.         In the event a Change in Control of the Company occurs prior to the end of the Performance Period (or prior to the determination of the final approved Earnings Multiple), then, upon the consummation of such transaction, a number of Vested Shares will be delivered to the Employee equal to the greater of: (1) the Target Performance Shares (as pro rated, if applicable, pursuant to section 3 above) or (2) the number of Performance Shares that would be Vested Shares had the calculation been based on the Performance Period including the most recent fiscal year end results of the Company and the companies in the Comparator Peer Group. For purposes of this Share Agreement, Change of Control shall mean and shall be deemed to occur if and when:         (a) Any person (as such term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934) is or becomes the beneficial owner, directly or indirectly, of securities of the Company representing 40% of more of the combined voting power of the Company’s then outstanding securities; or 2 of 4 --------------------------------------------------------------------------------       2006 Incentive Stock Agreement         (b) The individuals who, as of the grant date, constituted the Company’s Board of Directors (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual (other than any individual whose initial assumption of office is in connection with an actual or threatened election contest (as such term is used in Rule 14a-11 of Regulation A promulgated under the Securities Exchange Act of 1934)), becoming a director subsequent to the Grant Date, whose election, or nomination for election by the stockholders of the Company, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board, shall be considered as though such individual was a member of the Incumbent Board; or         (c) Shareholders of the Company approve an agreement, providing for (a) a transaction in which the Company will cease to be an independent publicly owned corporation, or (b) the sale or other disposition of all or substantially all of the Company’s assets, or (c) a plan of partial or complete liquidation of the Company.         The Employee will not vest and will forfeit all Performance Shares if, either:         (x) The Employee was terminated for Cause where “Cause” shall be defined as the Employee committing any act that shall or could cause the Company to suffer financial harm or damage to its reputation (either before or after termination of employment) through (i) dishonesty, (ii) violation of law in the course of the Employee’s employment or violation of the Company’s Corporate Compliance Manual and compliance bulletins or other written policies, or (iii) material deviation from the duties owed the Company by the Employee; or         (y) The Employee breached any restrictive covenants of his or hers that may be in place. The Employee understands and acknowledges that he or she is a key employee of the Company which was a reason, in part, for being provided with this Grant, and, as such, may have restrictive covenants in place. Forfeiture under this subsection (b) shall not constitute a release of any claim that the Company may have for damages, past, present, or future in respect of any such breach.       5. Executive Share Ownership Guidelines: If the Employee has been designated as a participant in the Company’s Executive Share Ownership Guidelines, which have been established by the Compensation Committee of the Board of Directors, Vested Shares earned by the Employee (net of tax withholdings) pursuant to this Share Agreement would qualify under and are subject to such guidelines.       6. Non-Transferability. Except pursuant to the laws of descent and distribution, the Performance Shares described in this Share Agreement may not be sold, assigned, transferred, pledged or otherwise encumbered by or on behalf of or for the benefit of the Employee. Unless otherwise provided at the time of delivery of the Vested Shares to the Employee, the Vested Shares may be so sold, assigned, transferred, pledged or encumbered.       7. Interpretation. Any dispute, disagreement or matter of interpretation which shall arise under this Share Agreement shall be finally determined by the Company’s Compensation Committee in its absolute discretion.       8. Taxes: Any Vested Shares under this program will be considered taxable income and subject to tax and tax withholdings as appropriate. The Company will reduce the number of Vested Shares to be delivered 3 of 4 --------------------------------------------------------------------------------       2006 Incentive Stock Agreement         to the Employee by the amount of the taxes due (with the shares valued at the average of the high and low selling prices on the date of delivery of the Vested Shares).       9. Governing Law. This Share Agreement and all rights hereunder shall be governed by, and construed and interpreted in accordance with, the laws of the state of New Jersey applicable to contracts made and to be performed entirely within such state.       10. Acknowledgements. By execution of this Share Agreement, the Employee agrees that he/she has received and reviewed a copy of:         (a) the Prospectus (link to Prospectus: http://questnet1.qdx.com/Business_Groups/Legal/policies/stock_Grant/stock_Grant.htm)relating to the Company’s Amended and Restated Employee Long-Term Incentive Plan;         (b) the Quest Diagnostics Incorporated 2004 Annual Report (link to 2005 Annual Report: http://www.corporate-ir.net/ireye/ir_site.zhtml?ticker=DGX&script=700to Shareholders and Form 10-K);         (c) the Company’s Policy for Purchasing and Selling Securities (“the Policy”) (link to Trading Policy: http://questnet1.qdx.com/Business_Groups/Legal/policies/policies.htm.) The Employee further agrees to fully comply with the terms of the Policy;         (d) the Company’s Executive Share Ownership Guidelines (link to guidelines: http://questnet1.qdx.com/Business_Groups/Legal/policies/policies.htm); and         (e) the Company’s Equity Award Eligibility Policy attached hereto as Appendix B. EMPLOYEE:     By:     --------------------------------------------------------------------------------   (NAME) 4 of 4 -------------------------------------------------------------------------------- Appendix A QUEST DIAGNOSTICS INCORPORATED PERFORMANCE SHARE AWARD AGREEMENT 2006 – 2008 Performance Period Baseline Year – Results for Fiscal Year 2005 for the Company and each company in the Comparator Peer Group.         • Fiscal Year refers to the year during which the last full month occurs in each company’s annual reporting period. For the Company and most companies in the Comparator Peer Group, the Fiscal Year 2005 ended in December. For certain other companies, the Fiscal Year ended during other months in 2005.       Final Year – Fiscal Year 2008 for the Company and each company in the Comparator Peer Group.       Performance Period – The Performance Period will run from January 1, 2006 through December 31, 2008, the Final Year for the Company (and corresponding Peer Group fiscal years).   Performance Goal(s) - Compound Annual Growth Rate (CAGR) in Fully-Diluted Earnings Per Share for the Company and each company in the Comparator Peer Group from the Baseline Year to the Final Year (i.e., for Fiscal Years 2006, 2007 and 2008).         • For the 2005 Baseline Year only, the Pro Forma Fully-Diluted Earnings Per Share reported in the Footnotes to the Financial Statements for the Company and each company in the Comparator Peer Group will be used. The Pro Forma Fully-Diluted Earnings Per Share includes the compensation cost of stock option and other equity awards. For Fiscal Years beginning in 2006, the reported Fully-Diluted Earnings Per Share results will include the annual compensation cost of each company’s equity awards.         • If any company in the Peer Group has not publicly reported its Fully Diluted Earnings Per Share by February 28, 2009, its CAGR will be computed as of its most recent quarterly report.       Comparator Peer Group – The Comparator Peer Group is comprised of the companies in the Standard & Poors 500 Healthcare Index as of December 31, 2008.         • Excluded from the list of companies in the Comparator Peer Group will be those companies reporting a negative EPS in the Baseline Year since calculating CAGR will not be possible for these companies. -------------------------------------------------------------------------------- 2006 Incentive Stock Agreement Appendix B Quest Diagnostics Incorporated “Equity Award Eligibility Policy” Option Eligibility         • Unreduced Work Schedule • One of the following salary grades:     • Corporate VP or Higher     • Salary Grade 53 or Higher     • Research & Development - Grade RD6 or Higher     • Medical Director - Grade MD2 For employees whose salary is administered outside the standard Quest structure (i.e., MedPlus, International, Clinical Trials Europe), a Quest Diagnostics salary grade has been assigned consistent with the above requirements. This grade is stored within the Company’s Stock Administration System. IMPORTANT: Meeting the criteria for “Option Eligibility” does not guarantee an award. All grants are subject to a separate approval process. 2 of 6 --------------------------------------------------------------------------------

  -------------------------------------------------------------------------------- Exhibit 10.1   Contract No. FAR001 STATE OF FLORIDA AGENCY FOR HEALTH CARE ADMINISTRATION STANDARD CONTRACT THIS CONTRACT is entered into between the State of Florida, AGENCY FOR HEALTH CARE ADMINISTRATION, hereinafter referred to as the "Agency", whose address is 2727 Mahan Drive, Tallahassee, Florida 32308, and HEALTHEASE HEALTH PLAN OF FLORIDA, INC. hereinafter referred to as the "Vendor", whose address is Post Office Box 26011, Tampa, Florida 33623-6011, a Florida for profit corporation, to deliver health care services at the component level and to the TANF and SSI populations. I.   THE VENDOR HEREBY AGREES: A. General Provisions     1. To provide services according to the terms and conditions set forth in this Contract, Attachment I, Scope of Services, and all other attachments named herein which are attached hereto and incorporated by reference. 2.   To perform as an independent vendor and not as an agent, representative, or employee of the Agency. 3.   To recognize that the State of Florida, by virtue of its sovereignty, is not required to pay any taxes on the services or goods purchased under the terms of this Contract. B.   Federal Laws and Regulations 1.   The Vendor shall comply with the provisions of 45 CFR, Part 74, and/or 45 CFR, Part 92, and other applicable regulations as specified in Attachments I and II. 2.   This Contract contains federal funding in excess of $25,000. Pursuant to 45 CFR, Part 76, if this Contract contains federal funding in excess of $25,000, the Vendor must, upon Contract execution, complete the Certification Regarding Debarment, Suspension, Ineligibility, and Voluntary Exclusion Contracts/Subcontracts, Attachment IV. 3.   This Contract contains federal funding in excess of $100,000. The Vendor must, upon Contract execution, complete the Certification Regarding Lobbying form, Attachment V. If a Disclosure of Lobbying Activities form, Standard Form LLL, is required, it may be obtained from the Agency’s Contract Manager. All disclosure forms as required by the Certification Regarding Lobbying form must be completed and returned to the Agency’s Contract Manager. C.   Audits and Records   1. To maintain books, records, and documents (including electronic storage media) pertinent to performance under this Contract in accordance with generally accepted accounting procedures and practices which sufficiently and properly reflect all revenues and expenditures of funds provided by the Agency under this Contract.   2. To assure that these records shall be subject at all reasonable times to inspection, review, or audit by state personnel and other personnel duly authorized by the Agency, as well as by federal personnel.   3. To maintain and file with the Agency such progress, fiscal and inventory reports as specified in Attachment II, and other reports as the Agency may require within the period of this Contract. In addition, access to relevant computer data and applications which generated such reports should be made available upon request.   4. To ensure that all related party transactions are disclosed to the Agency Contract Manager.     5. To include these aforementioned audit and record keeping requirements in all approved subcontracts and assignments. D.   Retention of Records     1. To retain all financial records, supporting documents, statistical records, and any other documents (including electronic storage media) pertinent to performance under this Contract for a period of five (5) years after termination of this Contract, or if an audit has been initiated and audit findings have not been resolved at the end of five (5) years, the records shall be retained until resolution of the audit findings. 2.Persons duly authorized by the Agency and federal auditors, pursuant to 45 CFR, Part 74 and/or 45 CFR, Part 92, shall have full access to and the right to examine any of said records and documents. 3.The rights of access in this section must not be limited to the required retention period but shall last as long as the records are retained. E.   Monitoring     1. To provide reports as specified in Attachment II. These reports will be used for monitoring progress or performance of the contractual services as specified in Attachment II.     2. To permit persons duly authorized by the Agency to inspect any records, papers, documents, facilities, goods and services of the Vendor which are relevant to this Contract. F.   Indemnification The Vendor shall save and hold harmless and indemnify the State of Florida and the Agency against any and all liability, claims, suits, judgments, damages or costs of whatsoever kind and nature resulting from the use, service, operation or performance of work under the terms of this Contract, resulting from any act, or failure to act, by the Vendor, his subcontractor, or any of the employees, agents or representatives of the Vendor or subcontractor. G. Insurance     1. To the extent required by law, the Vendor will be self-insured against, or will secure and maintain during the life of the Contract, Worker’s Compensation Insurance for all his employees connected with the work of this project and, in case any work is subcontracted, the Vendor shall require the subcontractor similarly to provide Worker’s Compensation Insurance for all of the latter’s employees unless such employees engaged in work under this Contract are covered by the Vendor’s self insurance program. Such self insurance or insurance coverage shall comply with the Florida Worker’s Compensation law. In the event hazardous work is being performed by the Vendor under this Contract and any class of employees performing the hazardous work is not protected under Worker’s Compensation statutes, the Vendor shall provide, and cause each subcontractor to provide, adequate insurance satisfactory to the Agency, for the protection of his employees not otherwise protected.   2. The Vendor shall secure and maintain Commercial General Liability insurance including bodily injury, property damage, personal & advertising injury and products and completed operations. This insurance will provide coverage for all claims that may arise from the services and/or operations completed under this Contract, whether such services and/or operations are by the Vendor or anyone directly, or indirectly employed by him. Such insurance shall include a Hold Harmless Agreement in favor of the State of Florida and also include the State of Florida as an Additional Named Insured for the entire length of the Contract. The Vendor is responsible for determining the minimum limits of liability necessary to provide reasonable financial protections to the Vendor and the State of Florida under this Contract.   3. All insurance policies shall be with insurers licensed or eligible to transact business in the State of Florida. The Vendor’s current certificate of insurance shall contain a provision that the insurance will not be canceled for any reason except after thirty (30) days written notice to the Agency’s Contract Manager. H. Assignments and Subcontracts   Toneither assign the responsibility of this Contract to another party nor subcontract for any of the work contemplated under this Contract without prior written approval of the Agency. No such approval by the Agency of any assignment or subcontract shall be deemed in any event or in any manner to provide for the incurrence of any obligation of the Agency in addition to the total dollar amount agreed upon in this Contract. All such assignments or subcontracts shall be subject to the conditions of this Contract and to any conditions of approval that the Agency shall deem necessary. I. Financial Reports       To provide financial reports to the Agency as specified in Attachment II. J. Return of Funds   To return to the Agency any overpayments due to unearned funds or funds disallowed pursuant to the terms of this Contract that were disbursed to the Vendor by the Agency. The Vendor shall return any overpayment to the Agency within forty (40) calendar days after either discovery by the Vendor, its independent auditor, or notification by the Agency, of the overpayment. K. Purchasing 1. P.R.I.D.E. It is expressly understood and agreed that any articles which are the subject of, or required to carry out this Contract shall be purchased from the corporation identified under Chapter 946, Florida Statutes, if available, in the same manner and under the same procedures set forth in Section 946.515(2), (4), Florida Statutes; and for purposes of this Contract the person, firm or other business entity carrying out the provisions of this Contract shall be deemed to be substituted for this agency insofar as dealings with such corporation are concerned. The “Corporation identified” is PRISON REHABILITATIVE INDUSTRIES AND DIVERSIFIED ENTERPRISES, INC. (P.R.I.D.E.) which may be contacted at: P.R.I.D.E. 2720-G Blair Stone Road Tallahassee, Florida 32301 (850) 487-3774 Toll Free: 1-800-643-8459 Website: www.pridefl.com     2. RESPECT of Florida   It is expressly understood and agreed that any articles that are the subject of, or required to carry out, this Contract shall be purchased from a nonprofit agency for the blind or for the severely handicapped that is qualified pursuant to Chapter 413, Florida Statutes, in the same manner and under the same procedures set forth in Section 413.036(1) and (2), Florida Statutes; and for purposes of this Contract the person, firm, or other business entity carrying out the provisions of this Contract shall be deemed to be substituted for the state agency insofar as dealings with such qualified nonprofit agency are concerned. The "nonprofit agency” identified is RESPECT of Florida which may be contacted at: RESPECT of Florida. 2475 Apalachee Parkway, Suite 205 Tallahassee, Florida 32301-4946 (850) 487-1471 Website: www.respectofflorida.org   3. Procurement of Products or Materials with Recycled Content It is expressly understood and agreed that any products which are required to carry out this Contract shall be procured in accordance with the provisions of Section 403.7065, Florida Statutes. L. Civil Rights Requirements/Vendor Assurance The Vendor assures that it will comply with:     1. Title VI of the Civil Rights Act of 1964, as amended, 42 U.S.C. 2000d et seq., which prohibits discrimination on the basis of race, color, or national origin.     2. Section 504 of the Rehabilitation Act of 1973, as amended, 29 U.S.C. 794, which prohibits discrimination on the basis of handicap.     3. Title IX of the Education Amendments of 1972, as amended, 20 U.S.C. 1681 et seq., which prohibits discrimination on the basis of sex.     4. The Age Discrimination Act of 1975, as amended, 42 U.S.C. 6101 et seq., which prohibits discrimination on the basis of age.     5. Section 654 of the Omnibus Budget Reconciliation Act of 1981, as amended, 42 U.S.C. 9849, which prohibits discrimination on the basis of race, creed, color, national origin, sex, handicap, political affiliation or beliefs.     6. The Americans with Disabilities Act of 1990, P.L. 101-336, which prohibits discrimination on the basis of disability and requires reasonable accommodation for persons with disabilities.     7. All regulations, guidelines, and standards as are now or may be lawfully adopted under the above statutes. The Vendor agrees that compliance with this assurance constitutes a condition of continued receipt of or benefit from funds provided through this Contract, and that it is binding upon the Vendor, its successors, transferees, and assignees for the period during which services are provided. The Vendor further assures that all contractors, subcontractors, subgrantees, or others with whom it arranges to provide services or benefits to participants or employees in connection with any of its programs and activities are not discriminating against those participants or employees in violation of the above statutes, regulations, guidelines, and standards. M. Discrimination   Anentity or affiliate who has been placed on the discriminatory vendor list may not submit a bid, proposal, or reply on a contract to provide any goods or services to a public entity; may not submit a bid, proposal, or reply on a contract with a public entity for the construction or repair of a public building or public work; may not submit bids, proposals, or replies on leases of real property to a public entity; may not be awarded or perform work as a contractor, supplier, subcontractor, or consultant under a contract with any public entity; and may not transact business with any public entity. The Florida Department of Management Services is responsible for maintaining the discriminatory vendor list and intends to post the list on its website. Questions regarding the discriminatory vendor list may be directed to the Florida Department of Management Services, Office of Supplier Diversity at (850) 487-0915. N. Requirements of Section 287.058, Florida Statutes   1. To submit bills for fees or other compensation for services or expenses in sufficient detail for a proper pre-audit and post-audit thereof.     2. Where applicable, to submit bills for any travel expenses in accordance with Section 112.061, Florida Statutes.   3. To provide units of deliverables, including reports, findings, and drafts, in writing and/or in an electronic format agreeable to both parties, as specified in Attachment II, to be received and accepted by the Contract Manager prior to payment.   4. To comply with the criteria and final date by which such criteria must be met for completion of this Contract as specified in Section III, Paragraph A. of this Contract.   5. To allow public access to all documents, papers, letters, or other material made or received by the Vendor in conjunction with this Contract, unless the records are exempt from Section 24(a) of Article I of the State Constitution and Section 119.07(1), Florida Statutes. It is expressly understood that substantial evidence of the Vendor's refusal to comply with this provision shall constitute a breach of Contract. O. Sponsorship As required by Section 286.25, Florida Statutes, if the Vendor is a nongovernmental organization which sponsors a program financed wholly or in part by state funds, including any funds obtained through this Contract, it shall, in publicizing, advertising or describing the sponsorship of the program, state: "Sponsored by HEALTHEASE HEALTH PLAN OF FLORIDA, INC. and the State of Florida, AGENCY FOR HEALTH CARE ADMINISTRATION". If the sponsorship reference is in written material, the words "State of Florida, AGENCY FOR HEALTH CARE ADMINISTRATION" shall appear in the same size letters or type as the name of the organization.   P. Final Invoice   TheVendor must submit the final invoice for payment to the Agency no more than 365 days after the Contract ends or is terminated. If the Vendor fails to do so, all right to payment is forfeited and the Agency will not honor any requests submitted after the aforesaid time period. Any payment due under the terms of this Contract may be withheld until all reports due from the Vendor and necessary adjustments thereto have been approved by the Agency.   Q. Use Of Funds For Lobbying Prohibited To comply with the provisions of Section 216.347, Florida Statutes, which prohibits the expenditure of Contract funds for the purpose of lobbying the Legislature, the judicial branch or a state agency. R. Public Entity Crime   A person or affiliate who has been placed on the convicted vendor list following a conviction for a public entity crime may not be awarded or perform work as a contractor, supplier, subcontractor, or consultant under a contract with any public entity, and may not transact business with any public entity in excess of the threshold amount provided in Section 287.017, Florida Statutes, for category two, for a period of 36 months from the date of being placed on the convicted vendor list. S. Health Insurance Portability and Accountability Act     To comply with the Department of Health and Human Services Privacy Regulations in the Code of Federal Regulations, Title 45, Sections 160 and 164, regarding disclosure of protected health information as specified in Attachment III. T. Confidentiality of Information    Not to use or disclose any confidential information, including social security numbers that may be supplied under this Contract pursuant to law, and also including the identity or identifying information concerning a Medicaid recipient or services under this Contract for any purpose not in conformity with state and federal laws, except upon written consent of the recipient, or his/her guardian. U. Employment   To comply with Section 274A (e) of the Immigration and Nationality Act. The Agency shall consider the employment by any contractor of unauthorized aliens a violation of this Act. If the Vendor knowingly employs unauthorized aliens, such violation shall be cause for unilateral cancellation of this Contract. The Vendor shall be responsible for including this provision in all subcontracts with private organizations issued as a result of this Contract. V. Vendor Performance Penalties or sanctions for unsatisfactory performance under this Contract are specified in Attachment II, if applicable. II. THE AGENCY HEREBY AGREES: A. Contract Amount   To pay for contracted services according to the conditions of Attachment I in an amount not to exceed $380,666,421.00 subject to the availability of funds. The State of Florida's performance and obligation to pay under this Contract is contingent upon an annual appropriation by the Legislature. B. Contract Payment   Section 215.422, Florida Statutes, provides that agencies have 5 working days to inspect and approve goods and services, unless bid specifications, Contract or purchase order specifies otherwise. With the exception of payments to health care providers for hospital, medical, or other health care services, if payment is not available within forty (40) days, measured from the latter of the date the invoice is received or the goods or services are received, inspected and approved, a separate interest penalty set by the Comptroller pursuant to Section 55.03, F. S., will be due and payable in addition to the invoice amount. To obtain the applicable interest rate, please contact the Agency’s Fiscal Section at (850) 488-5869, or utilize the Department of Financial Services website at www.dfs.state.fl.us/interest.html. Payments to health care providers for hospitals, medical or other health care services, shall be made not more than 35 days from the date of eligibility for payment is determined, and the daily interest rate is .0003333%. Invoices returned to a vendor due to preparation errors will result in a payment delay. Invoice payment requirements do not start until a properly completed invoice is provided to the Agency. A Vendor Ombudsman, whose duties include acting as an advocate for vendors who may be experiencing problems in obtaining timely payment(s) from a State agency, may be contacted at (850) 410-9724 or by calling the State Comptroller’s Hotline, 1-800-848-3792. III. THE VENDOR AND AGENCY HEREBY MUTUALLY AGREE: A. Effective/End Date This Contract shall begin upon execution by both parties or on July 1, 2006, (whichever is later) and end August 31, 2009, inclusive. B. Termination 1. Termination at Will This Contract may be terminated by either party upon no less than thirty (30) calendar days written notice, without cause, unless a lesser time is mutually agreed upon by both parties. Said notice shall be delivered by certified mail, return receipt requested, or in person with proof of delivery.   2. Termination Due To Lack of Funds In the event funds to finance this Contract become unavailable, the Agency may terminate the Contract upon no less than twenty-four (24) hours written notice to the Vendor. Said notice shall be delivered by certified mail, return receipt requested, or in person with proof of delivery. The Agency shall be the final authority as to the availability of funds. 3. Termination for Breach Unless the Vendor's breach is waived by the Agency in writing, the Agency may, by written notice to the Vendor, terminate this Contract upon no less than twenty-four (24) hours written notice. Said notice shall be delivered by certified mail, return receipt requested, or in person with proof of delivery. If applicable, the Agency may employ the default provisions in Chapter 60A-1.006(4), Florida Administrative Code. Waiver of breach of any provisions of this Contract shall not be deemed to be a waiver of any other breach and shall not be construed to be a modification of the terms of this Contract. The provisions herein do not limit the Agency's right to remedies at law or to damages. C. Contract Managers     1. The Agency’s Contract Manager’s name, address and telephone number for this Contract is as follows: G. Douglas Harper Agency for Health Care Administration 2727 Mahan Drive, MS #50  Tallahassee, FL 32308 (850) 487-2355 2.   The Vendor’s Contract Manager’s name, address and telephone number for this Contract is as follows: Imtiaz ("MT") Sattaur HealthEase Health Plan of Florida, Inc. P.O. Box 26011 Tampa, FL 33623-6011 (813) 290-6316     3. All matters shall be directed to the Contract Managers for appropriate action or disposition. A change in Contract Manager by either party shall be reduced to writing through an amendment to this Contract by the Agency.   D. Renegotiation or Modification     1. Modifications of provisions of this Contract shall only be valid when they have been reduced to writing and duly signed during the term of the Contract. The parties agree to renegotiate this Contract if federal and/or state revisions of any applicable laws, or regulations make changes in this Contract necessary.       2. The rate of payment and the total dollar amount may be adjusted retroactively to reflect price level increases and changes in the rate of payment when these have been established through the appropriations process and subsequently identified in the Agency's operating budget.   E. Name, Mailing and Street Address of Payee     1. The name (Vendor name as shown on Page 1 of this Contract) and mailing address of the official payee to whom the payment shall be made: HealthEase Health Plan of Florida, Inc. P.O. Box 26011 Tampa, FL 33623-6011   2. The name of the contact person and street address where financial and administrative records are maintained: Paul L. Behrens Renaissance One 8735 Henderson Road Tampa, FL 33634 F. All Terms and Conditions       This Contract and its attachments as referenced herein contain all the terms and conditions agreed upon by the parties. IN WITNESS THEREOF, the parties hereto have caused this two-hundred and ninety-six (296) page Contract, which includes any referenced attachments, to be executed by their undersigned officials as duly authorized. This Contract is not valid until signed and dated by both parties. HEALTHEASE HEALTH PLAN OF FLORIDA, INC. STATE OF FLORIDA, AGENCY FOR HEALTH CARE ADMINISTRATION           SIGNED BY:     /s/ Todd S. Farha               SIGNED BY:   /s/  Thomas Arnold                     NAME:    Todd S. Farha NAME:   Thomas W. Arnold             TITLE:    President and CEO TITLE:   Deputy Secretary, Medicaid             DATE:  6/26/06 DATE:  6/26/06               --------------------------------------------------------------------------------   FEDERAL ID NUMBER: 59-3646690 VENDOR FISCAL YEAR ENDING DATE: December 31st  List of attachments included as part of this Contract: Attachment I Scope of Services (16 Pages) Attachment II Medicaid Reform Health Plan Model Contract (265 Pages) Attachment III Business Associate Agreement (3 Pages) Attachment IV Debarment Certification (1 Page) Attachment V Lobbying Certification (1 Page) REMAINDER OF PAGE INTENTIONALLY LEFT BLANK -------------------------------------------------------------------------------- ATTACHMENT I SCOPE OF SERVICES A. Service (s) to be Provided: The Vendor (Health Plan) shall deliver health care services at the component level and to the specific population(s) approved below: (___) PSN - Prepaid - Comprehensive Component (___) PSN - Prepaid - Comprehensive and Catastrophic Components (___) HMO - Prepaid - Comprehensive Component (_X_) HMO - Prepaid - Comprehensive and Catastrophic Components (___) Other Authorized Health Plan - Prepaid - Comprehensive Component (___) Other Authorized Health Plan - Prepaid - Comprehensive and Catastrophic Components   (_X_) Temporary Assistance for Needy Families (TANF) (_X_) Supplemental Security Income (SSI) (___) Children with Chronic Conditions (CCC) (___) HIV/AIDS B. Manner of Service (s) Provision: 1.   Policies and Procedures The Health Plan shall comply with all provisions of this Contract and any subsequent amendments, and shall act in good faith in the performance of the Contract's provisions. The Health Plan shall develop, maintain and implement written policies and procedures covering all provisions of this Contract. All policies and procedures shall be prior-approved by the Agency in writing. The Health Plan agrees that failure to comply with all provisions of this Contract shall result in the assessment of penalties and/or termination of this Contract, in whole or in part, as set forth in this Contract. 2.   Benefit Grid/Customized Benefit Package Exhibit 1, Benefit Grid (Grid), attached hereto, describes the Health Plan’s Customized Benefit Package (CBP). The CBP includes all Covered Services, Qualified Benefits and Expanded Services as specified in Attachment II, Section V, Covered Services, and VI, Behavioral Health Care. The CBP has been determined to meet actuarial equivalency and sufficiency standards for the population or populations covered by the CBP. The Health Plan is required to provide these services to all Enrollees in accordance with Contract provisions. The Health Plan shall submit its CBP for recertification of actuarial equivalency and sufficiency standards for the upcoming year no later than June 30 of each year. CBPs may be changed on a Contract-Year basis and only if approved by the Agency in writing. C. Method of Payment: 1. General Notwithstanding the payment amounts which may be computed with the rate tables specified in Tables 2-6, the sum of total capitation payments under this Contract shall not exceed the total Contract amount of $380,666.421.00.   a. The Health Plan shall be paid capitation payments for each Agency Service Area, based upon Exhibits 3 through 7, Tables 2 through 6, attached hereto, depending on whether the Health Plan contracts for both the Comprehensive Component and the Catastrophic Component, or Comprehensive Component only, and whether the Health Plan is a Specialty Plan. Kick Payments shall be paid based upon the amounts specified in Exhibit 8, Table 7, attached hereto, for covered transplant services and Exhibit 9, Table 8, attached hereto, for covered obstetrical delivery services.   b. The Health Plans overall payment will be dependent upon the actual Plan Factor and the percentage adjustment deducted for the Enhanced Benefits Accounts. Each month the Agency will provide, in writing, the Health Plan with its Plan Factor.   c. All payments made to the Health Plan shall be in accordance with this section (Section C, Method of Payment) and Attachment II, Section XIII, Payment Methodology. 2. Enrollment Levels The Agency assigns the Health Plan an authorized maximum Enrollment level for each operational county. The authorized maximum Enrollment level is in effect on September 1, 2006, or upon Contract execution, whichever is later. a.   The Agency must approve, in writing, any increase in the Health Plan’s maximum Enrollment level for each operational county and subpopulation to be served, as applicable. Such approval shall not be unreasonably withheld, and shall be based upon the Health Plan’s satisfactory performance of terms of the Contract and upon the Agency’s approval of the Health Plan’s administrative and service resources, as specified in this Contract, in support of each Enrollment level. b.   Exhibit 2, Table 1, attached hereto, indicates the Health Plan’s maximum authorized Enrollment levels for each Medicaid Reform county and each applicable authorized eligibility category. 3. Capitation Rate Tables Tables 2 through 6 provide the capitation rates respective to the authorized areas of operation, as identified in subsection C, Method of Payment, Item 2, above, and for the specific populations identified in subsection A., Service(s) To Be Provided, above. The Capitation Rate payment shall be in accordance with Attachment II, Section XIII, Payment Methodology. a.   Table 2 - Capitation Rates for Comprehensive Component and Catastrophic Component Health Plans for each Medicaid Reform county for Children and Families and the Aged and Disabled without Medicare eligibility categories. . b.   Table 3 - Capitation Rates for Comprehensive Component Only Health Plans for each Medicaid Reform county for Children and Families and the Aged and Disabled without Medicare eligibility categories. c.   Table 4 - Capitation Rate Table for SSI Medicare Part B Only and SSI Medicare. Parts A and B Enrollees for all Medicaid Reform Counties. d.   Table 5 - Capitation Rates for HIV/AIDS Populations for each Medicaid Reform county. e.   Table 6 - Capitation Rates for Medicaid Reform counties for All Medicaid Reform counties. 4. Kick Payment Tables Beginning September 1, 2006, the Health Plan shall be paid Kick Payments for each Kick Payment service provided in accordance with the following tables: a.   Table 7 - Covered Transplant Services. b.   Table 8 - Obstetrical Delivery Services, regardless of whether or not the Health Plan is at risk for the Comprehensive Component only, or is at risk for both the Comprehensive Component and the Catastrophic Component. The Kick Payments shall be in accordance with Attachment II, Section XIII, Payment Methodology. REMAINDER OF PAGE INTENTIONALLY LEFT BLANK     -------------------------------------------------------------------------------- HEALTHEASE OF FLORIDA EXHIBIT 1 BENEFIT GRID   (i)   Broward - Children and Families Covered Service Category   Visit/Script Limit Limit Period Dollar Limit Limit Period (Annual) Copay Amount Copay Application (Annual/ Monthly) Hospital Inpatient Behavioral Health           0 admit Physical Health           0 admit   Transplant Services Transplant Services                 Outpatient-services Emergency Room               Medical/Drug Therapies (Chemo, Dialysis)               Ambulatory Surgery - ASC               Hospital Outpatient Surgery           0 visit Lab/X-ray           0 day Hospital Outpatient Services NOS         Annual 0 visit Outpatient Therapy (PT/RT)         Annual     Outpatient Therapy (OT/ST)                 Maternity and Family Planning Services Inpatient Hospital               Birthing Centers               Physician Care               Family Planning               Pharmacy                 Physician and Phys Extender Services (non maternity) EPSDT               Primary Care Physician           0 visit Specialty Physician           0 visit ARNP/Physician Assistant           0 visit Clinic (FQHC, RHC)           0 visit Clinic (CHD)               Other                 Other Outpatient Professional Services Home Health Services   24 Annual   Annual 0 visit Chiropractor   24 Annual   Annual 0 visit Podiatrist   24 Annual   Annual 0 visit Dental Services         Annual 0 coinsurance Vision Services         Annual 0 visit Hearing Services         Annual       Outpatient Mental Health Outpatient Mental Health           0 visit   Outpatient Pharmacy Outpatient Pharmacy     Annual   Annual       Other Services Ambulance               Non-emergent Transporation           0 trip Durable Medical Equipment         Annual     Expanded Benefit Adult Dental Adult dental expanded to include unlimited fillings, periodontic deep cleanings, annual exam, two cleanings per year, and x-rays. Circumcision Routine newborn circumcision up to one year of age. Over the Counter Benefit Agency approved over-the-counter drug benefit, not to exceed $25 per household, per month. Limited to non-prescription drugs containing a National Drug Code number, first aid and birth control supplies. Benefit must be offered through a plan’s pharmacy or plan’s subcontractor. -------------------------------------------------------------------------------- HEALTHEASE OF FLORIDA EXHIBIT 1 BENEFIT GRID   (ii)   Broward - Elderly and Disabled   Covered Service Category   Visit/Script Limit Limit Period Dollar Limit Limit Period (Annual) Copay Amount Copay Application (Annual/ Monthly) Hospital Inpatient Behavioral Health           0 admit Physical Health           0 admit   Transplant Services Transplant Services                 Outpatient-services Emergency Room               Medical/Drug Therapies (Chemo, Dialysis)               Ambulatory Surgery - ASC               Hospital Outpatient Surgery           0 visit Lab/X-ray           0 day Hospital Outpatient Services NOS         Annual 0 visit Outpatient Therapy (PT/RT)         Annual     Outpatient Therapy (OT/ST)                 Maternity and Family Planning Services Inpatient Hospital               Birthing Centers               Physician Care               Family Planning               Pharmacy                 Physician and Phys Extender Services (non maternity) EPSDT               Primary Care Physician           0 visit Specialty Physician           0 visit ARNP/Physician Assistant           0 visit Clinic (FQHC, RHC)           0 visit Clinic (CHD)               Other                 Other Outpatient Professional Services Home Health Services   120 Annual   Annual 0 visit Chiropractor   24 Annual   Annual 0 visit Podiatrist   24 Annual   Annual 0 visit Dental Services         Annual 0 coinsurance Vision Services         Annual 0 visit Hearing Services         Annual       Outpatient Mental Health Outpatient Mental Health           0 visit   Outpatient Pharmacy Outpatient Pharmacy   16 Monthly   Annual       Other Services Ambulance               Non-emergent Transporation           0 trip Durable Medical Equipment         Annual       Expanded Benefit Adult Dental Adult dental expanded to include unlimited fillings, periodontic deep cleanings, crowns, clear fillings, restorations, annual exam, two cleanings per year, and x-rays. Circumcision Routine newborn circumcision up to one year of age. Over the Counter Benefit Agency approved over-the-counter drug benefit, not to exceed $25 per household, per month. Limited to non-prescription drugs containing a National Drug Code number, first aid and birth control supplies. Benefit must be offered through a plan’s pharmacy or plan’s subcontractor. Meals on Wheels 10 meals within 15 days of post discharge (medically necessary)   -------------------------------------------------------------------------------- HEALTHEASE OF FLORIDA EXHIBIT 1 BENEFIT GRID   (iii)   Duval - Children and Families Covered Service Category   Visit/Script Limit Limit Period Dollar Limit Limit Period (Annual) Copay Amount Copay Application (Annual/ Monthly) Hospital Inpatient Behavioral Health           0 admit Physical Health           0 admit   Transplant Services Transplant Services                 Outpatient-services Emergency Room               Medical/Drug Therapies (Chemo, Dialysis)               Ambulatory Surgery - ASC               Hospital Outpatient Surgery           0 visit Lab/X-ray           0 day Hospital Outpatient Services NOS         Annual 0 visit Outpatient Therapy (PT/RT)         Annual     Outpatient Therapy (OT/ST)                 Maternity and Family Planning Services Inpatient Hospital               Birthing Centers               Physician Care               Family Planning               Pharmacy                 Physician and Phys Extender Services (non maternity) EPSDT               Primary Care Physician           0 visit Specialty Physician           0 visit ARNP/Physician Assistant           0 visit Clinic (FQHC, RHC)           0 visit Clinic (CHD)               Other                 Other Outpatient Professional Services Home Health Services   24 Annual   Annual 0 visit Chiropractor   24 Annual   Annual 0 visit Podiatrist   24 Annual   Annual 0 visit Dental Services         Annual 0 coinsurance Vision Services         Annual 0 visit Hearing Services         Annual       Outpatient Mental Health Outpatient Mental Health           0 visit   Outpatient Pharmacy Outpatient Pharmacy     Annual   Annual       Other Services Ambulance               Non-emergent Transporation           0 trip Durable Medical Equipment         Annual     Expanded Benefit Adult Dental Adult dental expanded to include unlimited fillings, periodontic deep cleanings, annual exam, two cleanings per year and x-rays. Circumcision Routine newborn circumcision up to one year of age. Over the Counter Benefit Agency approved over-the -counter drug benefit, not to exceed $25 per household, per month. Limited to non-prescription drugs containing a National Drug Code number, first aid and birth control supplies. Benefit must be offered through a plan’s pharmacy or plan’s subcontractor.   -------------------------------------------------------------------------------- HEALTHEASE OF FLORIDA EXHIBIT 1 BENEFIT GRID   (iv)   Duval - Elderly and Disabled Covered Service Category   Visit/Script Limit Limit Period Dollar Limit Limit Period (Annual) Copay Amount Copay Application (Annual/ Monthly) Hospital Inpatient Behavioral Health           0 admit Physical Health           0 admit   Transplant Services Transplant Services                 Outpatient-services Emergency Room               Medical/Drug Therapies (Chemo, Dialysis)               Ambulatory Surgery - ASC               Hospital Outpatient Surgery           0 visit Lab/X-ray           0 day Hospital Outpatient Services NOS         Annual 0 visit Outpatient Therapy (PT/RT)         Annual     Outpatient Therapy (OT/ST)                 Maternity and Family Planning Services Inpatient Hospital               Birthing Centers               Physician Care               Family Planning               Pharmacy                 Physician and Phys Extender Services (non maternity) EPSDT               Primary Care Physician           0 visit Specialty Physician           0 visit ARNP/Physician Assistant           0 visit Clinic (FQHC, RHC)           0 visit Clinic (CHD)               Other                 Other Outpatient Professional Services Home Health Services   120 Annual   Annual 0 visit Chiropractor   24 Annual   Annual 0 visit Podiatrist   24 Annual   Annual 0 visit Dental Services         Annual 0 coinsurance Vision Services         Annual 0 visit Hearing Services         Annual       Outpatient Mental Health Outpatient Mental Health           0 visit   Outpatient Pharmacy Outpatient Pharmacy   16 Monthly   Annual       Other Services Ambulance               Non-emergent Transporation           0 trip Durable Medical Equipment         Annual     Expanded Benefit Adult Dental Adult dental expanded to include unlimited fillings, periodontic deep cleanings, crowns, clear fillings, restorations, annual exam, two cleanings per year and x-rays. Circumcision Routine newborn circumcision up to one year of age.. Over the Counter Benefit Agency approved over-the -counter drug benefit, not to exceed $25 per household, per month. Limited to non-prescription drugs containing a National Drug Code number, first aid and birth control supplies. Benefit must be offered through a plan’s pharmacy or plan’s subcontractor. Meals on Wheels 10 meals within 15 days of post discharge (medically necessary)   -------------------------------------------------------------------------------- HEALTHEASE OF FLORIDA EXHIBIT 2 ENROLLMENT LEVELS TABLE 1 (Duval - Area 4, Broward - Area 10) Agency Area 04   Eligibility Category/ Population   County   Health Plan Provider Number   Plan Type   (Comp or Comp & Catastrophic)   Maximum Enrollment Level   TANF   Duval     Comprehensive & Catastrophic           55,000     SSI   Duval       Comprehensive & Catastrophic     HIV/AIDS             Children with Chronic Conditions           Agency Area 10   Eligibility Category/ Population   County   Health Plan Provider Number   Plan Type   (Comp or Comp & Catastrophic)     Maximum Enrollment Level   TANF     Broward       Comprehensive & Catastrophic           13,500     SSI     Broward       Comprehensive & Catastrophic     HIV/AIDS             Children with Chronic Conditions           REMAINDER OF PAGE INTENTIONALLY LEFT BLANK     -------------------------------------------------------------------------------- HEALTHEASE OF FLORIDA EXHIBIT 3 COMPREHENSIVE COMPONENT AND CATASTROPHIC COMPONENT CAPITATION RATES Table 2 Area: 10   Area: 10                  County: Broward                  September 1, 2006   ESTIMATED HEALTH PLAN RATES (NOT FOR USE UNLESS APPROVED BY CMS) Age Range FY0607 Discounted Reform rates Under Current Methodology Percentage of Current Methodology 75% of Current Methodology Preliminary FY0607 Base rates for Risk Adjusted Methodology Budget Neutrality Factor FY0607 Base rates for Risk Adjusted Methodology after Budget Neutrality Percentage of Risk Adjusted Methodology 25% of Risk Adjusted Methodology Final Rate (with Enhanced Benefit Adjustment) a b c d e f g h i j Eligibility Category: Children and Family                                     Month 0-2 All $688.92 75% $516.69 $117.60 1.18930 $139.86 25% $34.97 $551.66 Month 3-11 All $180.09 75% $135.07 $117.60 1.18930 $139.86 25% $34.97 $170.04 1-5 All $94.03 75% $70.52 $117.60 1.18930 $139.86 25% $34.97 $105.49 6-13 All $77.55 75% $58.16 $117.60 1.18930 $139.86 25% $34.97 $93.13 14-20 Female $107.54 75% $80.65 $117.60 1.18930 $139.86 25% $34.97 $115.62 14-20 Male $74.59 75% $55.94 $117.60 1.18930 $139.86 25% $34.97 $90.91 21-54 Female $181.88 75% $136.41 $117.60 1.18930 $139.86 25% $34.97 $171.37 21-54 Male $131.39 75% $98.54 $117.60 1.18930 $139.86 25% $34.97 $133.51 55+ All $288.52 75% $216.39 $117.60 1.18930 $139.86 25% $34.97 $251.36                     Composite Based on Total Casemonths $110.18         $139.86     $117.60                     Eligibility Category: Aged and Disabled                                     Month 0-2 All $15,308.07 75% $11,481.05 $777.12 1.20785 $938.64 25% $234.66 $11,715.71 Month 3-11 All $3,277.86 75% $2,458.40 $777.12 1.20785 $938.64 25% $234.66 $2,693.06 1-5 All $550.34 75% $412.75 $777.12 1.20785 $938.64 25% $234.66 $647.42 6-13 All $317.37 75% $238.03 $777.12 1.20785 $938.64 25% $234.66 $472.69 14-20 All $319.91 75% $239.93 $777.12 1.20785 $938.64 25% $234.66 $474.59 21-54 All $825.64 75% $619.23 $777.12 1.20785 $938.64 25% $234.66 $853.89 55+ All $833.65 75% $625.24 $777.12 1.20785 $938.64 25% $234.66 $859.90                     Composite Based on Total Casemonths $723.28         $938.64     $777.12 REMAINDER OF PAGE INTENTIONALLY LEFT BLANK   -------------------------------------------------------------------------------- HEALTHEASE OF FLORIDA EXHIBIT 3 COMPREHENSIVE COMPONENT AND CATASTROPHIC COMPONENT CAPITATION RATES   Table 2   Area: 04    County: Duval      September 1, 2006 Area: 04   ESTIMATED HEALTH PLAN RATES (NOT FOR USE UNLESS APPROVED BY CMS) Age Range FY0607 Discounted Reform rates Under Current Methodology Percentage of Current Methodology 75% of Current Methodology Preliminary FY0607 Base rates for Risk Adjusted Methodology Budget Neutrality Factor FY0607 Base rates for Risk Adjusted Methodology after Budget Neutrality Percentage of Risk Adjusted Methodology 25% of Risk Adjusted Methodology Final Rate (with Enhanced Benefit Adjustment) a b c d e f g h i j Eligibility Category: Children and Family                                     Month 0-2 All $738.35 75% $553.76 $125.17 1.13200 $141.69 25% $35.42 $589.19 Month 3-11 All $192.52 75% $144.39 $125.17 1.13200 $141.69 25% $35.42 $179.81 1-5 All $98.55 75% $73.91 $125.17 1.13200 $141.69 25% $35.42 $109.33 6-13 All $74.83 75% $56.12 $125.17 1.13200 $141.69 25% $35.42 $91.55 14-20 Female $109.44 75% $82.08 $125.17 1.13200 $141.69 25% $35.42 $117.50 14-20 Male $73.83 75% $55.37 $125.17 1.13200 $141.69 25% $35.42 $90.80 21-54 Female $192.76 75% $144.57 $125.17 1.13200 $141.69 25% $35.42 $179.99 21-54 Male $139.38 75% $104.53 $125.17 1.13200 $141.69 25% $35.42 $139.95 55+ All $305.74 75% $229.31 $125.17 1.13200 $141.69 25% $35.42 $264.73                     Composite Based on Total Casemonths $119.67         $141.69     $125.17                     Eligibility Category: Aged and Disabled                                     Month 0-2 All $13,652.29 75% $10,239.22 $635.88 1.14045 $725.19 25% $181.30 $10,420.52 Month 3-11 All $2,911.78 75% $2,183.83 $635.88 1.14045 $725.19 25% $181.30 $2,365.13 1-5 All $493.16 75% $369.87 $635.88 1.14045 $725.19 25% $181.30 $551.16 6-13 All $300.32 75% $225.24 $635.88 1.14045 $725.19 25% $181.30 $406.54 14-20 All $294.02 75% $220.51 $635.88 1.14045 $725.19 25% $181.30 $401.81 21-54 All $741.27 75% $555.95 $635.88 1.14045 $725.19 25% $181.30 $737.25 55+ All $736.02 75% $552.01 $635.88 1.14045 $725.19 25% $181.30 $733.31                     Composite Based on Total Casemonths $606.11         $725.19     $635.88 REMAINDER OF PAGE INTENTIONALLY LEFT BLANK   -------------------------------------------------------------------------------- HEALTHEASE OF FLORIDA EXHIBIT 4 COMPREHENSIVE COMPONENT ONLY Table 3   Area:______________        County: __________________                                                 September 1, 2006   ESTIMATED HEALTH PLAN RATES (NOT FOR USE UNELSS APPROVED BY CMS) Area ________                       Age Range   FY0607 Discounted Reform rates Under Current Methodology Percentage of Current Methodology 75% of Current Methodology FY0607 Base Rates for Risk-Adjusted Methodology Percentage of Risk-Adjusted Methodology 25% of Risk-Adjusted Methodology Budget Neutrality Factor Budget Adjusted of 25% of Risk Adjusted Method-ology Blended Rate (Risk = 1.00) Final Rate (with Enhanced Benefit Adjustment) (a)   (b) (c) (d) (e) (f) (g) (h) (i) (j) (k) Eligibility Category: Children and Family                   Month 0-2 All   $ 75% $ $ 25% $ $   $   Month 3-11 All   $ 75% $ $ 25% $ $   $   1-5 All   $ 75% $ $ 25% $ $   $   6-13 All   $ 75% $ $ 25% $ $   $   14-20 Female   $ 75% $ $ 25% $ $   $   14-20 Male   $ 75% $ $ 25% $ $   $   21-54 Female   $ 75% $ $ 25% $ $   $   21-54 Male   $ 75% $ $ 25% $ $   $   55+ All   $ 75% $ $ 25% $ $   $   Composite               $   $                           Eligibility Category:   Aged and Disabled                   Month 0-2 All   $ 75% $ $ 25% $ $   $   Month 3-11 All   $ 75% $ $ 25% $ $   $   1-5 All   $ 75% $ $ 25% $ $   $   6-13 All   $ 75% $ $ 25% $ $   $   14-20 All   $ 75% $ $ 25% $ $   $   21-54 All   $ 75% $ $ 25% $ $   $   55+ All   $ 75% $ $ 25% $ $   $   Composite               $   $                           REMAINDER OF PAGE INTENTIONALLY LEFT BLANK     -------------------------------------------------------------------------------- HEALTHEASE OF FLORIDA EXHIBIT 5 CAPITATION RATES SSI MEDICARE PART B ONLY AND SSI MEDICARE PARTS A AND B ENROLLEES FOR ALL MEDICAID REFORM COUNTIES   TABLE 4 Area: 4  County: Duval ESTIMATED HEALTH PLAN RATES (NOT FOR USE UNLESS APPROVED BY CMS)     Under Age 65 Age 65 & Over   SSI/Parts A & B   $146.72   $98.34   SSI/Part B Only   $300.24   $300.24   Area: 10  County: Broward ESTIMATED HEALTH PLAN RATES (NOT FOR USE UNLESS APPROVED BY CMS)     Under Age 65 Age 65 & Over   SSI/Parts A & B   $136.17   $91.25   SSI/Part B Only   $210.84   $210.84   REMAINDER OF PAGE INTENTIONALLY LEFT BLANK       --------------------------------------------------------------------------------   HEALTHEASE OF FLORIDA EXHIBIT 6 CAPITATION RATES FOR HIV/AIDS POPULATIONS FOR EACH MEDICAID REFORM COUNTY   TABLE 5   Area: 4  County: Duval ESTIMATED HEALTH PLAN RATES (NOT FOR USE UNLESS APPROVED BY CMS)     Capitation Rate     HIV (No Medicare) $950.48 AIDS (No Medicare) $2133.29 HIV-SSI/Parts A & B, SSI Part B Only $177.88 AIDS-SSI/Parts A & B, SSI Part B Only $249.55   Area: 10  County: Broward ESTIMATED HEALTH PLAN RATES (NOT FOR USE UNLESS APPROVED BY CMS)     Capitation Rate     HIV (No Medicare) $1484.87 AIDS (No Medicare) $3155.16 HIV-SSI/Parts A & B, SSI Part B Only $213.18 AIDS-SSI/Parts A & B, SSI Part B Only $299.07 REMAINDER OF PAGE INTENTIONALLY LEFT BLANK     --------------------------------------------------------------------------------   HEALTHEASE OF FLORIDA EXHIBIT 7 CAPITATION RATES FOR MEDICAID REFORM COUNTIES FOR ALL MEDICAID REFORM COUNTIES TABLE 6 Area: __________________  County: ____________________ ESTIMATED HEALTH PLAN RATES (NOT FOR USE UNLESS APPROVED BY CMS)     Age < 1 Yr Age 1 Yr Age 2 - 20 Yrs         Children with Chronic Conditions $ $ $   REMAINDER OF PAGE INTENTIONALLY LEFT BLANK   --------------------------------------------------------------------------------   HEALTHEASE OF FLORIDA EXHIBIT 8 KICK PAYMENT AMOUNTS FOR COVERED TRANSPLANT SERVICES   TABLE 7 Area: __10_______  County: ____Broward_______ Area: ___04______  County: _____Duval________ CPT Code Transplant CPT Code Description Children/Adolescents or Adult Payment Amount 32851   lung single, without bypass   Children/Adolescents   $320,800.00   32851   lung single, without bypass   Adult   $238,000.00 32852   lung single, with bypass   Children/Adolescents   $320,800.00   32852   lung single, with bypass   Adult   $238,000.00 32853   lung double, without bypass   Children/Adolescents   $320,800.00   32853   lung double, without bypass   Adult   $238,000.00 32854   lung double, with bypass   Children/Adolescents   $320,800.00   32854   lung double, with bypass   Adult   $238,000.00 33945   heart transplant with or without recipient cardiectomy   Children/Adolescents   $162,000.00   33945   heart transplant with or without recipient cardiectomy   Adult   $162,000.00   47135   liver, allotransplation, orthotopic, partial or whole from cadaver or living donor   Children/Adolescents   $122,600.00   47135     liver, allotransplation, orthotopic, partial or whole from cadaver or living donor     Adult     $122,600.00     47136     liver, heterotopic, partial or whole from cadaver or living donor any age     Children/Adolescents     $122,600.00     47136     liver, heterotopic, partial or whole from cadaver or living donor any age     Adult     $122,600.00   REMAINDER OF PAGE INTENTIONALLY LEFT BLANK   --------------------------------------------------------------------------------   HEALTHEASE OF FLORIDA EXHIBIT 9 KICK PAYMENT AMOUNTS FOR COVERED OBSTETRICAL DELIVERY SERVICES   TABLE 8 Area: ____10_______  County: _____Broward_______ CPT Code Obstetrical Delivery CPT Code Description Payment Amount 59409 Vaginal delivery only   $4,143.00 59410 Vaginal delivery including postpartum care 59515 Cesarean delivery including postpartum care 59612 Vaginal delivery only, after previous cesarean delivery 59614 Vaginal delivery only, after previous cesarean delivery including postpartum care 59622 Cesarean delivery only, following attempted vaginal delivery after previous cesarean delivery including postpartum care Area: ______04_________  County: _____Duval________ CPT Code Obstetrical Delivery CPT Code Description Payment Amount 59409 Vaginal delivery only   $4,097.62 59410 Vaginal delivery including postpartum care 59515 Cesarean delivery including postpartum care 59612 Vaginal delivery only, after previous cesarean delivery 59614 Vaginal delivery only, after previous cesarean delivery including postpartum care 59622 Cesarean delivery only, following attempted vaginal delivery after previous cesarean delivery including postpartum care REMAINDER OF PAGE INTENTIONALLY LEFT BLANK       -------------------------------------------------------------------------------- ATTACHMENT II Medicaid Reform Health Plan Model Contract July 2006 -------------------------------------------------------------------------------- Table of Contents   Section I Definitions and Acronyms A. Definitions  B. Acronyms    Section II General Overview A. Background  B. Purpose  C. Responsibilities of the State of Florida (the State) and the Agency for Health Care Administration (the Agency)  D. General Responsibilities of the Health Plan     Section III Eligibility and Enrollment A. Eligibility  B. Enrollment  C. Disenrollment    Section IV Enrollee Services and Marketing A. Enrollee Services  B. Marketing    Section V Covered Services A. Covered Services  B. Expanded Services  C. Excluded Services  D. Moral or Religious Objections  E. Customized Benefit Package F. Coverage Provisions   Section VI Behavioral Health Care A. General Provisions  B. Service Requirements    Section VII Provider Network A. General Provisions  B. Primary Care Providers  C. Minimum Standards  D. Appointment Waiting Times and Geographic Access Standards  E. Behavioral Health Services F. Specialists and Other Providers H. Continuity of Care  I. Network Changes   Section VIII Quality Management A. Quality Improvement  B. Utilization Management (UM)    Section IX Grievance System A. General Requirements  B. Grievance Process  C. Appeal Process  D. Medicaid Fair Hearing System    Section X Administration and Management A. General Provisions  B. Staffing  C. Provider Contracts Requirements  D. Provider Termination  E. Provider Services F. Medical Records Requirements G. Claims Payment  H. Encounter Data  I. Fraud Prevention   Section XI Information Management and Systems A. General Provisions  B. Data and Document Management Requirements  C. System and Data Integration Requirements  D. Systems Availability, Performance and Problem Management Requirements  E. System Testing and Change Management Requirements F. Information Systems Documentation Requirements G. Reporting Requirements - Specific to Information Management and Systems Functions and Capabilities - and Technological Capabilities  H. Other Requirements  I. Compliance with Standard Coding Schemes J. Data Exchange and Formats and Methods Applicable to Health Plans    Section XII Reporting Requirements A. Health Plan Reporting Requirements  B. Enrollment/Disenrollment Reports:  C. Grievance System  D. Provider Reporting  E. Marketing Representative Report F. Enhanced Benefits Report G. Catastrophic Component Threshold and Benefit Maximum Report  H. Critical Incidents  I. Hernandez Settlement Agreement (HAS) Report J. Performance Measure Report K. Financial Reporting  L. Suspected Fraud Reporting M.Denials of Authorization Reporting Requirements  N. Systems Availability and Performance Report  O. Claims Inventory Summary Report  P. Child Health Check-Up Reports  Q. Pharmacy Encounter Data  R. Health Plan Benefit Package  S. Transportation Services T. Enrollee Satisfaction Survey Summary U. Stakeholders’ Satisfaction Survey Summary  V. Behavioral Health Services Grievance and Appeals Reporting Requirements W. Critical Incident Reporting  X. Required Staff/Providers Y. FARS/CFARS Z. Behavioral Health Encounter Report AA. Minority Participation Report    Section XIII Method of Payment   Section XIV Sanctions A. General Provisions  B. Specific Sanctions    Section XV Financial Requirements A. Insolvency Protection  B. Insolvency Protection for a Capitated Provider Service Network (PSN)  C. Surplus Start Up Account  D. Surplus Requirement  E. Interest F. Inspection and Audit of Financial Records G. Physician Incentive Plans  H. Third Party Resources  I. Fidelity Bonds   Section XVI Terms and Conditions A. Agency Contract Management  B. Applicable Laws and Regulations  C. Assignment  D. Attorney's Fees  E. Conflict of Interest F. Contract Variation G. Court of Jurisdiction or Venue  H. Damages for Failure to Meet Contract Requirements  I. Disputes J. Force Majeure K. Legal Action Notification  L. Licensing M. Misuse of Symbols, Emblems, or Names in Reference to Medicaid  N. Offer of Gratuities  O. Subcontracts  P. Hospital Subcontracts Q. Termination Procedures  R. Waiver  S. Withdrawing Services from a County T. MyFloridaMarketPlace Vendor Registration U. MyFloridaMarketplace Vendor Registration and Transaction Fee Exemption  V. Ownership and Management Disclosure W. Minority Recruitment and Retention Plan  X. Independent Provider Y. General Insurance Requirements Z. Worker's Compensation Insurance AA. State Ownership  BB. Disaster Plan  REMAINDER OF PAGE INTENTIONALLY LEFT BLANK -------------------------------------------------------------------------------- Section I Definitions and Acronyms A.   Definitions   The following terms as used in this Contract shall be construed and/or interpreted as follows, unless the Contract otherwise expressly requires a different construction and/or interpretation. Abandoned Call— A call in which the caller elects an option and is either not permitted access to that option or disconnects from the system. Abuse — Provider practices that are inconsistent with generally accepted business or medical practices and that result in an unnecessary cost to the Medicaid program or in reimbursement for goods or services that are not medically necessary or that fail to meet professionally recognized standards for health care; or recipient practices that result in unnecessary cost to the Medicaid program. Action— The denial or limited authorization of a requested service, including the type or level of service, pursuant to 42 CFR 438.400(b). The reduction, suspension or termination of a previously authorized service. The denial, in whole or in part, of payment for a service. The failure to provide services in a timely manner, as defined by the State. The failure of the Health Plan to act within ninety (90) days from the date the Health Plan receives a Grievance, or 45 days from the date the Health Plan receives an Appeal. For a resident of a rural area with only one (1) managed care entity, the denial of an Enrollee's request to exercise his or her right to obtain services outside the network. Advance Directive— A written instruction, such as a living will or durable power of attorney for health care, recognized under State law (whether statutory or as recognized by the courts of the State), relating to the provision of health care when the individual is incapacitated. Advanced Registered Nurse Practitioner (ARNP) — A licensed advanced registered nurse practitioner who works in collaboration with a physician according to protocol, to provide diagnostic and clinical interventions. An ARNP must be authorized to provide these services by Chapter 464, F.S., and protocols filed with the Board of Medicine. Agency— State of Florida, Agency for Health Care Administration. Agent— When spelled with a capital "A" herein, is a term that refers to certain independent contractors with the state that perform administrative functions, including but not limited to: Fiscal Agent activities; outreach, eligibility and Enrollment activities; Systems and Technical Support. The term as used herein does not create a principal-agent relationship. Ancillary Provider— A Provider of ancillary medical services who has contracted with a Health Plan to provide ancillary medical services to the Health Plan's Enrollees. Authoritative Host— A system that contains the master or “authoritative” data for a particular data type, e.g. Enrollee, Provider, Health Plan, etc. The Authoritative Host may feed data from its master data files to other systems in real time or in batch mode. Data in an Authoritative Host is expected to be up-to-date and reliable. Automatic Assignment (or Auto-Assign)— The Enrollment of an eligible Medicaid Recipient, for whom Enrollment is mandatory, in a Health Plan chosen by AHCA or its Agent, and/or the assignment of a new Enrollee to a PCP chosen by the Health Plan. Appeal— A request for review of an Action, pursuant to 42 CFR 438.400(b). Baker Act— The Florida Mental Health Act, pursuant to Sections 394.479 through 394.484, Florida Statutes. Behavioral Health Services— Services listed in the Community Mental Health Services Coverage & Limitations Handbook and the Targeted Case Management Coverage & Limitations Handbook as specified in this Contract in Section VI.A Behavioral Health Care, General Provisions. Behavioral Health Care Case Manager— An individual who provides mental health care Case Management services directly to or on behalf of an Enrollee on an individual basis in accordance with 65E-15, F.A.C., and the Medicaid Targeted Case Management Handbook. Behavioral Health Care Provider— A licensed mental health professional, such as a "Clinical Psychologist," or registered nurse qualified due to training or competency in mental health care, who is responsible for the provision of mental health care to patients, or a physician licensed under Chapters 458 or 459, F.S., who is under contract to provide Behavioral Health Services to Enrollees. Beneficiary Assistance Program - An external grievance program, similar to the Subscriber Assistance Program, available to Medicaid Reform recipients that will allow an additional avenue to resolve a grievance. Benefit Maximum - The point when the cost of Covered Services received by a non-pregnant Enrollee, ages 21 and older reaches $550,000 in a state fiscal year, based on Medicaid Fee-for-Service payment levels. Care coordination services must continue to be offered by the Health Plan but the cost of additional services will not be covered by the Medicaid program for the remainder of the Contract Year in which the Benefit Maximum is met. Benefits— A schedule of health care services to be delivered to Enrollees covered by the Health Plan as set forth in Section V and Section VI of this Contract. Blocked Call— A call that cannot be connected immediately because no circuit is available at the time the call arrives or the telephone system is programmed to block calls from entering the queue when the queue backs up behind a defined threshold. Business Days— Traditional workdays, which are Monday, Tuesday, Wednesday, Thursday, and Friday. State holidays are excluded. Calendar Days— All seven (7) days of the week. Capitation Rate— The per member per month amount, including any adjustments, that is paid by the Agency to a capitated Health Plan for each Medicaid Recipient enrolled under a contract for the provision of Medicaid services during the payment period. Care Coordination/Case Management— A process which assesses, plans, implements, coordinates, monitors and evaluates the options and services required to meet an Enrollee's health needs using communication and all available resources to promote quality cost-effective outcomes. Proper Case Management occurs across a continuum of care, addressing the ongoing individual needs of an Enrollee rather than being restricted to a single practice setting. For purposes of this contract Care Coordination and Case Management are the same. Catastrophic Component -- The amount of financial risk assumed by a Health Plan or the Agency to provide Covered Services above $50,000 per Enrollee, based on Medicaid Fee-for-Service payment levels, and up to the overall annual Benefit Maximum. Catastrophic Component Threshold - The point when the cost of Covered Services, based on Medicaid Fee-for-Service payment levels, reaches $50,000 for an Enrollee in a state fiscal year. For a Health Plan that accepts the Comprehensive Capitation Rate only, the Agency begins reimbursing the Health Plan for the cost of Covered Services received by the Enrollee for the remainder of the Contract Year. This reimbursement is based on a percentage of Medicaid Fee-for-Service payment levels,. Cause— Special reasons that allow Mandatory Enrollees to change their Health Plan option outside their Open Enrollment period. May also be referred to as “Good Cause.” Centers for Medicare & Medicaid Services (CMS) — The agency within the United States Department of Health & Human Services that provides administration and funding for Medicare under Title XVIII, Medicaid under Title XIX, and the State Children’s Health Insurance Program under Title XXI of the Social Security Act. Certification— The process of determining that a facility, equipment or an individual meets the requirements of federal or State law, or whether Medicaid payments are appropriate or shall be made in certain situations. Child Health Check-Up Program (CHCUP) — A comprehensive and preventative health examinations provided on a periodic basis that are aimed at identifying and correcting medical conditions in Children/Adolescents. Policies and procedures are described in the Child Health Check-Up Services Coverage and Limitations Handbook. Children/Adolescents— Enrollees under the age of 21. Children & Families Services Program Office— Also referred to as the Children & Families Safety & Preservation Program Office, located in the DCF; the State agency responsible for overseeing programs that identify and protect abused and neglected Children and attempt to prevent domestic violence. Choice Counselor/Enrollment Broker— The State’s contracted or designated entity that performs functions related to outreach, education, counseling, Enrollment, and Disenrollment of Potential Enrollees into a Health Plan. Choice Counseling Specialists— Certified individuals authorized by an Agency-approved process who provide one-on-one information to Medicaid Recipients, to assist the Medicaid Recipients in choosing the Health Plan that best meets their health care needs and those of their family. Cold Call Marketing— Any unsolicited personal contact with a Medicaid Recipient by the Health Plan, its staff, its volunteers or its vendors with the purpose of influencing the Medicaid Recipient to enroll in the Health Plan or either to not enroll in, or disenroll from, another Health Plan.   Community Living Support Plan - A written document prepared by a mental health resident of an assisted living facility with a limited mental health license and the resident's mental health case manager in consultation with the administrator or the administrator's designee of the assisted living facility with a limited mental health license. A copy must be provided to the administrator. The plan must include information about the supports, services, and special needs of the resident which enable the resident to live in the assisted living facility and a method by which facility staff can recognize and respond to the signs and symptoms particular to that resident which indicate the need for professional services. Comprehensive Component -- The amount of financial risk assumed by a Health Plan to provide covered service up to 50,000 dollars per Enrollee based on Medicaid Fee-for-Service payment levels. Continuous Quality Improvement— A management philosophy that mandates continually pursuing efforts to improve the quality of products and services produced by an organization. Contract— The agreement between the Health Plan and the Agency to provide Medicaid services to Enrollees, comprised of the Contract, any addenda, appendices, attachments, or amendments thereto. Contract Period - The term of the contract from July 1, 2006 through August 31, 2009. Contract Year - The period of time from September 1 through August 31 of each calendar year. Contracting Officer— The Secretary of the Agency or his/her delegate. County Health Department (CHD)— CHDs are organizations administered by the Department of Health for the purpose of providing health services as defined in Chapter 154, F.S., which include the promotion of the public's health, the control and eradication of preventable diseases, and the provision of primary health care for special populations. Coverage & Limitations Handbook (Handbook)— A document that provides information to a Medicaid Provider regarding Enrollee eligibility, claims submission and processing, Provider participation, covered care, goods and services, limitations, procedure codes and fees, and other matters related to participation in the Medicaid program. Covered Services— Those services provided by the Health Plan in accordance with this Contract, as outlined in Section V, Covered Services, and Section VI, Behavioral Health Care, in this Contract. Crisis Support— Services for persons initially perceived to need emergency mental health services, but upon assessment, do not meet the criteria for such emergency care. These are acute care services that are available twenty-four (24) hours a day, seven (7) days a week, for intervention. Examples include: mobile crisis, crisis/emergency screening, crisis hot-line and emergency walk-in. Customized Benefit Package (CBP) - Covered Services, which may vary in amount, scope and/or duration from those listed in Section V, Covered Services and Section VI, Behavioral Health Services. The CBP must meet State standards for actuarial equivalency and sufficiency. Direct Ownership Interest — The ownership of stock, equity in capital or any interest in the profits of the disclosing entity. A disclosing entity is defined as a Medicaid provider or supplier, or other entity that furnishes services or arranges for furnishing services under Medicaid, or health related services under the social services program. Direct Service Behavioral Health Care Provider— An individual qualified by training or experience to provide direct behavioral health services under the supervision of the Health Plan’s medical director. Disease Management - A system of coordinated health care intervention and communication for populations with conditions in which patient self-care efforts are significant. Disease Management supports the physician or practitioner/patient relationship and plan of care; emphasized prevention of exacerbations and complications utilizing evidence-based practice guidelines and patient empowerment strategies, and evaluates clinical, humanistic and economic outcomes on an ongoing basis with the goal of improving overall health. Disenrollment— The Agency-approved discontinuance of an Enrollee's Enrollment in a Health Plan. Disclosing Entities— A Medicaid provider, other than an individual practitioner or group of practitioners, or a fiscal agent that furnishes services or arranges for furnishing services under Medicaid, or health related services under the social services program. Downward Substitution of Care— The use of less restrictive, lower cost services than otherwise might have been provided, that are considered clinically acceptable and necessary to meet specified objectives outlined in an Enrollee's plan of treatment, provided as an alternative to higher cost services. For services related to mental health, Downward Substitution of Care may include care provided by private practice psychologists and social workers, psycho-social rehabilitation, Medicaid community mental health services or Medicaid mental health targeted Case Management, and other services considered clinically appropriate, more cost-effective and less restrictive. Durable Medical Equipment (DME)— Medical equipment that can withstand repeated use, is customarily used to serve a medical purpose, is generally not useful in the absence of illness or injury and is appropriate for use in the Enrollee's home. Early and Periodic Screening, Diagnosis and Treatment Program (EPSDT)— See Child Health Check-Up Program. Emergency Behavioral Health Services— Those services required to meet the needs of an individual who is experiencing an acute crisis, resulting from a mental illness, which is a level of severity that would meet the requirements for an involuntary examination as specified in Section 394.463, Florida Statutes, and in the absence of a suitable alternative or psychiatric medication, would require hospitalization. Emergency Medical Condition— (a) A medical condition manifesting itself by acute symptoms of sufficient severity, which may include severe pain or other acute symptoms, such that a prudent layperson who possesses an average knowledge of health and medicine, could reasonably expect that the absence of immediate medical attention could reasonably be expected to result in any of the following: (1) Serious jeopardy to the health of a patient, including a pregnant woman or fetus; (2) Serious impairment to bodily functions; (3) Serious dysfunction of any bodily organ or part. (b) With respect to a pregnant woman: (1) That there is inadequate time to effect safe transfer to another Hospital prior to delivery; (2) That a transfer may pose a threat to the health and safety of the patient or fetus; (3) That there is evidence of the onset and persistence of uterine contractions or rupture of the membranes, in accordance with Section 395.002, F.S. Emergency Services and Care— Medical screening, examination and evaluation by a physician or, to the extent permitted by applicable laws, by other appropriate personnel under the supervision of a physician, to determine whether an Emergency Medical Condition exists. If an Emergency Medical Condition exists, Emergency Services and Care includes the care or treatment that is necessary to relieve or eliminate the Emergency Medical Condition within the service capability of the facility. Encounter Data - A record of covered services provided to Enrollees of a Health Plan. An Encounter is an interaction between a patient and provider (health plan, rendering physician, pharmacy, lab, etc.) who delivers services or is professionally responsible for services delivered to a patient. Enhanced Benefit — An activity or behavior identified by the State as beneficial to the health of an individual and designated to earn a credit in the Enhanced Benefit Program. Enhanced Benefit Account— The individual account resulting from an Enrollee earning rewards for healthy behaviors under the Enhanced Benefit Program. Enhanced Benefit Program— A program offered through Medicaid Reform whereby Enrollees are rewarded, through individual Enhanced Benefit Accounts, for healthy behaviors. Enrollee— A Medicaid Recipient currently enrolled in the Health Plan. Enrollment— The process by which an eligible Medicaid Recipient becomes an Enrollee in a Health Plan. Enrollee Suicide Attempt— An act which clearly reflects an attempt by an Enrollee to cause his or her own death, which results in bodily injury requiring medical treatment by a licensed health care professional. Expanded Services— A Health Plan Covered Service for which the Health Plan receives no direct payment from the Agency. Expedited Appeal Process— The process by which the Appeal of an Action is accelerated because the standard time-frame for resolution of the Appeal could seriously jeopardize the Enrollee's life, health or ability to obtain, maintain or regain maximum function. External Quality Review (EQR) — The analysis and evaluation by an EQRO of aggregated information on quality, timeliness, and access to the health care services that are furnished to Medicaid recipients by a Health Plan. External Quality Review Organization (EQRO)— An organization that meets the competence and independence requirements set forth in federal regulations 42 CFR 438.354, and performs EQR, other related activities as set forth in federal regulations or both. Federal Fiscal Year - The United States government’s fiscal year starts October 1 and ends on September 30. Federally Qualified Health Center (FQHC)— An entity that is receiving a grant under section 330 of the Public Health Service Act, as amended, and Section 1905(1)(2)(B) of the Social Security Act. FQHCs provide primary health care and related diagnostic services and may provide dental, optometric, podiatry, chiropractic and mental health services. Fee-for-Service (FFS)— A method of making payment by which the Agency sets prices for defined medical or allied care, goods or services. Fiscal Agent— Any corporation or other legal entity that enters into a contract with the Agency to receive, process and adjudicate claims under the Medicaid program. Fiscal Year — The State of Florida’s Fiscal Year starts July 1 and ends on June 30. Florida Medicaid Management Information System (FMMIS)— The information system used to process Florida Medicaid claims and payments to Health Plans, and to produce management information and reports relating to the Florida Medicaid program. This system is used to maintain Medicaid eligibility data and provider enrollment data. Florida Mental Health Act — Includes the Baker Act that covers admissions for persons who are considered to have an emergency mental health condition (a threat to themselves or others), as specified in Sections 394.479 through 394.484, Florida Statutes. Fraud — An intentional deception or misrepresentation made by a person with the knowledge that the deception results in unauthorized benefit to herself or himself or another person. The term includes any act that constitutes fraud under applicable federal or state law. Full-Time Equivalent Position (FTE)— The equivalent of one (1) full-time employee who works 40 hours per week. Good Cause— See Cause. Grievance— An expression of dissatisfaction about any matter other than an Action. Possible subjects for grievances include, but are not limited to, the quality of care, the quality of services provided and aspects of interpersonal relationships such as rudeness of a Provider or employee or failure to respect the Enrollee's rights. Grievance Procedure— The procedure for addressing Enrollees' grievances. Grievance System— The system for reviewing and resolving Enrollee Grievances and Appeals. Components must include a Grievance process, an Appeal process and access to the Medicaid Fair Hearing system. Health Assessment— A complete health evaluation combining health history, physical assessment and the monitoring of physical and psychological growth and development. Health Care Professional— A physician or any of the following: podiatrist, optometrist, chiropractor, psychologist, dentist, Physician Assistant, physical or occupational therapist, therapist assistant, speech-language pathologist, audiologist, Registered or practical Nurse (including nurse practitioner, clinical nurse specialist, certified Registered Nurse anesthetist and certified nurse midwife), a licensed certified social worker, registered respiratory therapist and certified respiratory therapy technician. Health Fair— An event conducted in a setting that is open to the public or segment of the public (such as the "elderly" or "school children") during which information about health-care services, facilities, research, preventative techniques or other health-care subjects is disseminated. At least two (2) health-related organizations that are not affiliated under common ownership must actively participate in the Health Fair. Health Maintenance Organization (HMO)— An organization or entity licensed in accordance with Section 641 of the Florida Statutes or in accordance with the Florida Medicaid State plan definition of an HMO. Health Plan— An entity that integrates financing and management with the delivery of health care services to an enrolled population. It employs or contracts with an organized system of Providers, which deliver services and frequently shares financial risk. For the purposes of this Contract, a Health Plan has also contracted with the Agency to provide Medicaid services under the Florida Medicaid Reform program, and includes health maintenance organizations authorized under chapter 641 of the Florida Statutes, exclusive provider organizations as defined in Chapter 627 of the Florida Statutes, health insurers authorized under chapter 624 of the Florida Statutes, and Provider Service Networks as defined in Section 409.912, Florida Statutes. Hospital— A facility licensed in accordance with the provisions of Chapter 395, Florida Statutes, or the applicable laws of the state in which the service is furnished. Hospital Services Agreement— The agreement between the Health Plan and a Hospital to provide medical services to the Health Plan's Enrollees. Indirect Ownership Interest — Ownership interest in an entity that has direct or indirect ownership interest in the disclosing entity. The amount of indirect ownership in the disclosing entity that is held by any other entity is determined by multiplying the percentage of ownership interest at each level. An indirect ownership interest must be reported if it equates to an ownership interest of five percent (5%) or more in the disclosing entity. Example: If “A” owns ten percent (10%) of the stock in a corporation that owns eighty percent (80) of the stock of the disclosing entity, “A’s” interest equates to an eight percent (8%) indirect ownership and must be reported. Individuals with Special Health Care Needs — Adults and Children/Adolescents, who face physical, mental or environmental challenges daily that place at risk their health and ability to fully function in society. Factors include individuals with mental retardation or related conditions; individuals with serious chronic illnesses, such as human immunodeficiency virus (HIV), schizophrenia or degenerative neurological disorders; individuals with disabilities resulting from many years of chronic illness such as arthritis, emphysema or diabetes; and Children/Adolescents and adults with certain environmental risk factors such as homelessness or family problems that lead to the need for placement in foster care. Information— (a) Structured Data: Data that adhere to specific properties and Validation criteria that are stored as fields in database records. Structured queries can be created and run against structured data, where specific data can be used as criteria for querying a larger data set; (b) Document: Information that does not meet the definition of structured data includes text, files, spreadsheets, electronic messages and images of forms and pictures. Information System(s)— A combination of computing hardware and software that is used in: (a) the capture, storage, manipulation, movement, control, display, interchange and/or transmission of information, i.e. structured data (which may include digitized audio and video) and documents; and/or (b) the processing of such information for the purposes of enabling and/or facilitating a business process or related transaction. Insolvency— A financial condition that exists when an entity is unable to pay its debts as they become due in the usual course of business, or when the liabilities of the entity exceeds its assets. Licensed — A facility, equipment, or an individual that has formally met state, county, and local requirements, and has been granted a license by a local, state or federal government entity. Kick Payment - The method of reimbursing managed care organizations in the form of a separate one-time fixed payment for specific services. Licensed Practitioner of the Healing Arts — A psychiatric nurse, Registered Nurse, advanced registered nurse practitioner, Physician Assistant, clinical social worker, mental health counselor, marriage and family therapist, or psychologist. List of Excluded Individuals and Entities (LEIE)— A database maintained by the Department of Health & Human Services, Office of the Inspector General. The LEIE provides information to the public, health care providers, patients and others relating to parties excluded from participation in Medicare, Medicaid and all other federal health care programs. Managed Behavioral Health Organization (MBHO)— A behavioral health-care delivery system managing quality, utilization and cost of services. Additionally, an MBHO measures performance in the area of mental disorders. Mandatory Assignment— The process the Agency uses to assign Potential Enrollees to a Health Plan. The Agency automatically assigns those Mandatory Potential Enrollees who did not voluntarily choose a Health Plan. Mandatory Enrollee— The categories of eligible beneficiaries who must be enrolled in a Health Plan. Mandatory Potential Enrollee— A Medicaid Recipient who is required to enroll in a Health Plan, but has not yet chosen a Health Plan in which to enroll. Market Area— The geographic area in which the Health Plan is authorized to market and/or conduct pre-enrollment activities. Marketing— Any activity or communication conducted by or on behalf of any Health Plan to a Medicaid Recipient who is not Enrolled with the Health Plan, that can reasonably be interpreted as intended to influence the Medicaid Recipient to enroll in the particular Health Plan. Marketing Representative — A person who provides information, pre-enrollment assistance, or otherwise promotes a Health Plan. Marketing Representatives shall be limited to licensed insurance agents. Medicaid Area — The specific counties designated by the Agency. Medicaid— The medical assistance program authorized by Title XIX of the Social Security Act, 42 U.S.C. §1396 et seq., and regulations there under, as administered in the State of Florida by the Agency under 409.901 et seq., F.S. Medicaid Recipient— Any individual whom DCF, or the Social Security Administration on behalf of the DCF, determines is eligible, pursuant to federal and State law, to receive medical or allied care, goods or services for which the Agency may make payments under the Medicaid program, and who is enrolled in the Medicaid program. Medicaid Reform— The program resulting from Chapter 409.91211, F.S. Medical Record— Documents corresponding to medical or allied care, goods or services furnished in any place of business. The records may be on paper, magnetic material, film or other media. In order to qualify as a basis for reimbursement, the records must be dated, legible and signed or otherwise attested to, as appropriate to the media. Medically Necessary or Medical Necessity— Services that include medical or allied care, goods or services furnished or ordered to: 1. Meet the following conditions: a. Be necessary to protect life, to prevent significant illness or significant disability or to alleviate severe pain; b. Be individualized, specific and consistent with symptoms or confirm diagnosis of the illness or injury under treatment and not in excess of the patient's needs; c. Be consistent with the generally accepted professional medical standards as determined by the Medicaid program, and not be experimental or investigational; d. Be reflective of the level of service that can be furnished safely and for which no equally effective and more conservative or less costly treatment is available statewide; and e. Be furnished in a manner not primarily intended for the convenience of the Enrollee, the Enrollee's caretaker or the provider.   2. Medically Necessary or Medical Necessity for those services furnished in a Hospital on an inpatient basis cannot, consistent with the provisions of appropriate medical care, be effectively furnished more economically on an outpatient basis or in an inpatient facility of a different type.   3. The fact that a provider has prescribed, recommended or approved medical or allied goods or services does not, in itself, make such care, goods or services Medically Necessary, a Medical Necessity or a Covered Service/Benefit. Medicare — The medical assistance program authorized by Title XVIII of the Social Security Act. Meds AD— Those recipients up to 88% of FPL with assets up to $5,000 for an individual and $6,000 for a couple without Medicare and those with Medicare that are not receiving institutional care, hospice care, or home and community based services. Neglect — A failure or omission to provide care, supervision, and services necessary to maintain enrollee’s physical and mental health, including but not limited to, food, nutrition, supervision and medical services that are essential for the well-being of the enrollee. Neglect might be a single incident or repeated conduct that results in, or could reasonably expected to result in, serious physical or psychological injury, or a substantial risk of death. Newborn— A live child born to an Enrollee, who is a member of the Health Plan. Non-Covered Service— A service that is not a Covered Service/Benefit of the Medicaid State Plan or of the Health Plan. Nursing Facility— An institutional care facility that furnishes medical or allied inpatient care and services to individuals needing such services. See Chapters 395 and 400, F.S. Open Enrollment— The sixty (60) day period before the end of an Enrollee's Enrollment year, during which an Enrollee may choose to change Health Plans for the following Enrollment year. Outpatient— A patient of an organized medical facility, or distinct part of that facility, who is expected by the facility to receive, and who does receive, professional services for less than a twenty-four (24) hour period, regardless of the hours of admission, whether or not a bed is used and/or whether or not the patient remains in the facility past midnight. Overpayment — Includes any amount that is not authorized to be paid by the Medicaid program whether paid as a result of inaccurate or improper cost reporting, improper claiming, unacceptable practices, fraud, abuse, or mistake.  Participating Specialist— A physician, licensed to practice medicine in the State of Florida, who contracts with the Health Plan to provide specialized medical services to the Health Plan's Enrollees. Peer Review— An evaluation of the professional practices of a provider by the provider's peers in order to assess the necessity, appropriateness and quality of care furnished as such care is compared to that customarily furnished by the provider's peers and to recognized health care standards. Penultimate Saturday— The Saturday preceeding the last Saturday of the month. Penultimate Sunday — The Sunday preceeding the last Sunday of the month. Pharmacy Benefits Administrator— An entity contracted to or included in a health plan accepting pharmacy prescription claims for enrollees in the plan, assuring these claims conform to coverage policy and determining the allowed payment. Physician’s Assistant — A person who is a graduate of an approved program or its equivalent or meets standards approved by the Board of Medicine and is certified to perform medical services delegated by the supervising physician in accordance with Chapter 458, F.S. Physicians' Current Procedural Terminology (CPT)—A systematic listing and coding of procedures and services published annually by the American Medical Association. Plan Factor - A budget-neutral adjustment using a Health Plan's available historical Enrollee diagnosis data grouped by a health-based risk assessment model.  A Health Plan's Plan Factor is developed from the aggregated individual risk scores of the Health Plan's prior Enrollment.  The Plan Factor modifies a Health Plan's monthly capitation payment to reflect the health status of its Enrollees. Portable X-Ray Equipment— X-ray equipment transported to a setting other than a hospital, Clinic or office of a physician or other Licensed Practitioner of the Healing Arts. Post-Stabilization Care Services— Covered Services related to an Emergency Medical Condition that are provided after an Enrollee is stabilized in order to maintain the condition, or to improve or resolve the Enrollee's condition pursuant to 42 CFR 422.113. Potential Enrollee — Pursuant to 42 CFR 438.10(a), an eligible Medicaid Recipient who is subject to Mandatory Assignment or may voluntarily elect to enroll in a given Health Plan, but is not yet an Enrollee of a specific Health Plan. Pre-Enrollment — The provision of Marketing and educational materials to a Medicaid Recipient and assistance in completing the Request for Benefit Information (RBI). Pre-Enrollment Application— See Request for Benefit Information. Prepaid Health Plan— A Health Plan reimbursed on a prepaid basis. (see Health Plan) Primary Care— Comprehensive, coordinated and readily-accessible medical care including: health promotion and maintenance; treatment of illness and injury; early detection of disease; and referral to specialists when appropriate. Primary Care Case Management— The provision or arrangement of Enrollees’ primary care and the referral of Enrollees for other necessary medical services on a 24-hour basis. Primary Care Provider (PCP)— A Health Plan staff or contracted physician practicing as a general or family practitioner, internist, pediatrician, obstetrician, gynecologist, advanced registered nurse practitioners, physician assistants or other specialty approved by the Agency, who furnishes Primary Care and patient management services to an Enrollee. See sections 641.19, 641.31 and 641.51, Florida Statutes. Prior Authorization— The act of authorizing specific services before they are rendered. Protocols— Written guidelines or documentation outlining steps to be followed for handling a particular situation, resolving a problem or implementing a plan of medical, nursing, psychosocial, developmental and educational services. Provider — A person or entity that is eligible to provide Medicaid services and has a contractual agreement with the Health Plan to provide Medicaid services. Provider Contract — An agreement between the Health Plan and a health care Provider as described above. Provider Service Network — A network established or organized and operated by a health care provider, or group of affiliated health care providers, including minority physician networks and emergency room diversion programs that meet the requirements of s. 409.91211, which provides a substantial proportion of the health care items and services under a contract directly through the provider or affiliated group of providers and may make arrangements with physicians or other health care professionals, health care institutions, or any combination of such individuals or institutions to assume all or part of the financial risk on a prospective basis for the provision of basic health services by the physicians, by other health professionals, or through the institutions. The health care providers must have a controlling interest in the governing body of the provider service network organization. For purposes of this Contract, the PSN shall operate in accordance with section 409.91211(3)(e), F.S., and is exempt from licensure under Chapter 641, F.S. The PSN shall be responsible for meeting certain standards in Chapter 641, F.S. as required in this Contract. Public Event— An event sponsored for the public or segment of the public by two (2) or more actively participating organizations, one (1) of which may be a health organization. Quality— The degree to which a Health Plan increases the likelihood of desired health outcomes of its Enrollees through its structural and operational characteristics and through the provision of health services that are consistent with current professional knowledge. Quality Enhancements - Certain health-related, community-based services that the Health Plan must offer and coordinate access to for its Enrollees, such as children’s programs, domestic violence classes, pregnancy prevention, smoking cessation, or substance abuse programs. Health Plans are not reimbursed by the Agency for these types of services. Quality Improvement (QI) — The process of monitoring and assuring that the delivery of health care services are available, accessible, timely, Medically Necessary, and provided in sufficient quantity, of acceptable Quality, within established standards of excellence, and appropriate for meeting the needs of the Enrollees.   Quality Improvement Program (QIP) — The process of assuring the delivery of health care is appropriate, timely, accessible, available and Medically Necessary. Registered Nurse (RN) — An individual who is licensed to practice professional nursing in accordance with Chapter 464, F.S.   Request for Benefit Information (RBI)— The form completed by a Potential Enrollee with the assistance of a Health Plan representative and submitted by the Health Plan to the Choice Counselor/Enrollment Broker to initiate the receipt of information for the Enrollment process. Also known as Pre-Enrollment Application. Residential Services — As applied to DJJ, refers to the out-of-home placement for use in a level 4, 6, 8 or 10 facility as a result of a delinquency disposition order. Also referred to as a Residential Commitment Program. Risk Adjustment (also Risk-Adjusted) - A process to adjust Capitation Rates to reflect the health conditions relative to the health status of the enrolled population. This process includes but is not limited to, risk assessment models, demographics, or population grouping. Risk Assessment — The process of collecting information from a person about hereditary, lifestyle and environmental factors to determine specific diseases or conditions for which the person is at risk. Rural— An area with a population density of less than 100 individuals per square mile, or an area defined by the most recent United State Census as rural, i.e. lacking a metropolitan statistical area (MSA). Rural Health Clinic (RHC)— A clinic that is located in an area that has a health-care provider shortage. An RHC provides primary health care and related diagnostic services and may provide optometric, podiatry, chiropractic and mental health services. An RHC employs, contracts or obtains volunteer services from licensed health care practitioners to provide services. Sales Activities — Actions performed by an agent of any Health Plan, including the acceptance of Pre-Enrollment Application Requests for Benefit Information, for the purpose of Enrollment of Potential Enrollees. Screen or Screening— Assessment of an Enrollee's physical or mental condition to determine evidence or indications of problems and need for further evaluation or services. Service Area— The designated geographical area within which the Health Plan is authorized by the Contract to furnish Covered Services to Enrollees. Service Authorization— The Health Plan’s approval for services to be rendered. The process of authorization must at least include a Health Plan Enrollee’s or a Provider’s request for the provision of a service. Service Location — Any location at which an Enrollee obtains any health care service provided by the Health Plan under the terms of the Contract. Sick Care — Non-urgent problems that do not substantially restrict normal activity, but could develop complications if left untreated (e.g., chronic disease). Span of Control — Information systems and telecommunications capabilities that the Health Plan itself operates or for which it is otherwise legally responsible according to the terms and Conditions of this Contract. The Health Plan span of control also includes Systems and telecommunications capabilities outsourced by the Health Plan. Special Supplemental Nutrition Program for Women, Infants & Children (WIC)— Program administered by the Department of Health that provides nutritional counseling; nutritional education; breast-feeding promotion and nutritious foods to pregnant, postpartum and breast-feeding women, infants and children up to the age of five (5) who are determined to be at nutritional risk and who have a low to moderate income. An individual who is eligible for Medicaid is automatically income eligible for WIC benefits. Additionally, WIC income eligibility is automatically provided to an Enrollee's family that includes a pregnant woman or infant certified eligible to receive Medicaid. Specialty Plan - A Health Plan designed for a specific population and whose Enrollees are primarily composed of Medicaid Recipients, Children with Chronic Conditions or for Medicaid Recipients who have been diagnosed with the human immunodeficiency virus or acquired immunodeficiency syndrome (HIV/AIDS). A Health Plan must be licensed under Chapter 641, Florida Statutes, in order to offer a Specialty Plan for the population with HIV/AIDS. State — State of Florida. Subcontract — An agreement entered into by the Health Plan for provision of administrative services on its behalf. Subcontractor — Any person or entity with which the Health Plan has contracted or delegated some of its functions, services or responsibilities for providing services under this Contract. Surface Mail — Mail delivery via land, sea, or air, rather than via electronic transmission.   Surplus — Net worth, i.e., total assets minus total liabilities. System Unavailability — As measured within the Health Plan’s information systems Span of Control, when a system user does not get the complete, correct full-screen response to an input command within three (3) minutes after depressing the “Enter” or other function key. Systems — See Information Systems. Temporary Assistance to Needy Families (TANF)— Public financial assistance provided to low-income families. Transportation— An appropriate means of conveyance furnished to an Enrollee to obtain Medicaid authorized/covered services. Unborn Activation— The process by which an unborn child, who has been assigned a Medicaid ID number is made Medicaid eligible upon birth. Urban — An area with a population density of greater than 100 individuals per square mile or an area defined by the most recent United State Census as urban, i.e. as having a metropolitan statistical area (MSA). Urgent Behavioral Health Care— Those situations that require immediate attention and assessment within twenty-three (23) hours even though the Enrollee is not in immediate danger to himself/herself or others and is able to cooperate in treatment. Urgent Care— Services for conditions, which, though not life-threatening, could result in serious injury or disability unless medical attention is received (e.g., high fever, animal bites, fractures, severe pain, etc.) or do substantially restrict an Enrollee's activity (e.g., infectious illnesses, flu, respiratory ailments, etc.). Validation — The review of information, data, and procedures to determine the extent to which they are accurate, reliable, free from bias and in accord with standards for data collection and analysis. Vendor — An entity submitting a proposal to become a Health Plan contractor. Violation— A determination by the Agency that a Health Plan failed to act as specified in this Contract or applicable statutes, rules or regulations governing Medicaid Health Plans. Each day that an ongoing violation continues shall be considered, for the purposes of this Contract, to be a separate Violation. In addition, each instance of failing to furnish necessary and/or required medical services or items to Enrollees shall be considered, for purposes of this Contract, to be a separate Violation. As well, each day that a Health Plan fails to furnish necessary and/or required medical services or items to Enrollees shall be considered, for purposes of this Contract, to be a separate Violation. Voluntary Enrollee— An Enrollee that is not mandated to enroll in a Health Plan, but chooses to enroll in a Health Plan. Voluntary Potential Enrollee— A Potential Enrollee that is not mandated to enroll in a Health Plan, and is not yet Enrolled in a Health Plan.   Well Care Visit— A routine medical visit for one (1) of the following: CHCUP visit, family planning, routine follow-up to a previously treated condition or illness, adult physicals or any other routine visit for other than the treatment of an illness. REMAINDER OF PAGE INTENTIONALLY LEFT BLANK       B.     Acronyms   ADL — Activities of Daily Living   ADM— Alcohol, Drug Abuse & Mental Health Office of the Florida Department of Children & Families (aka SAMH — listed below)   ALF— Assisted Living Facility   APD— Agency for People with Disabilities   BBA — Balanced Budget Act of 1997   CAP — Corrective Action Plan   CARES — Comprehensive Assessment & Review for Long-Term Care Services   CDC — Centers for Disease Control   CHD — County Health Department   CMS — Centers for Medicare & Medicaid Services   CFR — Code of Federal Regulations   CHCUP — Child Health Check-Up Program   CPT— Physicians’ Current Procedural Terminology   DCF— Department of Children & Families   DFS - Department of Financial Services   DHHS— United States Department of Health & Human Services   DOH— Department of Health   DJJ— Department of Juvenile Justice   DEA— Drug Enforcement Administration   DME— Durable Medical Equipment   EDI — Electronic Data Interchange    EDT - Eastern Daylight Time   EPSDT— Early and Periodic Screening, Diagnosis & Treatment Program   EQR — External Quality Review   EQRO— External Quality Review Organization   EST— Eastern Standard Time   FAC— Florida Administrative Code   FFS— Fee-for-Service   FQHC— Federally Qualified Health Center   FTE— Full Time Equivalent Position   HIPAA— Health Insurance Portability & Accountability Act   HMO— Health Maintenance Organization   IBNR - Incurred but not reported   LEIE— List of Excluded Individuals & Entities   MBHO— Managed Behavioral Health Organization   ODBC — Open Database Connectivity   PCCB - Per capita capitation benchmark   PCP— Primary Care Physician   QI - Quality Improvement   QIP— Quality Improvement Program   RBI - Request for Benefit Information   RFP— Request for Proposal   RHC— Rural Health Clinic   SAMH— Alcohol, Drug Abuse & Mental Health Office of the Florida Department of Children & Families (aka ADM — listed above)   SFTP— Secure File Transfer Protocol   SOBRA— Sixth Omnibus Budget Reconciliation Act   SQL — Structured Query Language   SSI — Supplemental Security Income    UM — Utilization Management   WIC— Special Supplemental Nutrition Program for Women, Infants & Children     -------------------------------------------------------------------------------- Section II General Overview  A.   Background     1. Effective July 1, 2006, the Agency for Health Care Administration will begin implementing Medicaid Reform in the counties of Broward and Duval. At the end of the first year of implementation, Medicaid Reform will be extended to Nassau, Clay and Baker counties. Medicaid Reform will transform the Medicaid program by empowering Medicaid Recipients to take control of their health care, providing more choices for Recipients, and enhancing their health status through increased health literacy and incentives to engage in healthy behaviors.   2. The principles governing Medicaid Reform are: a.   Patient Responsibility and Empowerment; b.   Marketplace Decisions; c.   Bridging Public and Private Coverage; and d.   Sustainable Growth Rate.   3. These principles will empower Medicaid Recipients, provide flexibility to Providers, and facilitate program management for government. B.   Purpose   One of the key goals of Medicaid Reform is the expansion of health care choices for Medicaid Recipients and enhanced access to services. To achieve this goal the Agency proceeded with an open application process to obtain the services of Health Plans. This Contract is the agreement between the Agency and entities operating under Medicaid Reform as a Health Plan. C.   Responsibilities of the State of Florida (the State) and the Agency for Health Care Administration (the Agency)   1.   The Agency will be responsible for administering the Medicaid program, including all aspects of Medicaid Reform. The Agency will administer contracts, monitor Health Plan performance, and provide oversight in all aspects of the Health Plan’s operations. 2.   The State of Florida has sole authority for determining eligibility for Medicaid and whether Medicaid Recipients are mandated to enroll in, may enroll in, or may not enroll in Medicaid Reform. 3.   The Agency or its Agent will review the Florida Medicaid Management Information System (FMMIS) file daily and will send written notification and information to all Potential Enrollees. A Potential Enrollee will have thirty (30) Calendar Days to select a Health Plan. 4.   The Agency or its Agent will Auto-Assign Mandatory Potential Enrollees who do not select a Health Plan during their choice period to a Health Plan using a pre-established algorithm. 5.   Enrollment in a Health Plan, whether chosen or Auto-Assigned, will be effective at 12:01 a.m. on the first (1st) Calendar Day of the month following Potential Enrollee selection or Auto-Assignment, for those Potential Enrollees who choose or are Auto- Assigned to a Health Plan on or between the first (1st) Calendar Day of the month and the Penultimate Saturday of the month. For those Enrollees who choose or are Auto-Assigned a Health Plan between the Sunday after the Penultimate Saturday and before the last Calendar Day of the month, Enrollment in a Health Plan will be effective on the first (1st) Calendar Day of the second (2nd) month after choice or Auto-assignment. 6.   The Agency or its Agent will notify the Health Plan of an Enrollee’s selection or assignment to a Health Plan. 7.   The Agency or it Agent will send a written confirmation notice to Enrollees identifying the chosen or Auto-Assigned Health Plan. If the Enrollee has not chosen a PCP, the confirmation notice will advise the Enrollee that a PCP will be chosen for him/her. Notice to the Enrollee will be made in writing and sent via Surface Mail. Notice to the Health Plan will be made via file transfer. 8.   Conditioned on continued eligibility, Mandatory Enrollees will have a Lock-In period of twelve (12) consecutive months. After an initial ninety (90) day change period, Mandatory Enrollees will only be able to disenroll from their Health Plan for Cause. The Agency or its Agent will notify Enrollees at least once every twelve (12) months, and at least sixty (60) Calendar Days prior to the date the Lock-In period ends (the Open Enrollment period), that they have the opportunity to change Health Plans. Enrollees who do not make a choice will be deemed to have chosen to remain with their current Health Plan, unless the current Health Plan no longer participates in Medicaid Reform. In this case, the Enrollee will be Auto-Assigned to a new Health Plan. 9.   The Agency or its Agent will automatically re-enroll an Enrollee into the Health Plan in which he or she was most recently enrolled if the Enrollee has a temporary loss of eligibility, defined for purposes of this Contract as less than 180 Calendar Days. In this instance, for Mandatory Potential Enrollee, the Lock-In period will continue as though there had been no break in eligibility, keeping the original twelve (12) month period. 10.   If a temporary loss of eligibility has caused the Enrollee to miss the Open Enrollment period, the Agency or its Agent will enroll the Enrollee in the Health Plan in which he or she was enrolled prior to the loss of eligibility. The Enrollee will have ninety (90) Calendar Days to disenroll without Cause. 11.   The State will issue a Medicaid identification (ID) number to a newborn upon notification from the Health Plan, the hospital, or other authorized Medicaid provider, consistent with the unborn activation process. 12.   The Agency or its Agent will notify Enrollees of their right to request Disenrollment as follows: a. For Cause at any time, or b. Without Cause, at the following times:   (1) During the ninety (90) days following the Enrollee's initial Enrollment, or the date the Agency or its Agent sends the Enrollee notice of the enrollment, whichever is later;   (2) At least every twelve (12) months;   (3) If the temporary loss of Medicaid eligibility has caused the Enrollee to miss the Open Enrollment period; or (4)   When the Agency or its Agent grants the Enrollee the right to terminate Enrollment without Cause. The Agency or its Agent determines the Enrollee's right to terminate Enrollment on a case-by-case basis. (5)   If the individual chooses to opt out and enroll in their employer-sponsored health insurance plan. 13.   The Agency or its Agent will process all Disenrollments from the Health Plan. The Agency or its Agent will make final determinations about granting Disenrollment requests and will notify the Health Plan via file transfer and the Enrollee via Surface Mail of any Disenrollment decision. Enrollees dissatisfied with an Agency determination may have access to the Medicaid Fair Hearing process. 14.   When Disenrollment is necessary because an Enrollee loses Medicaid eligibility, Disenrollment shall be immediate. 15.   The Agency and/or its Agent shall determine the activities and behaviors that qualify for contributions to the individual’s Enhanced Benefit Account. 16.   The Agency will conduct periodic monitoring of the Health Plan’s operations for compliance with the provisions of the Contract and applicable federal and State laws and regulations. D.   General Responsibilities of the Health Plan    1.   The Health Plan shall comply with all provisions of this Contract and its amendments, if any, and shall act in good faith in the performance of the Contract's provisions. The Health Plan shall develop and maintain written policies and procedures to implement all provisions of this Contract. The Health Plan agrees that failure to comply with all provisions of this Contract shall result in the assessment of penalties and/or termination of the Contract, in whole or in part, as set forth in this Contract. 2.   The Health Plan shall comply with all pertinent Agency rules in effect throughout the duration of the Contract. 3.   The Health Plan shall comply with all current Florida Medicaid Handbooks ("Handbooks") as noticed in the Florida Administrative Weekly ("FAW"), or incorporated by reference in rules relating to the provision of services set forth in Section V Covered Services, and Section VI, Behavioral Health Care, except where the provisions of the Contract alter the requirements set forth in the Handbooks promulgated in the Florida Administrative Code (FAC) unless a customized benefit package has been certified by the Agency. In addition, the Health Plan shall comply with the limitations and exclusions in the Handbooks, unless otherwise specified by this Contract. In no instance may the limitations or exclusions imposed by the Health Plan be more stringent than those specified in the Handbooks, unless authorized in the Customized Benefit Package by the Agency. The Health Plan may not arbitrarily deny or reduce the amount, duration or scope of a required service solely because of the diagnosis, type of illness, or condition. The Health Plan may exceed Handbook limits by offering Expanded Services, as described in Section V, Covered Services or through its approved Customized Benefit package. 4.   The Capitated PSN may only choose to offer a Specialty Plan for Medicaid Recipients in:   a. Temporary Assistance to Needy Families (TANF) eligibility category;   b. Supplemental Security Income (SSI) eligibility category; or   c. Children with Chronic Conditions. 5.   The Health Plan may offer Expanded Services, as described in Section V, Covered Services to Enrollees, in addition to the required services and Quality Enhancements. The Health Plan shall define with specificity its Expanded Services in regards to amount, duration and scope, and obtain approval, in writing, by the Agency prior to implementation. 6.   This Contract including all attachments and exhibits, represents the entire agreement between the Health Plan and the Agency and supersedes all other contracts between the parties when it is executed by duly authorized signatures of the Health Plan and the Agency. Correspondence and memoranda of understanding do not constitute part of this Contract. In the event of a conflict of language between the Contract and the attachments, the provisions of the Contract shall govern. The Agency reserves the right to clarify any contractual relationship in writing and such clarification shall govern. Pending final determination of any dispute over any Agency decision, the Health Plan shall proceed diligently with the performance of its duties as specified under the Contract and in accordance with the direction of the Agency's Division of Medicaid. 7.   The Health Plan shall have a Quality Improvement program that ensures enhancement of quality of care and emphasizes improving the quality of patient outcomes. The Agency may restrict the Health Plan’s Enrollment activities if the Health Plan does not meet acceptable Quality Improvement and performance indicators, based on HEDIS reports and other outcome measures to be determined by the Agency. Such restrictions may include, but shall not be limited to, the termination of mandatory assignments. 8.   The Health Plan must demonstrate that it has adequate knowledge of Medicaid programs, provision of health care services, disease management initiatives, medical claims data, and the capability to design and implement cost savings methodologies. The Health Plan must demonstrate the capacity for financial analyses, as necessary to fulfill the requirements of this Contract. Additionally, the Health Plan must meet all requirements for doing business in the State of Florida. 9.   The Health Plan may be required to provide to the Agency or its Agent information or data that is not specified under this Contract. In such instances, and at the direction of the Agency, the Health Plan shall fully cooperate with such requests and furnish all information in a timely manner, in the format in which it is requested. The Health Plan shall have at least thirty (30) Calendar Days to fulfill such ad hoc requests. 10.   The Health Plan shall fully cooperate with, and provide necessary data to, the Agency and its Agent for the design, management, operations and monitoring of the Enhanced Benefits Program. 11.   A Health Plan, who accepts the Comprehensive Component of the Capitation Rate only, shall continue to provide all Covered Services to each Enrollee, who reaches the Catastrophic Component Threshold. The Health Plan shall continue to apply its QM and UM program components, as well as other administrative policies and protocols to the delivery of care and services to the Enrollees who meet the threshold. The Health Plan may submit documentation for reimbursement for Covered Services costs as outlined in Section XIII., Method of Payment, subsection D. Claims Payment for Health Plans Providing the Comprehensive Component Only. 12.   When the cost of an Enrollee’s Covered Services reaches the Benefit Maximum of $550,000 in a Contract Year, the Health Plan shall assist the Enrollee in obtaining necessary health care services in the community. The Health Plan shall continue to coordinate the care received by the Enrollee in the community. The Health Plan shall resume all responsibilities for the provision of Covered Services at the beginning of the Contract Year (September 1) following the year in which the Maximum Benefit was reached by the Enrollee. 13.   Health Maintenance Organizations and other licensed managed care organizations shall enroll all network providers with the Agency’s Fiscal Agent, no later than November 30, 2006, using the Agency’s streamlined Provider Enrollment process. All Capitated PSNs shall use the streamlined Provider Enrollment process to enroll network providers prior to contract execution. 14.   The Health Plans shall collect and submit Encounter Data for each Contract Year in the format required by the Agency and within the time frames specified by the Agency. An encounter guide along with technical assistance will be forthcoming. At a minimum the Health Plans shall be responsible for the following: a.   Health Plans shall collect and submit to the Agency or its designee, enrollee service level encounter data for all covered services. b.   Encounter data shall be submitted following HIPAA standards, namely the ANSI X12N 837 Transaction formats (P - Professional, I - Institutional, and D - Dental), and the National Council for Prescription Drug Programs NCPDP format (for Pharmacy services). c.   All covered services rendered to health plan enrollees shall result in the creation of an encounter record. REMAINDER OF PAGE INTENTIALLY LEFT BLANK   -------------------------------------------------------------------------------- Section III Eligibility and Enrollment A.   Eligibility   The following Populations represent broad categories that contain multiple eligibility groups. Certain exceptions may apply within the broad categories and will be determined by the Agency. 1.   Mandatory Populations The categories of eligible recipients authorized to be enrolled in the Health Plan are: Low Income Families and Children; Sixth Omnibus Budget Reconciliation Act (SOBRA) Children; Supplemental Security Income (SSI) Medicaid Only, Refugees, and the Meds AD population. Title XXI MediKids are eligible for enrollment in the plan in accordance with section 409.8132, F.S. Except as otherwise specified in this contract, Title XXI MediKids eligible participants are entitled to the same conditions and services as currently eligible Title XIX Medicaid beneficiaries. Women enrolled in the plan who change eligibility categories to the SOBRA eligibility category due to the pregnancy will remain eligible for enrollment in the plan. 2.   Voluntary Populations The following categories describe beneficiaries who may enroll in a health plan but are not required to do so: a. Foster care Children/Adolescents; b. Individuals diagnosed with developmental disabilities, as defined by the Agency; c. Children with chronic conditions who are eligible to participate in the Children’s Medical Services Program or a Specialty Plan for children with chronic conditions but not enrolled in the program; d.  Individuals with Medicare coverage (e.g. dual eligible individuals); and e. Children and adolescents who have an open case for services in the Department of Children and Families’ HomeSafenet database system. 3.   Excluded Populations The following categories describe Medicaid Recipients who are not eligible to enroll in a Health Plan: a. Pregnant women who have not enrolled in Medicaid Reform prior to the effective date of their SOBRA eligibility; b. Medicaid Recipients who, at the time of application for Enrollment and/or at the time of Enrollment, are domiciled or residing in an institution, including nursing facilities (and have been CARES assessed), sub-acute inpatient psychiatric facility for individuals under the age of 21, or an Intermediate Care Facility/Developmentally Disabled (ICF-DD); c. Medicaid Recipients whose Medicaid eligibility was determined through the medically needy program. d. Qualified Medicare Beneficiaries ("QMBs"), Special Low Income Medicare Beneficiaries (SLMBs), or Qualified Individuals at Level 1 (QI-1s). e. Medicaid Recipients who have other creditable health-care coverage, such as TriCare or a private health maintenance organization (HMO). f. Medicaid Recipients who reside in the following: (1) Residential commitment programs/facilities operated through the Department of Juvenile Justice (DJJ); (2) Residential group care operated by the Family Safety & Preservation Program of the DCF; (3) Children's residential treatment facilities purchased through the Substance Abuse & Mental Health District ("SAMH") Offices of the DCF (also referred to as Purchased Residential Treatment Services - "PRTS"); (4) SAMH residential treatment facilities licensed as Level I and Level II facilities; and (5) Residential Level I and Level II substance abuse treatment programs, as described in Sections 65D-30.007(2)(a) and (b), F.A.C. g. Medicaid Recipients participating in the Family Planning waiver. h. Participants in the Sub-acute Inpatient Psychiatric Program ("SIPP"). i. Title XXI-funded children with chronic conditions who are enrolled in Children’s Medical Services Network. j. Women eligible for Medicaid due to breast and/or cervical cancer. k. Individuals eligible under a hospice-related eligibility group. B.   Enrollment 1.   General Provisions a. Only Medicaid Recipients who are included in the mandatory or voluntary group and living in counties with authorized Health Plans are eligible to enroll and receive services from the Health Plan. b. The Agency or its Agent shall be responsible for Enrollment, including Enrollment into a Health Plan, Disenrollment, and outreach and education activities. The Health Plan shall coordinate with the Agency and its Agent as necessary for all Enrollment and Disenrollment functions. c.  The Health Plan shall accept Medicaid Recipients without restriction and in the order in which they enroll. The Health Plan shall not discriminate against Medicaid Recipients on the basis of religion, gender, race, color, age, or national origin, and shall not use any policy or practice that has the effect of discriminating on the basis of religion, gender, race, color, or national origin, or on the basis of health, health status, pre-existing condition, or need for health care services. d. The Health Plan shall accept new Enrollees through-out the Contract period up to the authorized maximum enrollment levels approved in Attachment I. 2.   Enrollment in a Specialty Plan Enrollment in a plan authorized to serve individuals diagnosed with HIV/AIDS or Children with Chronic Conditions will be limited to individuals in a mandatory or voluntary population who are diagnosed with such a condition and their family members. For a specialty plan for children with chronic conditions, only sibling family members under the age of 18 years of age may enroll when an eligible sibling is enrolled. 3.   Enrollment with a Primary Care Provider (PCP) a. The Health Plan shall offer each Enrollee a choice of PCPs. After making a choice, each Enrollee shall have a single PCP. b. The Health Plan shall assign a PCP to those Enrollees who did not choose a PCP at the time of Health Plan selection. The Health Plan shall take into consideration the Enrollee's last PCP (if the PCP is known and available in the Health Plan's network), closest PCP to the Enrollee's home address, ZIP code location, keeping Children/Adolescents within the same family together, age (adults versus Children/Adolescents) and gender (OB/GYN). c. The Health Plan shall provide written notice via Surface Mail to the Enrollees, by the first day of the Enrollee's enrollment, of the following: (1) The Enrollee's PCP assignment; (2) The Enrollee's ability to choose a different PCP; (3) A list of Participating Providers from which to make a choice; and   (4) The procedures for changing PCPs. d. The Health Plan shall permit Enrollees to change PCPs at any time. e. The Health Plan shall assign all Enrollees that are reinstated after a temporary loss of eligibility to the PCP who was treating them prior to loss of eligibility, unless the Enrollee specifically requests another PCP, the PCP no longer participates in the Health Plan or is at capacity, or the Enrollee has changed geographic areas. 4.   Newborn Enrollment a. The Health Plan shall utilize the unborn activation process to facilitate enrollment and shall be responsible for newborns from the date they are enrolled in the Health Plan. b. Upon unborn activation, the newborn shall be enrolled in the Health Plan in which his/her mother was enrolled during the next enrollment cycle. c. Newborn Enrollment shall occur through the following procedures: (1) Upon identification of an Enrollee's pregnancy, the Health Plan shall immediately notify DCF of the pregnancy and any relevant information known (i.e., due date and gender). The Health Plan must provide this notification by completing the DCF-ES 2039 Form and submitting the completed form to DCF. The Health Plan shall indicate its name and number as the entity initiating the referral. The DCF-ES 2039 form is located on the Medicaid web site: http://www.fdhc.state.fl.us/Medicaid/Newborn. (2) DCF will generate a Medicaid ID number and the unborn child will be added to the Medicaid file. This information will be transmitted to the Medicaid Fiscal Agent. The Medicaid ID number will remain inactive until after the child is born. (3) The Health Plan shall comply with all requirements set forth by the Agency or its Agent related to Unborn Activation (see Policy Transmittal 06-02, Unborn Activation Process). To ensure the prompt Enrollment of newborns, the Health Plan shall ensure that the form DCF-ES 2039 is completed and submitted, via electronic submission, to the local DCF Economic Self-Sufficiency Services Office immediately upon the birth of the child. If the hospital is not a Participating Hospital, the Plan must submit Form 2039 to DCF. With regard to Participating Hospitals, the Plan must include, as part of its Participating Hospital Agreement, a clause that states whether the Plan or the Participating Hospital will complete the Form 2039 for all who lack an unborn record. (4) Upon notification that a pregnant Enrollee has presented to the Hospital for delivery, the Health Plan shall inform the Hospital, the pregnant Enrollee’s attending physician and the newborn’s attending and consulting physicians that the newborn is an Enrollee only if the Health Plan has verified that the newborn has an unborn record on the system that is awaiting activation. At this time the Health Plan shall initiate the Unborn Activation process. (5) Upon activation, the newborn shall be enrolled in the Health Plan in which his/her mother was enrolled during the month of birth.   5.   Enrollment Cessation The Health Plan may request that the Agency halt or reduce Enrollment temporarily if continued full Enrollment would exceed its capacity to provide required services under the Contract. The Agency may also limit Health Plan Enrollments when such action is considered to be in the Agency's best interest. 6.   Enrollment Notice a. Prior to or upon Enrollment, the Health Plan shall provide the following information to all new Enrollees: (1) A written notice providing the actual date of Enrollment, and the name, telephone number and address of the Enrollee’s PCP assignment. (2) Notification that Enrollees can change their Health Plan selection, subject to Medicaid limitations. (3) Enrollment materials regarding PCP choice as described in Section III, B. (4) New Enrollee Materials as described in Section IV.   C.   Disenrollment   1.   General Provisions a. If the Contract is renewed, the Enrollment status of all Enrollees shall continue uninterrupted. b. The Health Plan shall ensure that it does not restrict the Enrollee's right to disenroll voluntarily in any way. c. The Health Plan or its agents shall not provide or assist in the completion of a Disenrollment request or assist the Agency’s Choice Counselor/Enrollment Broker in the Disesnrollment process. d. The Health Plan shall ensure that Enrollees that are disenrolled and wish to file an appeal have the opportunity to do so. All Enrollees shall be afforded the right to file an appeal except for the following reasons for Disenrollment: (1) Moving out of the Service Area; (2) Loss of Medicaid eligibility; and (3) Enrollee death. e. An Enrollee may submit to the Agency or its Agent a request to disenroll from the Health Plan without Cause during the ninety (90) Calendar Day change period following the date of the Enrollee's initial Enrollment with the Health Plan, or the date the Agency or its Agent sends the Enrollee notice of the Enrollment, whichever is later. An Enrollee may request Disenrollment without Cause every twelve (12) months thereafter. f. The effective date of an approved Disenrollment shall be the last Calendar Day of the month in which Disenrollment was made effective by the Agency or its Agent, but in no case shall Disenrollment be later than the first (1st) Calendar Day of the second (2nd) month following the month in which the Enrollee or the Health Plan files the Disenrollment request. If the Agency or its Agent fails to make a Disenrollment determination within this timeframe, the Disenrollment is considered approved. g. The Health Plan shall keep a daily written log or electronic documentation of all oral and written Enrollee Disenrollment requests and the disposition of such requests. The log shall include the following: (1) The date the request was received by the Health Plan; (2) The date the Enrollee was referred to the Agency's Choice Counselor/Enrollment Broker or the date of the letter advising the Enrollee of the Disenrollment procedure, as appropriate; and (3) The reason that the Enrollee is requesting Disenrollment. h. The Health Plan shall send to the Agency or its Agent a monthly summary report of all submitted Disenrollment requests. This report must specify the reason for such Disenrollment requests. It shall be reconciled to the Health Plan Enrollment Report processed by the Agency or its Agent for the applicable month and shall be reviewed by the Agency or its Agent for compliance with acceptable reasons for Disenrollment. The Agency may reinstate Enrollment for any Enrollee whose reason for Disenrollment is not consistent with established guidelines. 2.   Cause for Disenrollment a. A Mandatory Enrollee may request Disenrollment from the Health Plan for Cause at any time. Such request shall be submitted to the Agency or its Agent. The following reasons constitute Cause for Disenrollment from the Health Plan:   (1) The Enrollee moves out of the Service Area or his/her address is incorrect.   (2) The Provider is no longer with the Health Plan.   (3) The Enrollee is excluded from enrollment.   (4) A substantiated marketing violation occurred.   (5) The Enrollee is prevented from participating in the development of his/her treatment plan.   (6) The Enrollee has an active relationship with a provider who is not on the Health Plan's panel, but is on the panel of another Health Plan.   (7) The Enrollee is in the wrong Health Plan due to an error.   (8) The Health Plan no longer participates in the county.   (9) The State has imposed intermediate sanctions upon the Health Plan, as specified in 42 CFR 438.702(a)(3).   (10) The Enrollee needs related services to be performed concurrently, but not all related services are available within the Health Plan network; or, the Enrollee's PCP has determined that receiving the services separately would subject the Enrollee to unnecessary risk.   (11) The Health Plan does not, because of moral or religious objections, cover the service the Enrollee seeks.   (12) The Enrollee missed his/her Open Enrollment due to a temporary loss of eligibility, defined as 180 days or less.   (13) Other reasons per 42 CFR 438.56(d)(2), including, but not limited to, poor quality of care; lack of access to services covered under the Contract; inordinate or inappropriate changes of PCPs; service access impairments due to significant changes in the geographic location of services; lack of access to Providers experienced in dealing with the Enrollee’s health care needs; or fraudulent Enrollment. b. Voluntary Enrollees may disenroll from the Health Plan at any time. 3.   Involuntary Disenrollment a. With proper written documentation, the following are acceptable reasons for which the Health Plan shall submit involuntary Disenrollment requests to the Agency: (1) Enrollee has moved out of the Service Area; (2) Enrollee death; (3) Determination that the Enrollee is ineligible for Enrollment based on the criteria specified in this Contract in Section III.A.3, Excluded Populations, and (4) Fraudulent use of the Enrollee ID card. b. The Health Plan shall promptly submit such Disenrollment requests to the Agency. In no event shall the Health Plan submit the Disenrollment request at such a date as would cause the Disenrollment to be effective later than forty-five (45) Calendar Days after the Health Plan’s receipt of the reason for involuntary Disenrollment. The Health Plan shall ensure that involuntary Disenrollment documents are maintained in an identifiable Enrollee record. c. If the Health Plan submitted the Disenrollment request for one of the above reasons, the Health Plan shall verify that the information is accurate. d. If the Health Plan discovers that an ineligible Enrollee has been enrolled, then it shall request Disenrollment of the Enrollee and shall notify the Enrollee in writing that the Health Plan is requesting Disenrollment and the Enrollee will be disenrolled in the next Contract month, or earlier if necessary. Until the Enrollee is Disenrolled, the Health Plan shall be responsible for the provision of services to that Enrollee. e. On a monthly basis, the Health Plan shall review its ongoing Enrollment report (FLMR 8200-R0004) to ensure that all Enrollees are residing in the Health Plan’s authorized Service Area. For Enrollees with out-of-Service Area addresses on the Enrollment report, the Health Plan shall notify the Enrollee in writing that the Enrollee should contact the Choice Counselor/Enrollment Broker to choose another Health Plan, or other managed care option available in the Enrollee’s new Service Area, and that the Enrollee will be Disenrolled. f. The Health Plan may submit involuntary Disenrollment requests to the Agency or its Agent for assigned Enrollees that meet both of the following requirements: (1) The Health Plan was unable to contact the Enrollee by mail, phone, or personal visit within the first three (3) months of Enrollment; and (2) The Enrollee did not use Health Plan services within the first three (3) months of Enrollment. Such Disenrollments shall be submitted in accordance with Section XII, Reporting Requirements, of this Contract. The Health Plan shall maintain documentation of its inability to contact the Enrollee and that it has no record of providing services to the Enrollee, or to another family unit member, in the Enrollee's file. g. The Health Plan may submit an involuntary Disenrollment request to the Agency or its Agent after providing to the Enrollee at least one (1)verbal warning and at least one (1) written warning of the full implications of his/her failure of actions:   (1) For an Enrollee who continues not to comply with a recommended plan of health care or misses three (3) consecutive appointments within a continuous six (6) month period. Such requests must be submitted at least sixty (60) Calendar Days prior to the requested effective date.   (2) For an Enrollee whose behavior is disruptive, unruly, abusive or uncooperative to the extent that his or her Enrollment in the Health Plan seriously impairs the organization's ability to furnish services to either the Enrollee or other Enrollees. This Section does not apply to Enrollees with mental health diagnoses if the Enrollee’s behavior is attributable to the mental illness. h. The Agency may approve such requests provided that the Health Plan documents that attempts were made to educate the Enrollee regarding his/her rights and responsibilities, assistance which would enable the Enrollee to comply was offered through case management, and it has been determined that the Enrollee’s behavior is not related to the Enrollee’s medical or behavioral condition. All requests will be reviewed on a case-by-case basis and subject to the sole discretion of the Agency. Any request not approved is final and not subject to dispute or appeal. i. The Health Plan shall not request Disenrollment of an Enrollee due to: (1)   Health diagnosis; (2)   Adverse changes in an Enrollee’s health status; (3)   Utilization of medical services; (4)   Diminished mental capacity; (5)   Pre-existing medical condition; (6)   Uncooperative or disruptive behavior resulting from the Enrollee’s special needs (with the exception of C.3.g.2 above); (7)   Attempt to exercise rights under the Health Plan's Grievance System; or (8)   Request of one (1) PCP to have an Enrollee assigned to a different Provider out of the Health Plan. REMAINDER OF PAGE INTENTIONALLY LEFT BLANK   -------------------------------------------------------------------------------- Section IV Enrollee Services and Marketing A. Enrollee Services 1.   General Provisions a. The Health Plan shall have written policies and procedures for the provision of Enrollee Services, as specified in this Contract. Such policies and procedures shall be submitted to the Agency for approval. b. The Health Plan shall ensure that Enrollees are aware of their rights and responsibilities, the role of PCPs, how to obtain care, what to do in an emergency or urgent medical situation, how to request a Grievance, Appeal or Medicaid Fair Hearing, how to report suspected Fraud and Abuse, procedures for obtaining required Behavioral Health Services, including any additional Health Plan phone numbers to be used for obtaining services, and all other requirements and Benefits of the Health Plan. c. The Health Plan shall have the capability to answer Enrollee inquiries via written materials, telephone, electronic transmission, and face-to-face communication. d. Mailing envelopes for Enrollee materials shall contain a request for address correction. For Enrollees whose Enrollee Materials are returned to the Health Plan as undeliverable, the Health Plan shall use and maintain in a file a record of all of the following methods to contact the Enrollee:   (1) Telephone contact at the telephone number obtained from the local telephone directory, directory assistance, city directory, or other directory.   (2) Telephone contact with DCF and Families Economic Self-Sufficiency Services Office staff to determine if they have updated address information and telephone number.   (3) Routine checks (at least once a month for the first three (3) months of Enrollment) on services or claims authorized or denied by the Health Plan to determine if the Enrollee has received services, and to locate updated address and telephone number information. e. New Enrollee materials are not required for a former Enrollee who was disenrolled because of the loss of Medicaid eligibility and who regains his/her eligibility within 180 days and is automatically reinstated as a Health Plan Enrollee. In addition, unless requested by the Enrollee, new Enrollee materials are not required for a former Enrollee subject to Open Enrollment who was disenrolled because of the loss of Medicaid eligibility, who regains his/her eligibility within 6 months of his/her managed care enrollment, and is reinstated as a Health Plan Enrollee. A notation of the effective date of the reinstatement is to be made on the most recent application or conspicuously identified in the Enrollee's administrative file. Enrollees, who were previously enrolled in a Health Plan, lose and regain eligibility after 180 days, will be treated as new Enrollees. f. The Health Plan shall notify, in writing, each person who is to be reinstated, of the effective date of the reinstatement and the assigned primary care physician. The notifications shall distinguish between Enrollees subject to Open Enrollment and Enrollees not subject to Open Enrollment and shall include information regarding change procedures for cause, or general Health Plan change procedures through the Agency’s toll-free Choice Counselor/Enrollment Broker telephone number as appropriate. The notification shall also instruct the Enrollee to contact the Health Plan if a new Enrollee card and/or a new Enrollee handbook are needed. The Health Plan shall provide such notice to each affected Enrollee by the first (1st) Calendar Day of the month following the Health Plan’s receipt of the notice of reinstatement. 2.   Requirements for Written Materials a. The Health Plan shall make all written materials available in alternative formats and in a manner that takes into consideration the Enrollee's special needs, including those who are visually impaired or have limited reading proficiency. The Health Plan shall notify all Enrollees and Potential Enrollees that information is available in alternative formats and how to access those formats. b. The Health Plan shall make all written material available in English, Spanish, and all other appropriate foreign languages. The appropriate foreign languages comprise all languages in the Health Plan Service Area spoken by approximately five percent (5%) or more of the total population. The Health Plan shall provide, free of charge, interpreters for Potential Enrollees or Enrollees whose primary language is a foreign language. c. The Health Plan shall provide Enrollee information in accordance with 42 CFR 438.10, which addresses information requirements related to written and oral information provided to Enrollees, including: languages; format; Health Plan features, such as benefits, cost sharing, service area, Provider network, and physician incentive plans; Enrollment and Disenrollment rights and responsibilities; Grievance Systems; and Advance Directives. The Health Plan shall notify Enrollees on at least an annual basis of their right to request and obtain information in accordance with the above regulations. d. All written materials shall be at or near the fourth (4th) grade comprehension level. Suggested reference materials to determine whether the Health Plan’s written materials meet this requirement are:   (1) Fry Readability Index;   (2) PROSE The Readability Analyst (software developed by Education Activities, Inc.);   (3) Gunning FOG Index;   (4) McLaughlin SMOG Index;   (5) The Flesch-Kincaid Index; or   (6) Other software approved by the Agency. e. The Health Plan shall provide written notice to the Agency of any changes to any written materials provided to Enrollees. Written materials shall be provided to the Agency at least forty-five (45) Calendar Days prior to the effective date of the change. Written notice of such changes shall be provided to Enrollees at least thirty (30) days prior to the effective date of the change. f. All written materials, including any materials for the Health Plan Web site, shall be submitted to the Agency for approval prior to being distributed. 3.   New Enrollee Materials Immediately upon the assigned Enrollees Enrollment, the Health Plan shall mail to the new Enrollee: the Enrollee Handbook; the Provider Directory; the Enrollee Identification; and the following additional materials: a. A request for the following information to be updated: Enrollee’s name, address (home and mailing), county of residence, and telephone number; b. A completed, signed and dated release form authorizing the Health Plan to release medical information to the federal and State governments or their duly appointed agents; and, current behavioral health care provider information; c. A notice that Enrollees who lose eligibility and are disenrolled shall be automatically re-Enrolled in the Health Plan if eligibility is regained within 180 days; d. Each mailing shall include a postage paid, pre-addressed return envelope; and e. The initial mailing may be combined with the PCP assignment notification. Each mailing shall be documented in the Health Plan’s records. 4.   Enrollee Handbook Requirements a. The Enrollee services handbook shall include the following information:   (1) Table of Contents;   (2) Terms and conditions of Enrollment including the reinstatement process;   (3) Description of the Open Enrollment process;   (4) Description of services provided, including limitations and general restrictions on Provider access, exclusions and out-of-network use;   (5) Procedures for obtaining required services, including second opinions, and authorization requirements, including those services available without Prior Authorization;   (6) Toll-free telephone number of the appropriate Area Medicaid Office;   (7) Emergency Services and procedures for obtaining services both in and out of the Health Plan’s Service Area, including explanation that Prior Authorization is not required for Emergency Services, the locations of any emergency settings and other locations at which Providers and Hospitals furnish Emergency Services and Post-Stabilization Care Services, and use of the 911-telephone system or its equivalent;   (8) The extent to which, and how, after-hours and emergency coverage is provided, and that the Enrollee has a right to use any Hospital or other setting for Emergency Care;   (9) Procedures for Enrollment, including Enrollee rights and protections; (10) A notice advising Enrollees how to change PCPs; (11) Grievance System components and procedures; (12) Enrollee rights and procedures for Disenrollment, including the toll-free telephone number for the Agency’s contracted Choice Counselor/Enrollment Broker; (13) Procedures for filing a request for Disenrollment for Cause; (14) Information regarding newborn enrollment, including the mother’s responsibility to notify the Health Plan and the mother’s DCF case worker of the newborn’s birth and selection of a PCP; (15) Enrollee rights and responsibilities, including the extent to which, and how, Enrollees may obtain services from out-of-network providers and the right to obtain family planning services from any participating Medicaid provider without Prior Authorization for such services, and other provisions in accordance with 42 CFR 438.100; (16) Information on emergency transportation and non-emergency transportation, counseling and referral services available under the Health Plan; and how to access these services; (17) Information that interpretation services and alternative communication systems are available, free of charge, for all foreign languages, and how to access these services; (18) Information that Post-Stabilization Services are provided without Prior Authorization and other Post-Stabilization Care Services rules set forth in 42 CFR 422.113(c); (19) Information that services will continue upon appeal of a suspended authorization and that the Enrollee may have to pay in case of an adverse ruling; (20) Information regarding health care Advance Directives pursuant to Chapter 765, F.S., and 42 CFR 422.128; (21) Cost sharing for the Enrollee, if any; (22) Instructions explaining how Enrollees may obtain information from the Health Plan regarding quality performance indicators, including beneficiary information; (23) How and where to access any benefits that are available under the Medicaid State Plan but are not covered under the Contract, including any cost sharing; (24) Any restrictions on the Enrollee's freedom of choice among network Providers; (25) A release document for each Enrollee authorizing the Health Plan to release medical information to the federal and State governments or their duly appointed Agents. (26) A notice that clearly states that the Enrollee may select an alternative behavioral health case manager or direct service provider within the Health Plan, if one is available; (27) A description of Behavioral Health Services provided, including limitations, exclusions and out-of-network use; (28) An explanation that Enrollees may choose to have all family members served by the same PCP or they may choose different PCPs based on each Enrollee’s needs (29) A description of Emergency Behavioral Health Services procedures both in and out of the Health Plan's Service Area; (30) Information to assist the Enrollee in assessing a potential behavioral health problem; (31) Procedures for reporting fraud, abuse and overpayment; and (32) Information regarding HIPAA relative to the Enrollee’s personal health information (PHI). b. For a counseling or referral service that the Health Plan does not cover because of moral or religious objections, the Health Plan need not furnish information on how and where to obtain the service. c. Written information regarding Advance Directives provided by the Health Plan must reflect changes in State law as soon as possible, but no later than ninety (90) days after the effective date of the change. d. The Health Plan, in its Enrollee handbook and provider manual, shall clearly specify required procedural steps in the Grievance process, including the address, telephone number and office hours of the Grievance staff. The Health Plan shall specify phone numbers for a grievant to call to present a Grievance or to contact the Grievance staff. Each phone number shall be toll-free within the grievant’s geographic area and provide reasonable access to the Health Plan without undue delays. The Grievance System must provide an adequate number of phone lines to handle incoming Grievances and Appeals. e. The Health Plan shall make information available upon request regarding the structure and operation of the health plan and any physician incentive plans, as set forth in 42 CFR 438.10(g)(3). 5.   Provider Directory a. The Health Plan shall mail a Provider Directory to all new Enrollees, including Enrollees re-Enrolled after an Open Enrollment period. This Provider Directory shall be the most current printed Directory with an addendum providing the most up to date Provider information. The Health Plan shall update and re-print the Provider Directory at least annually. The Provider Directory shall include names, locations, office hours, telephone numbers of, and non-English languages spoken by, current Health Plan Providers. This includes at a minimum, information on PCPs, specialists, pharmacies, hospitals, certified nurse midwives and licenses midwives, and Ancillary Providers. The Provider Directory shall also identify Providers that are not accepting new patients. b. The Health Plan shall maintain an on-line Provider Directory. Such on-line Provider Directory shall be updated at least monthly. The Health Plan shall file an attestation to this effect with the Bureau of Managed Health Care and the Bureau of Health Systems Development. c. If the Health Plan elects to use a more restrictive pharmacy network than the network available to Medicaid Recipients enrolled in the non-Medicaid Reform FFS program, then the directory shall include the names of the pharmacies. If all pharmacies that are part of a chain and are within the Health Plan's Service Area are under contract with the Health Plan, the Provider Directory need only list the chain name. d. In accordance with section 1932(b)(3) of the Social Security Act, the Provider Directory shall include an advisement that some Providers may not perform certain services based on religious or moral beliefs. e. Lists of Providers shall be arranged alphabetically, showing the Provider's name and specialty, and separately, by specialty, in alphabetical order. f. List of the Health Plan's behavioral health service centers, including city and county. 6.   Enrollee ID Card a. Immediately upon the Enrollee’s enrollment with the Health Plan, the Health Plan shall mail, via Surface Mail, an Enrollee Identification (ID) Card. The Enrollee ID Card shall include, at a minimum:   (1) The Enrollee's name and Medicaid ID number; (2) The Health Plan's name, address and Enrollee services number;  and   (3) A telephone number that a non-contracted provider may call for billing information. 7.   Toll-free Help Line a. The Health Plan shall operate a toll-free telephone help line. Such help line shall respond to all areas of Enrollee inquiry. b. If the Health Plan has authorization requirements for prescribed drug services and is subject to the Hernandez Settlement Agreement (HSA), the Health Plan may allow the telephone help line staff to act as Hernandez Ombudsman, pursuant to the terms of the HSA, so long as the Health Plan maintains a Hernandez Ombudsman Log. The Health Plan may maintain the Hernandez Ombudsman Log as part of the Health Plan’s telephone help line log, so long as the Health Plan can access the Hernandez Ombudsman Log information separately for reporting purposes. The log shall contain information as described in Section V.D.14, Prescribed Drug Services, of this Contract. b. The Health Plan shall have telephone call policies and procedures that shall include requirements for staffing, personnel, hours of operation, call response times, maximum hold times, and maximum abandonment rates, monitoring of calls via recording or other means, and compliance with standards. c. The telephone helpline shall handle calls from non-English speaking Enrollees, as well as calls from Enrollees who are hearing impaired. d. The telephone help line shall be fully staffed between the hours of 8:00 a.m. and 7:00 p.m., EDT or EST, as appropriate, Monday through Friday, excluding State holidays. The telephone help line staff shall be trained to respond to Enrollee questions in all areas, including but not limited to, Covered Services, the Provider network, and non-emergency transportation. e. The Health Plan shall develop performance standards and monitor telephone help line performance by recording calls and employing other monitoring activities. Such standards shall be submitted and approved by the Agency. At a minimum, the standards shall require that, measured on a monthly basis:   (1) One hundred percent (100%) of all calls are answered within four (4) rings (these calls may be placed in a queue);   (2) The wait time in the queue shall not exceed three (3) minutes;   (3) The Blocked Call rate does not exceed one percent (1%); and   (4) The rate of Abandoned Calls does not exceed five percent (5%). f. The Health Plan shall have an automated system available between the hours of 7:00 p.m. and 8:00 a.m., EDT or EST, as appropriate, Monday through Friday and at all hours on weekend and holidays. This automated system must provide callers with operating instructions on what to do in case of an emergency and shall include, at a minimum, a voice mailbox for callers to leave messages. The Health Plan shall ensure that the voice mailbox has adequate capacity to receive all messages. A Health Plan Representative shall return messages on the next Business Day. 8.   Cultural Competency a. In accordance with 42 CFR 438.206, the Health Plan shall have a comprehensive written Cultural Competency Plan describing how the Health Plan will ensure that services are provided in a culturally competent manner to all Enrollees, including those with limited English proficiency. The Cultural Competency Plan must describe how the Providers, Health Plan employees, and systems will effectively provide services to people of all cultures, races, ethnic backgrounds, and religions in a manner that recognizes values, affirms, and respects the worth of the individual Enrollees and protects and preserves the dignity of each. b. The Health Plan may distribute a summary of the Cultural Competency Plan to network Providers if the summary includes information on how the Provider may access the full Cultural Competency Plan on the Web site. This summary shall also detail how the Provider can request a hard-copy from the Health Plan at no charge to the Provider. 9.   Translation Services The Health Plan is required to provide oral translation services of information to any Enrollee who speaks any non-English language regardless of whether an Enrollee speaks a language that meets the threshold of a prevalent non-English language. The Health Plan is required to notify its Enrollees of the availability of oral interpretation services and to inform them of how to access oral interpretation services. Oral interpretation services are required for all Health Plan information provided to Enrollees and includes notices of Action. There shall be no charge to the Enrollee for translation services. B. Marketing 1.   General Provisions a. For each new Contract period, the Health Plan shall submit to the Agency for written approval, pursuant to section 409.912, F.S., its Marketing plan and all Marketing and pre-Enrollment materials no later than sixty (60) Calendar Days prior to Contract renewal, and for any changes in Marketing and pre-Enrollment materials during the re-contracting and renewal period, no later than sixty (60) Calendar Days prior to implementation. The Marketing materials shall be distributed in the Health Plan’s entire Service Area in accordance with 42 CFR 438.104. b. Marketing materials include, but are not limited to, all solicitation materials, forms, brochures, fact sheets, posters, lectures, ad copy for radio or television, Medicaid recruitment materials and presentations, Request for Benefit Information forms (previously known as pre-enrollment applications), etc. c. To announce a specific event, the Health Plan shall submit a request to market pursuant to Section IV.B.4, Approval Process, of this Contract, and shall include the announcement of the event that will be given out to the public. d. The Health Plan shall be responsible for developing and implementing a written plan designed to solicit Enrollment from Potential Enrollees and to control the actions of its Marketing staff. All of the Marketing policies set forth in this Contract apply to staff, Subcontractors, Health Plan volunteers and all persons acting for or on behalf of the Health Plan. All materials developed shall be governed by the requirements set forth in this Section. Additionally, the Health Plan is vicariously liable for any Marketing violations of its employees, agents or Subcontractors. e. The Health Plan shall limit its Market Area to residents of the Service Area and shall not market to residents of a Service Area not approved by the Agency. 2.   Prohibited Activities The Health Plan is prohibited from engaging in the following non-exclusive list of activities: a. In accordance with section 409.912 and 409.91211, F.S., practices that are discriminatory, including, but not limited to, attempts to discourage Enrollment or reenrollment on the basis of actual or perceived health status. b. Direct or indirect Cold Call Marketing for solicitation of Medicaid Recipients, either by door-to-door, telephone or other means, in accordance with section 4707 of the Balanced Budget Act of 1997, and section 409.912, F.S. c. Overly aggressive solicitation, such as repeated telephoning, continued recruitment after an offer for Enrollment is declined by a Medicaid Recipient, or similar techniques. Health Plan representatives shall not directly solicit Potential Enrollees for the purpose of enrolling in the Health Plan except as provided in Section IV.B.3., Permitted Activities. d. In accordance with section 409.912, F.S., activities that could mislead or confuse Medicaid Recipients, or misrepresent the Health Plan, its Marketing Representatives, or the Agency. No fraudulent, misleading, or misrepresentative information shall be used in Marketing, including information regarding other governmental programs. Statements that could mislead or confuse include, but are not limited to, any assertion, statement or claim (whether written or oral) that:   (1) The Medicaid Recipient must enroll in the Health Plan in order to obtain Medicaid, or in order to avoid losing Medicaid benefits;   (2) The Health Plan is endorsed by any federal, State or county government, the Agency, or CMS, or any other organization which has not certified its endorsement in writing to the Health Plan;   (3) Marketing Representatives are employees or representatives of the federal, State or county government, or of anyone other than the Health Plan or the organization by whom they are reimbursed;   (4) The State or county recommends that a Medicaid Recipient enroll with the Health Plan; and/or   (5) A Medicaid Recipient will lose benefits under the Medicaid program or any other health or welfare benefits to which the Recipient is legally entitled, if the Recipient does not enroll with the Health Plan. e. In accordance with section 409.912, F.S., granting or offering of any monetary or other valuable consideration for Enrollment, except as authorized by section 409.912, F.S. f. Offers of insurance, such as but not limited to, accidental death, dismemberment, disability or life insurance. g. Enlisting the assistance of any employee, officer, elected official or agent of the State in recruitment of Medicaid Recipients except as authorized in writing by the Agency. h. Offers of material or financial gain to any persons soliciting, referring or otherwise facilitating Medicaid Recipient Enrollment, except for authorized licensed Marketing Representatives. The Health Plan shall ensure that only licensed Marketing Representatives market the Health Plan to Medicaid Recipients. i. Giving away promotional items in excess of $1.00 retail value to attract attention. Items to be given away shall bear the Health Plan's name and shall only be given away at Health Fairs or other general Public Events. In addition, such promotional items must be offered to the general public and shall not be limited to Medicaid Recipients who indicate they will enroll in the Health Plan. j. In accordance with section 409.912, F.S., Marketing to Medicaid Recipients in State offices unless approved in writing and approved by the affected State Agency when solicitation occurs in the office of another State Agency. The Agency shall ensure that Marketing Representatives stationed in State offices market to Medicaid Recipients only in designated areas and in such a way as to not interfere with the Medicaid Recipients' activities in the State office. The Health Plan shall not use any other State facility, program, or procedure in the recruitment of Medicaid Recipients except as authorized in writing by the Agency. Request for approval of activities at State offices must be submitted to the Agency at least thirty (30) Calendar Days prior to the activity. k. Marketing face-to-face to assigned Enrollees or Medicaid Recipients unless the Enrollee or Recipient contacts the Health Plan and requests information. Upon such request the Health Plan shall notify the Choice Counselor/Enrollment Broker of such request, and the Health Plan shall keep documentation of such contacts and visits in the Enrollee’s file. l. Providing any gift, commission, or any form of compensation to the Choice Counselor/Enrollment Broker, including the Choice Counselor/Enrollment Broker's full-time, part-time or temporary employees and Subcontractors. m. The Health Plan shall not market, prior to the Enrollment, the incentives that shall be offered to the Enrollee as described in Section VIII.B.7., Incentive Programs. Marketing may describe the programs (not the incentives) that shall be offered (e.g., prenatal classes). The Health Plan may inform Enrollees once they are actually enrolled in the Health Plan about the specific incentives available. n. All activities included in section 641.3903, F.S. 3.   Permitted Activities The Health Plan may engage in the following activities under the supervision and with the written approval of the Agency: a. The Health Plan upon written approval of the Agency, may have a marketer in Provider offices as long as the Provider approves and the marketer provides information to the Potential Enrollee only upon request. In addition, the Health Plan and the Provider shall not require the Potential Enrollee to visit the marketer, nor shall the marketer approach the Potential Enrollee. No Sales Activities shall be allowed in Provider offices. b. The Health Plan may leave Request for Benefit Information (RBI) cards (as described in Section V, B.7) in Provider offices, at Public Events and Health Fairs. These cards may be completed by Potential Enrollees and delivered to the Health Plan or turned in at the Provider office. Information on the card is limited to name, address and telephone number of the Potential Enrollee and space for signature. A space to note a contact time may be provided. A follow up visit to the Potential Enrollee’s home may not occur prior to the referral being logged by the Health Plan’s regional or headquarters Enrollee services office. Twenty-four (24) hours or the next Business Day shall elapse after the request is logged before the home visit may occur. c. The Health Plan may market at State offices, Health Fairs and Public Events and contact thereafter, in person, Potential Enrollees who request further information about the Health Plan, in accordance with section 4707 of the BBA. The Health Plan shall submit, for review and approval by the Agency, its intent to market at Health Fairs and Public Events at least two (2) weeks prior to the event. The Health Plan shall obtain complete disclosure of information, in a format to be approved by the Agency, from each organization participating in a Health Fair or Public Event prior to the event. The information disclosure is only required when the Health Plan is the primary organizer of the Health Fair or Public Event. If the Health Plan has been invited by a community organization to be a sponsor of an event, the Health Plan shall provide the Agency with a copy of the invitation in lieu of the information disclosure. All disclosure information shall be sent to the Agency with the Health Plan’s request for approval of the event. d. The main purpose of a Health Fair or a Public Event shall not be Medicaid Health Plan marketing, but Medicaid Health Plan marketing may be provided at these events, subject to Agency rules and oversight. e. Upon the effective date of Enrollment, Health Plan marketing staff or other Health Plan staff may visit Enrollees in order to obtain completed new Enrollee materials. All such visits must be documented in the Enrollee's file. f. The Health Plan may leave Agency approved written materials (brochures or posters, etc) in Provider Offices, at Public Events, and at Health Fairs. g. Marketing face-to-face to Potential Enrollees may be allowed if the Potential Enrollee contacts the Health Plan’s headquarters or regional Enrollee services office directly to request a home visit. The Health Plan shall not allow the visit to the Potential Enrollee’s home to occur before the next Business Day or twenty-four (24) hours have elapsed since the request for the visit. The Health Plan must be able to provide evidence to the Agency that the twenty-four (24) hour or next Business Day requirement has been met. The Health Plan will be required, upon request by the Agency, to provide a log that shows how initial contact with the Potential Enrollee was made. Only Agency registered Marketing Representatives shall be allowed to make home visits. Each Health Plan shall make available to the Agency, as requested, a report of the number of home visits made by each Agency registered Marketing Representative to Potential Enrollee’s homes. 4.   Approval Process a. The Health Plan shall submit a detailed description of its Marketing plan and copies of all Marketing materials, the Health Plan or its Subcontractors plan to distribute, to the Agency for prior approval. This requirement includes, but is not limited to: posters, brochures, Web sites, and any materials that contain statements regarding the Benefit package and Provider network-related materials. Neither the Health Plan nor its Subcontractors shall distribute any Marketing materials without prior approval from the Agency. b. Health Fairs and Public Events shall be approved or denied by the Agency using the following process:   (1) A Health Plan shall submit its bi-monthly Marketing schedule to the Agency, two (2) weeks in advance of each month. The Marketing Schedule may be revised if a Health Plan provides notice to the Agency one (1) week prior to the Public Event or the Health Fair. The Agency may expedite this process as needed.   (2) The Agency will approve or deny the Health Plan's bi-monthly Marketing schedule and revision request no later than five (5) Business Days from receipt of the schedule and/or revision request.   (3) The Health Plan shall use the standard Agency format. Such format will include minimum requirements for necessary information. The Agency will explain in writing what is sufficient information for each requirement.   (4) The Agency will establish a statewide log to track the approval and disapproval of Health Fairs and Public Events.   (5) The Agency may provide verbal approvals or disapprovals to meet the five (5) Business Day requirement, but the Agency will follow up in writing with specific reasons for disapprovals within five (5) Business Days of verbal disapprovals. 5.   Provider Compliance The Health Plan shall ensure its health care Providers comply with the following Marketing requirements: a. Health care Providers may give out Health Plan brochures at Health Fairs or in their own offices comparing the Benefits of different Health Plans with which they contract. However, they cannot orally compare Benefits among Health Plans, unless Marketing Representatives from each Health Plan are present. b. Health care Providers may co-sponsor events, such as Health Fairs and cooperatively market and advertise with the Health Plan in indirect ways; such as television, radio, posters, fliers, and print advertisement. c. Health care Providers may announce a new affiliation with a Health Plan or give a list of Health Plans with which they contract to their patients. d. Health care Providers shall not furnish lists of their Medicaid Recipients to Health Plans with which they contract, or any other entity, nor can Providers furnish other Health Plans' membership lists to any Health Plan, nor can Providers take applications in their offices. 6.   Marketing Representatives a. The Health Plan shall not Subcontract with any brokerage firm or independent agent for purposes of Marketing. b. The Health Plan shall be required to register each Marketing Representative with the Agency. The registration shall consist of providing the Agency with the representative's name; address; telephone number; cellular telephone number; DFS license number; the names of all Medicaid Health Plans with which the Marketing Representative was previously employed; and the name of the Medicaid Health Plan with which the Marketing Representative is presently employed. c. The Health Plan shall provide the Agency, on a monthly basis, information on terminations of all Marketing Representatives. The Health Plan shall maintain and make available to the Agency upon request evidence of current licensure and contractual agreements with all Marketing Representatives used by the Health Plan to recruit Medicaid Recipients. d. The Health Plan shall report to DFS and the Agency any Marketing Representative who violates any requirements of this Contract, within fifteen (15) Calendar Days of knowledge of such violation. e. While Marketing, Marketing Representatives shall wear picture identification that includes their DFS license number and identifies the Health Plan represented. f. The Marketing Representative shall inform the Medicaid Recipient that the Representative is not an employee of the State and is not a Choice Counseling Specialist, but is a Representative of the Health Plan. g. The Health Plan shall not pay commission compensation, or shall recoup commissions paid, to Marketing Representatives for new Enrollees whose voluntary Disenrollment is effective within the first (1st) three (3) months of their initial Enrollment, unless the Disenrollment is due to the Enrollee moving out of the county in which the Health Plan has been authorized to operate. In addition, the Health Plan shall not pay commission compensation, or shall recoup commission paid, to Marketing Representatives for excluded Medicaid Recipients, per Section III.A.3, Excluded Populations, who were enrolled in error. A Marketing Representative's total monthly commission cannot exceed forty percent (40%) of the Marketing Representative's total monthly compensation, excluding benefits. h. The Health Plan shall instruct and provide initial and periodic training to its Marketing Representatives regarding the Marketing provisions of this Contract. i. The Health Plan shall implement procedures for background and reference checks for use in its Marketing Representative hiring practices. 7.   Request for Benefit Information (RBI) Activities a. The Health Plan shall refer Potential Enrollees interested in enrolling in the Health Plan to the Choice Counselor/Enrollment Broker. b. In accordance with section 409.912, F.S., and Agency guidelines, and upon approval of the Agency, the Health Plan may assist Potential Enrollees in obtaining information through the completion of a RBI, previously known as a pre-Enrollment application for information. c. RBIs may be for an individual or for a family. No health status information may be asked on the RBI. Each RBI shall include an option for the Potential Enrollee to request information about all Health Plan choices and shall include the name of the Choice Counselor/Enrollment Broker Help Line. All RBIs shall contain at least the following information for each Potential Enrollee   (1) Name;   (2) Address (home and mailing);   (3) County of residence;   (4) Telephone number;   (5) Date of Application;   (6) Applicant’s signature or signature of parent or guardian; and,   (7) Marketing Representative’s signature and DFS license number. d. At the time of completion of the RBI, the Health Plan shall furnish the Potential Enrollee with a copy of the completed RBI. e. The Health Plan shall accept RBIs only from Potential Enrollees who reside within the authorized Service Area. In addition, the Health Plan shall use the Provider number associated with the county in which the Potential Enrollee resides. f. If the Voluntary Potential Enrollee is recognized to be in foster care by the Health Plan, and is dependent, prior to Enrollment, the Health Plan must receive written authorization from (1) a parent, (2) a legal guardian, or (3) DCF or DCF’s delegate. If a parent is unavailable, the Health Plan shall obtain authorization from DCF. The RBI shall include information that the Potential Enrollee is in foster care. g. The Health Plan shall provide a reasonable written explanation of the Health Plan Benefits to the Potential Enrollee prior to accepting the RBI. The Health Plan shall explain to all Potential Enrollees that the family may choose to have all members served by the same PCP or they may choose different PCPs based on each Enrollee’s needs. The information must comply with 42 CFR 438.10. h. Upon completion of the RBI and all pre-Enrollment Marketing to Potential Enrollees, the Health Plan shall submit the RBI to the Choice Counselor/Enrollment Broker for further education and counseling and verification that the Potential Enrollee made an informed, voluntary choice, free from duress. REMAINDER OF PAGE INTENTIONALLY LEFT BLANK -------------------------------------------------------------------------------- Section V Covered Services  A. Covered Services 1. The Health Plan shall ensure the provision of services in sufficient amount, duration and scope to be reasonably expected to achieve the purpose for which the services are furnished and shall ensure the provision of the following covered services as defined and specified in this Contract. The Health Plan may implement appropriate utilization management techniques and procedures, as established in this Contract and the Health Plans approved policies and procedures manuals. 2. The Health Plan’s policies and procedures manuals shall be prior approved by the Agency and shall incorporate provider, service and product standards specified in the Agency’s Medicaid Services Coverage and Limitations Handbooks, as appropriate, and this Contract. 3. The Health Plan must require out-of-network providers to coordinate with respect to payment and must ensure that cost to the beneficiary is no greater than it would be if the covered services were furnished within the network. 4. The Health Plan may submit a Customized Benefit Package (CBP), which may vary the co-pays or the amount, duration and scope of the following services for non-pregnant adults: hospital outpatient not otherwise specified (NOS), home health, dental, pharmacy, chiropractic, podiatry, vision, durable medical equipment and physical therapy services as specified below.   a. Amount, duration and scope may vary for durable medical supplies (DME) with the exception of any prosthetic/orthotic supply priced over $3,000 on the Medicaid fee schedule and except for motorized wheelchairs, which must be covered up to the State Plan limit.   b. Dialysis services, contraceptives, and chemotherapy-related medical and pharmaceutical services must be covered up to the State Plan limit.   c. Hearing services for non-pregnant adults may vary amount, duration and scope except for hearing aid services, which must be covered up to the State Plan limit.   d. The CBP must meet the Agency’s actuarial equivalency and sufficiency standards for the population or populations which will be covered by the CBP.   e. The Health Plan shall submit its CBP to the Agency for recertification of actuarial equivalency and sufficiency standards on an annual basis. 5. The Health Plan shall provide all medically necessary services in accordance with Medicaid Handbook requirements for pregnant women, Children/Adolescents, and Enrollees with a HIV/AIDS diagnoses as identified by the Agency. REMAINDER OF PAGE INTENTIONALLY LEFT BLANK     6. The Health Plan shall ensure the provision of the services listed below. Health Plan Covered Service Chart Advanced Registered Nurse Practitioner Services Ambulatory Surgical Centers Birth Center Services Child Health Check-Up Services Chiropractic Services Community Mental Health Services County Health Department Services Dental Services Durable Medical Equipment and Medical Supplies Dialysis Services Emergency Room Services Family Planning Services Federally Qualified Health Center Services Freestanding Dialysis Centers Hearing Services Home Health Care Services Hospital Services - Inpatient Hospital Services - Outpatient Immunizations Independent Laboratory Services Licensed Midwife Services Optometric Services Physician Services Physician Assistant Services Podiatry Services Portable X-ray Services Prescribed Drugs Primary Care Case Management Services Rural Health Clinic Services Targeted Case Management Therapy Services: Occupational Therapy Services: Physical Therapy Services: Respiratory Therapy Services: Speech Transplant Services Transportation Services Vision Services     B. Expanded Services Expanded services are those services offered by the Health Plan as specified in Attachment I of this contract and approved in writing by the Agency. These services are in excess of the amount, duration and scope of those services listed in Section V. Covered Services and Section VI. Behavioral Health Care. Such services may include, but are not limited to:   1. Expanded Behavioral Health Services - respite care services, prevention services in the community, parental education programs, community-based therapeutic services for adults, and any other new and innovative interventions or services designed to improve the mental well-being of Enrollees.   2. The Health Plan may offer an Agency-approved over-the-counter expanded drug benefit, not to exceed twenty-five dollars ($25.00) per household, per month. Such benefits shall be limited to nonprescription drugs containing a National Drug Code ("NDC") number, first aid supplies and birth control supplies. Such benefits must be offered through the Health Plan's pharmacy or the Health Plan's agreement with a pharmacy. The Health Plan shall make payments for the over-the-counter drug benefit directly to the pharmacy.   3. Adult Dental Services - routine preventive services, diagnostic and restorative services, radiology services and discounts on dental services.   4. Adult Vision Services - eye exams, eye glasses and contact lens.   5. Adult Hearing Services - hearing evaluations, hearing aid devices and hearing aid repairs. C. Excluded Services    1. The Health Plan is not obligated to provide for any services not specified in this Contract. Enrollees who require services available through Medicaid but not specified by this Contract shall receive the services through the Medicaid Fee-for-Service reimbursement system unless those services have been limited by the Health Plan’s Agency-approved CBP. In such cases, the Health Plan's responsibility is limited to case management and referral. Therefore, the Health Plan shall determine the need for the services and refer the Enrollee to the appropriate service provider. The Health Plan may request assistance from the local Medicaid Field Office for referral to the appropriate service setting.   2. The Health Plan shall consult the DCF office to identify appropriate methods of assessment and referral for those Enrollees requiring long-term care institutional services, institutional services for persons with developmental disabilities or state hospital services. The Health Plan is responsible for transition and referral of these Enrollees to appropriate service providers, including helping the Enrollees to obtain an attending physician. The Plan shall disenroll all Enrollees requiring these services in accordance with Section III.C.3.a.(3) of this Contract. D. Moral or Religious Objections The Health Plan is required to provide or arrange for all Covered Services. If, during the course of the Contract period, pursuant to 42 CFR 438.102, the Health Plan elects not to provide, reimburse for, or provide coverage of a counseling or referral service because of an objection on moral or religious grounds, the Health Plan shall notify:   1. The Agency within one hundred and twenty (120) Calendar Days prior to adopting the policy with respect to any service.   2. Enrollees thirty (30) Calendar Days prior to adopting the policy with respect to any service. E. Customized Benefit Package   1. The Health Plans may choose to have a benefit package for non-pregnant adults, which includes all of the Covered Services described above in this section and those in Section VI, Behavioral Health Care, or may choose to offer a Customized Benefit Package (CBP).   2. Should a Health Plan choose to offer a CBP, the Health Plan shall provide all of the Covered Services described above in this section and those in Section VI, Behavioral Health Care, to pregnant women, Children/Adolescents, and Enrollees with a HIV/AIDS diagnoses as identified by the Agency.   3. Approved CBPs must comport with the Benefit Grid and the attached instructions found in Attachment I that have been tested for actuarial equivalency and sufficiency of benefits, before being approved by the Agency.   a. Actuarial equivalency is tested by using a Benefit Plan Evaluation Model that:   (1) Compares the value of the level of benefits in the proposed package to the value of the current Medicaid State Plan package for the average member of the covered population; and   (2) Ensures that the overall level of benefits is appropriate.   b. Sufficiency is tested by comparing the proposed CBP to State established standards. The standards are based on the covered population’s historical use of Medicaid State Plan services. These standards are used to ensure that the proposed CBP is adequate to cover the needs of the vast majority of the Enrollees.   c. If, in its CBP, the Health Plan limits a service to a maximum annual dollar value, the Health Plan must calculate the dollar value of the service using the Medicaid fee schedule. If the Health Plan limits pharmacy services to a maximum annual dollar value, pharmacy dollar values are evaluated at a pre-rebate level. F. Coverage Provisions  The Health Plan shall provide the following services in accordance with the provisions herein, and in accordance with the Florida Medicaid Coverage and Limitations Handbooks and the Florida Medicaid State Plan unless certified in a Customized Benefit Package in the Benefit Grid. The Health Plan shall comply with all State and federal laws pertaining to the provision of such services.   1. Advance Directives a. In compliance with 42 CFR 438.6(i)(1)-(2) and 42 CFR 422.128, the Health Plan shall maintain written policies and procedures for Advance Directives, including mental health Advance Directives. Such Advance Directives shall be included in each Enrollee's medical record. The Health Plan shall provide these policies to all Enrollee's eighteen (18) years of age and older and shall advise Enrollees of:   (1) Their rights under the law of the State of Florida, including the right to accept or refuse medical, surgical, or behavioral health treatment and the right to formulate Advance Directives; and   (2) The Health Plan's written policies respecting the implementation of those rights, including a statement of any limitation regarding the implementation of Advance Directives as a matter of conscience. b. The information must include a description of State law and must reflect changes in State law as soon as possible, but no later than ninety (90) Calendar Days after the effective change. c. The Health Plan's information must inform Enrollees that complaints may be filed with the State's complaint hotline. d. The Health Plan shall educate its staff about its policies and procedures on Advance Directives, situations in which Advance Directives may be of benefit to Enrollees, and their responsibility to educate Enrollees about this tool and assist them to make use of it. e. The Health Plan shall educate Enrollees about their ability to direct their care using this mechanism and shall specifically designate which staff and/or network Providers are responsible for providing this education.   2. Child Health Check-Up Program (CHCUP) a. The Health Plan shall provide a health screening evaluation that shall consist of: comprehensive health and developmental history, including assessment of past medical history, developmental history and behavioral health status; comprehensive unclothed physical examination; developmental assessment; nutritional assessment; appropriate immunizations according to the appropriate Recommended Childhood Immunization Schedule for the United States; laboratory testing (including blood lead testing); health education (including anticipatory guidance); dental screening (including a direct referral to a dentist for Enrollees beginning at three (3) years of age or earlier as indicated); vision screening, including objective testing as required; hearing screening, including objective testing as required; diagnosis and treatment; and referral and follow-up as appropriate. b. For Children/Adolescents who the Health Plan identifies through blood lead screenings as having abnormal levels of lead, the Health Plan shall provide Case Management follow-up services as required in Chapter Two (2) of the Child Health Check-Up Services Coverage and Limitations Handbook. Screening for lead poisoning is a required component of this Contract. The Health Plan shall require all Providers to screen all Enrolled Children for lead poisoning at twelve (12) and twenty-four (24) months of age. In addition, Children/Adolescents between the ages of twenty-four (24) months and seventy-two (72) months of age must receive a screening blood lead test if there is no record of a previous test. The Health Plan shall provide additional diagnostic and treatment services determined to be Medically Necessary to a Child/Adolescent diagnosed with an elevated blood lead level. The Health Plan shall recommend, but shall not require, the use of paper filter tests as part of the lead screening requirement. c. The Health Plan shall inform Enrollees of all testing/screenings due in accordance with the periodicity schedule specified in the Medicaid Child Health Check-Up Services Coverage and Limitations Handbook. The Health Plan shall contact Enrollees to encourage them to obtain health assessment and preventative care. d.  The Health Plan shall refer Enrollees to appropriate service Providers within six (6) months of the examination for further assessment and treatment of conditions found during the examination. e. The Health Plan shall offer scheduling assistance and Transportation to Enrollees in order to assist them to keep, and travel to, medical appointments. f. The CHCUP program includes the maintenance of a coordinated system to follow the Enrollee through the entire range of screening and treatment, as well as supplying CHCUP training to medical care Providers. g. The Health Plan shall achieve a CHCUP screening rate of at least sixty percent (60%) for those Enrollees who are continuously enrolled for at least eight (8) months during the Federal Fiscal Year (October 1 - September 30) in accordance with section 409.912, F.S. This screening compliance rate shall be based on the CHCUP screening data reported by the Health Plan and due to the Agency by January 15 following the end of each Federal Fiscal Year as specified in Section XII, Reporting, of this Contract. The data shall be monitored by the Agency for accuracy and, if the Health Plan does not achieve the 60 percent (60%) screening rate for the Federal Fiscal Year reported, the Health Plan shall file a corrective action plan (CAP) with the Agency no later than February 15, following the fiscal year reported. Any data reported by the Health Plan that is found to be inaccurate shall be disallowed by the Agency and the Agency shall consider such findings as being in violation of the Contract and may sanction the Health Plan accordingly. h. The Health Plan shall adopt annual screening and participation goals to achieve at least an eighty percent (80%) CHCUP screening and participation rate. For each Federal Fiscal Year that the Health Plan does not meet the eighty percent (80%) screening and participation rate, it must file a CAP with the Agency no later than February 15 following the Federal Fiscal Year being reported.   3. Cost Sharing Cost-sharing amounts shall be delineated in the Florida State Medicaid Plan, and the Florida Coverage and Limitations Handbooks, as promulgated in Florida Administrative Code. The Health Plan may choose to eliminate cost sharing requirements as approved by the Agency. Attachment I outlines the approved cost sharing limits.   4. Dental The Health Plan shall cover diagnostic services, preventive treatment, CHCUP dental screening (including a direct referral to a dentist for Enrollees beginning at three (3) years of age or earlier as indicated); restorative treatment, endodontic treatment, periodontal treatment, restorative treatment, surgical procedures and/or extractions, orthodontic treatment, complete and partial dentures, complete and partial denture relines and repairs, and adjunctive and emergency services for Enrollees under the age of twenty-one (21). Adult services include medically necessary emergency dental procedures to alleviate pain or infection. Emergency dental care shall be limited to emergency oral examinations, necessary radiographs, extractions, and incisions and drainage of abscesses. Adult dental services shall also include dentures.   5. Emergency Services a. The Health Plan shall advise all Enrollees of the provisions governing Emergency Services and Care. The Health Plan shall not deny claims for Emergency Services and Care received at a Hospital due to lack of parental consent. In addition, the Health Plan shall not deny payment for treatment obtained when a representative of the Health Plan instructs the Enrollee to seek Emergency Services and Care. b. The Health Plan shall not:   (1) Require Prior Authorization for an Enrollee to receive pre-Hospital transport or treatment or for Emergency Services and Care;   (2) Specify or imply that Emergency Services and Care are covered by the Health Plan only if secured within a certain period of time;   (3) Use terms such as "life threatening" or "bona fide" to qualify the kind of emergency that is covered; or   (4) Deny payment based on a failure by the Enrollee or the Hospital to notify the Health Plan before, or within a certain period of time after, Emergency Services and Care were given. c. The Health Plan shall provide pre-Hospital and Hospital-based trauma services and Emergency Services and Care to Enrollees. See sections 395.1041, 395.4045 and 401.45, F.S. d. When an Enrollee presents himself/herself at a Hospital seeking Emergency Services and Care, the determination that an Emergency Medical Condition exists shall be made, for the purposes of treatment, by a physician of the Hospital or, to the extent permitted by applicable law, by other appropriate personnel under the supervision of a Hospital physician. See sections 409.9128 and 409.901, F.S    (1) The physician, or the appropriate personnel, shall indicate on the Enrollee's chart the results of all screenings, examinations and evaluations.   (2) The Health Plan shall compensate the provider for all screenings, evaluations and examinations that are reasonably calculated to assist the provider in arriving at the determination as to whether the Enrollee's condition is an Emergency Medical Condition.   (3) The Health Plan shall for all Emergency Services and Care.   (4) If the provider determines that an Emergency Medical Condition does not exist, the Health Plan is not required to pay for services rendered subsequent to the provider's determination. e. If the provider determines that an Emergency Medical Condition exists, and the Enrollee notifies the Hospital or the Hospital emergency personnel otherwise have knowledge that the patient is an Enrollee of the Health Plan, the Hospital must make a reasonable attempt to notify the Enrollee's PCP, if known, or the Health Plan, if the Health Plan has previously requested in writing that said notification be made directly to the Health Plan, of the existence of the Emergency Medical Condition. f. If the Hospital, or any of its affiliated providers, do not know the Enrollee's PCP, or have been unable to contact the PCP, the Hospital must:   (1) Notify the Health Plan as soon as possible before discharging the Enrollee from the emergency care area; or   (2) Notify the Health Plan within twenty-four (24) hours or on the next Business Day after admission of the Enrollee as an inpatient to the Hospital. g. If the Hospital is unable to notify the Health Plan, the Hospital must document its attempts to notify the Health Plan, or the circumstances that precluded the Hospital's attempts to notify the Health Plan. The Health Plan shall not deny payment for Emergency Services and Care based on a Hospital's failure to comply with the notification requirements of this Section. h. If the Enrollee's PCP responds to the Hospital's notification, and the Hospital physician and the PCP discuss the appropriate care and treatment of the Enrollee, the Health Plan may have a member of the Hospital staff with whom it has a Participating Provider contract participate in the treatment of the Enrollee within the scope of the physician's Hospital staff privileges. i. The Health Plan may transfer the Enrollee, in accordance with State and federal law, to a Participating Hospital that has the service capability to treat the Enrollee's Emergency Medical Condition. The attending emergency physician, or the provider actually treating the Enrollee, is responsible for determining when the Enrollee is sufficiently stabilized for transfer discharge, and that determination is binding on the entities identified in 42 CFR 438.114(b) as responsible for coverage and payment. j. Notwithstanding any other State law, a Hospital may request and collect any insurance or financial information necessary to determine if the patient is an Enrollee of the Health Plan, in accordance with federal law, from an Enrollee, so long as Emergency Services and Care are not delayed in the process. k. In accordance with 42 CFR 438.411 and 42 CFR 422.113(c), the Health Plan shall cover Post Stabilization Care Services without authorization, regardless of whether the Enrollee obtains a service within or outside the Health Plan's network for the following situations:   (1) Post-Stabilization Care Services that were pre-approved by the Health Plan;   (2) Post-Stabilization Care Services that were not pre-approved by the Health Plan because the Health Plan did not respond to the treating provider's request for pre-approval within one (1) hour after the treating provider sent the request;   (3) The treating Provider could not contact the Health Plan for pre-approval; and   (4) Those Post-Stabilization Care Services that a treating physician viewed as Medically Necessary after stabilizing an Emergency Medical Condition. These are non-emergency services; the Health Plan can choose not to cover if provided by a nonparticipating provider, except in those circumstances detailed in k. (1), (2), and (3) above. l. The Health Plan shall not deny claims for the provision of Emergency Services and Care submitted by a nonparticipating provider solely based on the period between the date of service and the date of clean claim submission, unless that period exceeds 365 days. m. Reimbursement for services provided to an Enrollee under this Section by a nonparticipating provider shall be the lesser of:   (1) The nonparticipating provider's charges;   (2) The usual and customary provider charges for similar services in the community where the services were provided;   (3) The amount mutually agreed to by the Health Plan and the nonparticipating provider within sixty (60) Calendar Days after the nonparticipating provider submits a claim; or   (4) The Medicaid rate. n. Notwithstanding the requirements set forth in this Section, the Health Plan shall make payment on all claims for Emergency Services and Care by nonparticipating providers pursuant to the requirements set forth in section 641.3155, F.S.   6. Emergency Services - Behavioral Health Services a. An out-of-area, non-participating provider shall notify the Health Plan within twenty-four (24) hours of the Enrollee presenting for Emergency Behavioral Health Services. In cases in which the Enrollee has no identification, or is unable to verbally identify himself/herself when presenting for Behavioral Health Services, the out of area, non-participating provider shall notify the Health Plan within twenty-four (24) hours of learning the Enrollee's identity. The out of area, non-participating provider shall deliver to the Health Plan the Medical Records that document that the identity of the Enrollee could not be ascertained at the time the Enrollee presented for Emergency Behavioral Health Services due to the Enrollee's condition. b. If the out-of-area, non-participating provider fails to provide the Health Plan with an accounting of the Enrollee's presence and status within twenty-four (24) hours after the Enrollee presents for treatment and provides identification, the Health Plan shall only approve claims for the time period required for treatment of the Enrollee's Emergency Behavioral Health Services, as documented by the Enrollee's Medical Record. c. The Health Plan shall review and approve or disapprove all out-of-plan Emergency Behavioral Health Service claims within the time frames specified for emergency claims payment in Section V.D.3., Emergency Care Requirements. d. The Health Plan shall submit to the Agency for review and final determination all denied Appeals from behavioral health care providers and out-of-plan, non-participating Behavioral Health Care Providers for denied Emergency Behavioral Health Service claims. The provider, whether a participating provider or not, must submit the denied Appeal to the Agency within ten (10) days after receiving notice of the Health Plan's final Appeal determination. e. The Health Plan must evaluate and authorize or deny services for Enrollees presenting at non-participating receiving facilities (that are not Crisis Stabilization Units), within the Health Plan's service area, for involuntary examination within three (3) hours of being notified by phone by the receiving facility. f. The receiving facility must notify the Health Plan within four (4) hours of the Enrollee presenting. If the Receiving Facility fails to notify the Health Plan of the Enrollee's presence and status within four (4) hours, the Health Plan shall pay only for the first four (4) hours of the Enrollee's treatment, subject to Medical Necessity. g. If the receiving facility is a non-participating receiving facility and documents in the Medical Record that it is unable, after a good faith effort, to identify the Enrollee and, therefore, fails to notify the Health Plan of the Enrollee's presence, the Health Plan shall pay for medical stabilization lasting no more than three (3) days from the date the Enrollee presented at the receiving facility, as documented by the Enrollee's Medical Record and subject to Medical Necessity, unless there is irrefutable evidence in the Medical Record that a longer period was required to treat the Enrollee.   7. Family Planning Services The Health Plan shall provide family planning services for the purpose of enabling Enrollees to make comprehensive and informed decisions about family size and/or spacing of births. The Health Plan shall provide the following services: planning and referral, education and counseling, initial examination, diagnostic procedures and routine laboratory studies, contraceptive drugs and supplies, and follow-up care in accordance with the Medicaid Physicians Services Coverage and Limitations Handbook. Policy requirements include: a. The Health Plan shall furnish services on a voluntary and confidential basis.  b. The Health Plan shall allow Enrollees freedom of choice of family planning methods covered under the Medicaid program, including Medicaid covered implants, where there are no medical contra-indications. c. The Health Plan shall render the services to Enrollees under the age of eighteen (18) provided the Enrollee is married, a parent, pregnant, has written consent by a parent or legal guardian, or in the opinion of a physician, the Enrollee may suffer health hazards if the services are not provided. See section 31.0051, F.S. d. The Health Plan shall allow each Enrollee to obtain family planning services from any Medicaid Provider and require no prior authorization for such services. If the Enrollee receives services from a non-network Medicaid provider, then the Health Plan must reimburse at the Medicaid reimbursement rate, unless another payment rate is negotiated. e. The Health Plan shall make available and encourage all pregnant women and mothers with infants to receive postpartum visits for the purpose of voluntary family planning, including discussion of all appropriate methods of contraception, counseling and services for family planning to all women and their partners. The Health Plan shall direct Providers to maintain documentation in the Enrollee's Medical Records to reflect this provision. See section 409.912, F.S. f. The provisions of this subsection shall not be interpreted so as to prevent a health care provider or other person from refusing to furnish any contraceptive or family planning service, supplies or information for medical or religious reasons. A health care provider or other person shall not be held liable for such refusal.   8. Hospital Services — Inpatient Inpatient Services - Medically Necessary services ordinarily furnished by a State licensed acute care Hospital for the medical care and treatment of inpatients provided under the direction of a physician or dentist in a Hospital maintained primarily for the care and treatment of patients with disorders other than mental diseases. Inpatient psychiatric Hospital services are Medically Necessary Behavioral Health Care Services and may be provided in a general Hospital psychiatric unit or in a specialty Hospital. a. Inpatient services include, but are not limited to, rehabilitation Hospital care (which are counted as inpatient Hospital days), medical supplies, diagnostic and therapeutic services, use of facilities, drugs and biologicals, room and board, nursing care and all supplies and equipment necessary to provide adequate care. See the Medicaid Hospital Services Coverage & Limitations Handbook.  b. Inpatient services also include inpatient care for any diagnosis including psychiatric and mental health (Baker Act and non-Baker Act), tuberculosis and renal failure when provided by general acute care Hospitals in both emergent and non-emergent conditions. c. The Health Plan may provide services in a nursing home as downward substitution for Inpatient Services. Such services shall not be counted as inpatient hospital days. d. The Health Plan shall provide Medically Necessary transplants covered in the Handbook, including pre-transplant care and post-transplant care. For other transplants not covered by Medicaid, the Health Plan shall cover pre-transplant care and post-transplant follow-up.   e. The Health Plan shall cover physical therapy services when Medically Necessary and when provided during an Enrollee's inpatient stay. f. The Health Plan shall provide up to twenty-eight (28) inpatient hospital days in an inpatient Hospital substance abuse treatment program for pregnant substance abusers who meet ISD Criteria with Florida Medicaid modifications, as specified in InterQual Level of Care 2003-Acute Criteria-Pediatric and/or InterQual Level of Care 2003-Acute Criteria-Adult (McKesson Health Solutions, LLC, “McKesson”), 2003 Edition or the most current edition, for use in screening cases admitted to rehabilitative Hospitals and CON approved rehabilitative units in acute care Hospitals with admission dates of January 1, 2003 and after. In addition, the Health Plan shall provide inpatient Hospital treatment for severe withdrawal cases exhibiting medical complications which meet the severity of illness criteria under the alcohol/substance abuse system-specific set which generally requires treatment on a medical unit where complex medical equipment is available. Withdrawal cases (not meeting the severity of illness criteria under the alcohol/substance abuse criteria) and substance abuse rehabilitation (other than for pregnant women), including court ordered services, are not covered in the inpatient Hospital setting. g. The Health Plan shall adhere to the provisions of the Newborns and Mothers Health Protection Act (NMHPA) of 1996 regarding postpartum coverage for mothers and their newborns. Therefore, the Health Plan shall provide for no less than a forty-eight (48) hour Hospital length of stay following a normal vaginal delivery, and at least a ninety-six (96) hour Hospital length of stay following a Cesarean section. In connection with coverage for maternity care, the Hospital length of stay is required to be decided by the attending physician in consultation with the mother. h. The Health Plan shall prohibit the following practices:   (1) Denying the mother or newborn child eligibility, or continued eligibility, to enroll or renew coverage under the terms of the Health Plan, solely for the purpose of avoiding the NMHPA requirements;   (2) Providing monetary payments or rebates to mothers to encourage them to accept less than the minimum protections available under NMHPA;   (3) Penalizing or otherwise reducing or limiting the reimbursement of an attending physician because the physician provided care in a manner consistent with NMHPA;   (4) Providing incentives (monetary or otherwise) to an attending physician to induce the physician to provide care in a manner inconsistent with NMHPA; and   (5) Restricting for any portion of the forty-eight (48) hour, or ninety-six (96) hour, period prescribed by NMHPA in a manner that is less favorable than the Benefits provided for any preceding portion of the Hospital stay.   (6) The Health Plan shall pay for any Medically Necessary duration of stay in a noncontracted facility which results from a medical emergency until such time as the Plan can safely transport the Enrollee to a Plan participating facility.   9. Hospital Services — Outpatient Outpatient hospital services consist of preventive, diagnostic, therapeutic or palliative care under the direction of a physician or dentist at a licensed acute care Hospital. Outpatient hospital services include Medically Necessary emergency room services, dressings, splints, oxygen and physician ordered services and supplies for the clinical treatment of a specific diagnosis or treatment. a. The Health Plan shall provide Emergency Services and Care as Medically Necessary. b. The Health Plan shall have a procedure for the authorization of dental care and associated ancillary medical services provided in an outpatient hospital setting if that care meets the following requirements:   (1) Is provided under the direction of a dentist at a licensed Hospital; and   (2) Is Medically Necessary; or   (3) The Health Plan shall pay for any Medically Necessary duration of stay in a noncontracted facility which results from a medical emergency until such time as the Plan can safely transport the Enrollee to a Plan participating facility.   10. Hospital Services — Ancillary Services a. The Health Plan shall provide Medically Necessary ancillary medical services at the Hospital without limitation. Ancillary Hospital services include, but are not limited to, radiology, pathology, neurology, neonatology, and anesthesiology. When the Health Plan or the Health Plan's authorized physician authorizes these services (either inpatient or outpatient), the Health Plan must reimburse the provider of the service at the Medicaid line item rate, unless the Health Plan and the Hospital have negotiated another reimbursement rate. Also, the Health Plan must reimburse non-network physicians for emergency ancillary services provided in a hospital setting. b. The Health Plan shall have a procedure for the authorization of Medically Necessary dental care and associated ancillary services provided in licensed ambulatory surgical center settings if that care is provided under the direction of a dentist as described in state plan.   11. Hysterectomies, Sterilizations and Abortions The Health Plan shall maintain a log of all hysterectomy, sterilization and abortion procedures performed for its Enrollees. The log must include, at a minimum, the Enrollee’s name and identifying information, date of procedure, and type of procedure. The Health Plan shall provide abortions only in the following situations: a. If the pregnancy is a result of an act of rape or incest; or b. The physician certifies that the woman is in danger of death unless an abortion is performed.   12. Immunizations The Health Plan shall: a. Provide immunizations in accordance with the Recommended Childhood Immunization Schedule for the United States, or when Medically Necessary for the Enrollee's health; b. Provide for the simultaneous administration of all vaccines for which an Enrollee up to the age of 20 is eligible at the time of each visit; and c. Follow only true contraindications established by the Advisory Committee on Immunization Practices ("ACIP"), unless:   (1) In making a medical judgment in accordance with accepted medical practices, such compliance is deemed medically inappropriate; or   (2) The particular requirement is not in compliance with Florida law, including Florida law relating to religious or other exemptions. d. Participate, or direct its Providers to participate, in the Vaccines For Children Program ("VFC"). See Section 1905(r)(1) of the Social Security Act. The VFC is administered by the Department of Health, Bureau of Immunizations, and provides vaccines at no charge to physicians and eliminates the need to refer children to CHDs for immunizations. e. The Health Plan shall provide coverage and reimbursement to the Participating Provider for immunizations covered by Medicaid, but not provided through VFC; f.  Ensure that Providers have a sufficient supply of vaccines if the Health Plan is the VFC enrollee. The Health Plan shall direct those Providers that are directly enrolled in the VFC program to maintain adequate vaccine supplies; g. Pay no more than the Medicaid program vaccine administration fee of $10.00 per administration, unless another rate is negotiated with the Participating Provider. h. Pay the immunization administration fee at no less than the Medicaid rate when an Enrollee receives immunizations from a nonparticipating provider, so long as:… (i) The nonparticipating provider contacts the Health Plan at the time of service delivery; (ii) The Health Plan is unable to document to the nonparticipating provider that the Enrollee has already received the immunization; and (iii) The nonparticipating provider submits a claim for the administration of immunization services and provides medical records documenting the immunization to the Health Plan.       13. Pregnancy Related Requirements The Health Plan must provide the most appropriate and highest level of Quality care for pregnant Enrollees. Required care includes the following: a. Florida's Healthy Start Prenatal Risk Screening - The Health Plan shall ensure that the Provider offers Florida's Healthy Start prenatal risk screening to each pregnant Enrollee as part of her first prenatal visit. As required by section 383.14, F.S., 2004 and 64C-7.009, F.A.C.    (1) The Health Plan shall ensure that the Provider uses the DOH prenatal risk form (DH Form 3134), which can be obtained from the local CHD.   (2) The Health Plan shall ensure that the Provider retains a copy of the completed screening instrument in the Enrollee's Medical Record and provides a copy to the Enrollee.   (3) The Health Plan shall ensure that the Provider submits the completed DH Form 3134 to the CHD in the county in which the prenatal screen was completed within ten (10) Business Days of completion.   (4) The Health Plan shall collaborate with the Healthy Start care coordinator within the Enrollee's county of residence to assure risk appropriate care is delivered. b. Florida's Healthy Start Infant (Postnatal) Risk Screening Instrument - The Health Plan shall ensure that the Provider completes the Florida Healthy Start Infant (Postnatal) Risk Screening Instrument (DH Form 3135) with the Certificate of Live Birth and transmits the documents to the CHD in the county in which the infant was born within ten (10) Business Days of completion. The Health Plan shall ensure that the Participating Provider retains a copy of the completed DH Form 3135 in the Enrollee's Medical Record and provides a copy to the Enrollee. c. Pregnant Enrollees or infants who do not score high enough to be eligible for Healthy Start care coordination may be referred for services, regardless of their score on the Healthy Start risk screen, in the following ways:   (1) If the referral is to be made at the same time the Healthy Start risk screen is administered, the Provider may indicate on the risk screening form that the Enrollee or infant is invited to participate based on factors other than score; or     (2) If the determination is made subsequent to risk screening, the Participating Provider may refer the Enrollee or infant directly to the Healthy Start care coordinator based on assessment of actual or potential factors associated with high risk, such as HIV, hepatitis B, substance abuse or domestic violence. d. The Health Plan shall refer all pregnant women, breast-feeding and postpartum women, infants and Children up to age five (5) to the local WIC office.   (1) The Health Plan shall provide: i. A completed Florida WIC program Medical Referral Form with the current height or length and weight (taken within 60 Calendar Days of the WIC appointment); ii. Hemoglobin or hematocrit; and iii. Any identified medical/nutritional problems.   (2) For subsequent WIC certifications, the Health Plan shall ensure that Providers coordinate with the local WIC office to provide the above referral data from the most recent CHCUP.   (3) Each time the Health Plan completes a WIC Referral Form, the Health Plan shall ensure that the Provider gives a copy of the WIC Referral Form to the Enrollee and retains a copy in the Enrollee's Medical Record. e. The Health Plan shall ensure that the Providers provide all women of childbearing age HIV counseling and offer them HIV testing. See Chapter 381, F.S.   (1) The Health Plan shall ensure that its Providers, in accordance with Florida law, offer all pregnant women counseling an HIV testing at the initial prenatal care visit and again at twenty-eight (28) to thirty-two (32) weeks.   (2) The Health Plan shall ensure that its Providers attempt to obtain a signed objection if a pregnant woman declines an HIV test. See Section 384.31, F.S., 2004 and 64D-3.019, F.A.C.   (3) The Health Plan shall ensure that all pregnant women who are infected with HIV are counseled about and offered the latest antiretroviral regimen recommended by the U.S. Department of Health & Human Services. (U.S. Department of Health & Human Services, Public Health Service Task Force Report entitled Recommendations for the Use of Antiretroviral Drugs in Pregnant HIV-1 Infected Women for Maternal Health and Interventions to Reduce Perinatal HIV-1 Transmission in the United States. To receive a copy of the guidelines, contact the DOH, Bureau of HIV/AIDS at (850) 245-4334, or go to http://aidsinfo.nih.gov/guidelines/.) f. The Health Plan shall ensure that its Providers screen all pregnant Enrollees receiving prenatal care for the Hepatitis B surface antigen (HBsAg) during the first prenatal visit.   (1) The Health Plan shall ensure that the Providers perform a second HBsAg test between twenty-eight (28) and thirty-two (32) weeks of pregnancy for all pregnant Enrollees who tested negative at the first (1st) prenatal visit and are considered high-risk for Hepatitis B infection. This test shall be performed at the same time that other routine prenatal screening is ordered.   (2) All HBsAg-positive women shall be reported to the local CHD and to Healthy Start, regardless of their Healthy Start screening score. g. The Health Plan shall ensure that infants born to HBsAg-positive Enrollees shall receive Hepatitis B Immune Globulin (HBIG) and the Hepatitis B vaccine once they are physiologically stable, preferably within twelve (12) hours of birth and shall complete the Hepatitis B Maxine series according to the recommended vaccine schedule established by the Recommended Childhood Immunization Schedule for the United States.   (1) The Health Plan shall ensure that its Providers test infants born to HBsAg-positive Enrollees for HBsAg and Hepatitis B surface antibodies (anti-HBs) six (6) months after the completion of the vaccine series to monitor the success or failure of the therapy.   (2) The Health Plan shall ensure that Providers report to the local CHD a positive HBsAg result in any child aged twenty-four (24) months or less within twenty-four (24) hours of receipt of the positive test results.   (3) The Health Plan shall ensure that infants born to Enrollees who are HBsAg-positive are referred to Healthy Start regardless of their Healthy Start screening score. h. The Health Plan shall report to the Perinatal Hepatitis B Prevention Coordinator at the local CHD all prenatal or postpartum Enrollees who test HBsAg-positive. The Health Plan also shall report said Enrollees’ infants and contacts to the Perinatal Hepatitis B Prevention Coordinator at the local CHD.   (1) The Health Plan shall report the following information - name, date of birth, race, ethnicity, address, infants, contacts, laboratory test performed, date the sample was collected, the due date or EDC, whether or not the Enrollee received prenatal care, and immunization dates for infants and contacts.   (2) The Health Plan shall use the Perinatal Hepatitis B Case and Contact Report (DH Form 1876) for reporting purposes. i. The Health Plan shall ensure that the PCP maintains all documentation of Healthy Start screenings, assessments, findings and referrals in the Enrollees’ Medical Records. The Health Plan shall ensure quick access to Enrollees’ Medical Records in the Provider contract. j. The Health Plan shall provide the most appropriate and highest level of Quality care for pregnant Enrollees, including, but not limited to, the following:   (1) Prenatal Care - The Health Plan shall: i. Require a pregnancy test and a nursing assessment with referrals to a physician, PA or ARNP for comprehensive evaluation; ii. Require Case Management through the gestational period according to the needs of the Enrollee; iii. Require any necessary referrals and follow-up; iv. Schedule return prenatal visits at least every four (4) weeks until the thirty-second (32nd) week, every two (2) weeks until the thirty-sixth (36th) week, and every week thereafter until delivery, unless the Enrollee’s condition requires more frequent visits;  v. Contact those Enrollees who fail to keep their prenatal appointments as soon as possible, and arrange for their continued prenatal care; vi. Assist Enrollees in making delivery arrangements, if necessary; and vii. Ensure that all Providers screen all pregnant Enrollees for tobacco use and make certain that the Providers make available to the pregnant Enrollees smoking cessation counseling and appropriate treatment as needed.   (2) Nutritional Assessment/Counseling - The Health Plan shall ensure that its Providers supply nutritional assessment and counseling to all pregnant Enrollees. The Health Plan shall: i. Ensure the provision of safe and adequate nutrition for infants by promoting breast-feeding and the use of breast milk substitutes; ii. Offer a mid-level nutrition assessment; iii. Provide individualized diet counseling and a nutrition care plan by a public health nutritionist, a nurse or physician following the nutrition assessment; and iv. Documentation of the nutrition care plan in the Medical Record by the person providing counseling.   (3) Obstetrical Delivery - The Health Plan shall develop and use generally accepted and approved protocols for both low risk and high risk deliveries which reflect the highest standards of the medical profession, including Healthy Start and prenatal screening, and ensure that all Providers use these protocols. i. The Health Plan shall ensure that all Providers document preterm delivery risk assessments in the Enrollee’s Medical Record by the twenty-eighth (28th) week. ii. If the Provider determines that the Enrollee’s pregnancy is high risk, the Health Plan shall ensure that the Provider’s obstetrical care during labor and delivery includes preparation by all attendants for symptomatic evaluation and that the Enrollee progresses through the final stages of labor and immediate postpartum care.   (4) Newborn Care - The Health Plan shall make certain that its Providers supply the highest level of care for the Newborn beginning immediately after birth. Such level of care shall include, but not be limited to, the following: i. Instilling of prophylactic eye medications into each eye of the Newborn; ii. When the mother is Rh negative, the securing of a cord blood sample for type Rh determination and direct Coombs test; iii. Weighing and measuring of the Newborn; iv. Inspecting the Newborn for abnormalities and/or complications; v. Administering of one half milligram of vitamin K; vi. APGAR scoring; vii. Any other necessary and immediate need for referral in consultation from a specialty physician, such as the Healthy Start (postnatal) infant screen; and viii. Any necessary Newborn and infant hearing screenings. (To be conducted by a licensed audiologist pursuant to Chapter 468, F.S., 2004, a physician licensed under Chapters 458 or 459, F.S., 2004, or an individual who has completed documented training specifically for newborn hearing screenings and who is directly or indirectly supervised by a licensed physician or a licensed audiologist.)   (5) Postpartum Care - The Health Plan shall: i. Provide a postpartum examination for the Enrollee within six (6) weeks after delivery; ii. Ensure that its Providers supply voluntary family planning, including a discussion of all methods of contraception, as appropriate; iii. Ensure that eligible Newborns are enrolled with the Health Plan and that continuing care of the Newborn be provided through the CHCUP program component.   14. Prescribed Drug Services a. The Health Plan shall provide those products and services associated with the dispensing of medicinal drugs pursuant to a valid prescription, as defined in Chapter 465, F.S. Prescribed Drug Services generally include all prescription drugs listed in the Agency’s Prescribed Drug List (“PDL,” See section 409.91195, F.S.), except for specific hemophilia-related drugs identified by the Agency to be reimbursed as Fee-for-Service beginning September 1, 2006. The PDL shall include at least two (2) products, when available, in each therapeutic class. Antiretroviral agents are not subject to the PDL Policy requirements, pursuant to section 409.912(39), F.S., include, but are not limited to, the following:   (1) The Health Plan shall make available those drugs and dosage forms listed in the PDL.   (2) The Health Plan shall not arbitrarily deny or reduce the amount, duration or scope of prescriptions solely based on the Enrollee’s diagnosis, type of illness or condition. The Health Plan may place appropriate limits on prescriptions based on criteria such as Medical Necessity, or for the purpose of utilization control, provided the Health Plan reasonably expects said limits to achieve the purpose of the Prescribed Drug Services set forth in the Medicaid State Plan.   (3) The Health Plan shall make available those drugs not on the PDL, when requested and approve, if the drugs on the PDL have been used in a step therapy sequence or when other documentation is provided. b. The Health Plan shall provide to Enrollees, who desire to quit smoking, one (1) course of nicotine replacement therapy, of twelve (12) weeks duration, or the manufacturer’s recommended duration, per year. The Health Plan may use either nicotine transdermal patches or nicotine gum. c. If the Health Plan has authorization requirements for prescribed drug services, the Health Plan shall comply with all aspects of the Settlement Agreement to Hernandez, et. al. v. Medows (case number 02-20964 Civ-Gold/Simonton) (HSA). An HSA situation arises when an Enrollee attempts to fill a prescription at a participating pharmacy location and is unable to receive his/her prescription as a result of:   (1) An unreasonable delay in filling the prescription;   (2) A denial of the prescription;   (3) The reduction of a prescribed good or service; and/or   (4) The termination of a prescription. d. The Health Plan shall ensure that its Enrollees are receiving the functional equivalent of those goods and services received by non-Medicaid Reform Fee-for-Service Medicaid Recipients in accordance with the HSA.    (1) The Health Plan shall maintain a log of all correspondences and communications from Enrollees relating to the HSA Ombudsman process. The “Ombudsman Log” shall contain, at a minimum, the Enrollee’s name, address and telephone number and any other contact information, the reason for the participating pharmacy location’s denial (and unreasonable delay in filling a prescription, a denial of a prescription and/or the termination of a prescription), the pharmacy’s name (and store number, if applicable), the date of the call, a detailed explanation of the final resolution, and the name of prescribed good or service.   (2) The Health Plan’s Enrollees are third party beneficiaries for this Section of the Contract.   (3) The Health Plan shall conduct HSA surveys on an annual basis, of no less than five percent (5%) of all participating pharmacy locations to ensure compliance with the HSA. (a)   The Health Plan may survey less than five percent (5%), with written approval from the Agency, if the Health Plan can show that the number of participating pharmacies it surveys is a statistically significant sample that adequately represents the pharmacies that have contracted with the Health Plan to provide pharmacy services. (b)   The Health Plan shall not include in the HSA Survey any participating pharmacy location that the Health Plan found to be in complete compliance with the HSA requirements within the last twelve months. (c)   The Health Plan shall require all participating pharmacy locations that fail any aspect of the HSA survey to undergo mandatory training within six (6) months and then be re-evaluated within one (1) month of the Health Plan’s HSA training to ensure that the participating pharmacy location is in compliance with the HSA.   (4) The Health Plan shall offer to train all new and existing participating pharmacy locations regarding the HSA requirements.   (5) The Health Plan may delegate any or all functions to one (1) or more Pharmacy Benefits Administrators (PBA), so long as none of the PBAs are owned, operated, related to, or subsidiaries of, any pharmacy. Before entering into a Subcontract, the Health Plan shall: (a)   Provide a copy of the model Subcontract between the Health Plan and the PBA to the Bureau of Managed Health Care; (b)   Receive written approval from the Bureau of Managed Health Care for the use of said model Subcontract; and (c)   Work with the Fiscal Agent to integrate the systems. e. The Health Plan shall provide name brand drugs in compliance with State law. The Health Plan shall authorize claims from a pharmacy for the cost of a multi-source brand drug if the prescriber:   (1) Writes in his or her own handwriting on the valid prescription that the drug is Medically Necessary; as determined by section 465.025, F.S and   (2) The prescriber submits the functionally equivalent of the FDA MedWatch form to the Health Plan, in his or her own handwriting, that an Enrollee has had an adverse reaction to a generic drug or has had, in his or her medical opinion, better results when taking the brand-name drug. f. Effective September 1, 2006, hemophilia-related drugs identified by the Agency for distribution through the Hemophilia Disease Management Pilot Program will be reimbursed on a Fee-for-Service basis. Upon implementation of the Hemophilia Disease Management Pilot Program, the Health Plan shall coordinate the care of its’ enrollees with Agency-approved organizations and shall not be responsible for the distribution of Hemophilia-related drugs. g. Health Plans shall submit pharmacy encounter data in a format supplied by the Agency on an ongoing quarterly payment schedule, as specified in Section XII of this Contract. For example, data for all claims paid during 04/01/06 and 06/30/06 is due to the Agency by 07/31/06.   15. Quality Enhancements In addition to the covered services specified in this Section, the Health Plan shall offer Quality Enhancements ("QEs") to Enrollees as specified below. a. The Health Plan shall offer QEs in community settings that are accessible to Enrollees. b. The Health Plan shall inform Enrollees and Providers of the QEs, and how to access services related to QEs, through the Enrollee and Provider Handbooks. c. The Health Plan shall develop and maintain written policies and procedures to implement QEs. d. The Health Plan may cosponsor the annual training of Providers, provided that the training meets the Provider training requirements for the programs listed below. The Plan is encouraged to actively collaborate with community agencies and organizations, including CHD's, local Early Intervention Programs, Healthy Start Coalitions and local school districts in offering these services.  e. If the Health Plan involves the Enrollee in an existing community program for purposes of meeting the QE requirement, the Health Plan shall document referrals to the community program, shall follow-up on the Enrollee's receipt of services from the community program and record the Enrollee's involvement in the Enrollee’s Medical Record. f. QE programs shall include, but not be limited to, the following:   (1) Children's Programs - The Health Plan shall provide regular general wellness programs targeted specifically toward Enrollees from birth to the age of five (5), or the Health Plan shall make a good faith effort to involve Enrollees in existing community Children's Programs. i. Children's Programs shall promote increased utilization of prevention and early intervention services for at risk Enrollees with Children/Adolescents in the target population. The Health Plan shall approve claims for services recommended by the Early Intervention Program when they are Covered Services and Medically Necessary. ii. The Health Plan shall offer annual training to Providers that promote proper nutrition, breast-feeding, immunizations, CHCUP, wellness, prevention and early intervention services.   (2) Domestic Violence - The Health Plan shall ensure that PCPs screen Enrollees for signs of domestic violence and shall offer referral services to applicable domestic violence prevention community agencies.   (3) Pregnancy Prevention - The Health Plan shall conduct regularly scheduled Pregnancy Prevention programs, or shall make a good faith effort to involve Enrollees in existing community Pregnancy Prevention programs, such a the Abstinence Education Program. The programs shall be targeted towards teen Enrollees, but shall be open to all Enrollees, regardless of age, gender, pregnancy status or parental consent.   (4) Prenatal/Postpartum Pregnancy Programs - The Health Plan shall provide regular home visits, conducted by a home health nurse or aide, and counseling and educational materials to pregnant and postpartum Enrollees who are not in compliance with the Health Plan's prenatal and postpartum programs. The Health Plan shall coordinate its efforts with the local Healthy Start Care Coordinator to prevent duplication of services.   (5) Smoking Cessation - The Health Plan shall conduct regularly scheduled Smoking Cessation programs as an option for all Enrollees, or the Health Plan shall make a good faith effort to involve Enrollees in existing community or Smoking Cessation programs. The Health Plan shall provide Smoking Cessation counseling to Enrollees. The Health Plan shall provide Participating PCPs with the Quick Reference Guide to assist in identifying tobacco users and supporting and delivering effective Smoking Cessation interventions. (The Quick Reference Guide is a distilled version of the Public Health Service sponsored Clinical Practice Guideline, Treating Tobacco Use & Dependence. The Plan can obtain copies of the Quick Reference guide by contacting the DHHS, Agency for Health Care Research & Quality (AHR) Publications Clearinghouse at (800) 358-9295 or P.O. Box 8547, Silver Spring, MD 20907.)   (6) Substance Abuse - The Health Plan shall offer Substance Abuse screening training to its Providers on an annual basis. i. The Health Plan shall have all PCPs screen Enrollees for signs of Substance Abuse as part of prevention evaluation at the following times:   (a) Initial contact with a new Enrollee;   (b) Routine physical examinations;   (c) Initial prenatal contact;   (d) When the Enrollee evidences serious over-utilization of medical, surgical, trauma or emergency services; and   (e) When documentation of emergency room visits suggests the need. ii. The Health Plan shall offer targeted Enrollees either community or Health Plan sponsored Substance Abuse programs.   16. Protective Custody The Health Plan shall provide a physical screening within seventy-two (72) hours, or immediately, if required, for all enrolled Children/Adolescsents taken into protective custody, emergency shelter or the foster care program by DCF, See Rule 65C-12.002, F.A.C. a. The Health Plan shall provide these required examinations, or, if unable to do so within the required time frames, must approve the out of network claim and forward it to the Agency and/or its Agent. b. For all CHCUP screenings for Children/Adolescents whose Enrollment and Medicaid eligibility are undetermined at the time of entry into the care and custody of DCF, and who are later determined to be Enrollees at the time the examinations took place, the Health Plan shall approve the claims and forward them to the Agency and/or the Fiscal Agent.   17. Therapy Services Medicaid Therapy Services are physical, speech-language (including augmentative and alternative communication systems), occupational and respiratory therapies. The Health Plan shall cover therapy services consistent with handbook requirements. Adults are covered for physical and respiratory therapy services under the Outpatient Hospital Services program. The Agency shall reimburse schools participating in the certified school match program for school-based Therapy Services rendered to Enrollees. The provision of school-based Therapy Services to an Enrollee does not replace, substitute or fulfill a service prescription or doctors' orders for Therapy Services external to the Health Plan. The Health Plan shall:     a. Refer Enrollees to appropriate Participating Providers for further assessment and treatment of conditions;   b. Offer Enrollees scheduling assistance in making treatment appointments and obtaining transportation; and   c. Provide for care management in order to follow the Enrollee’s progress from screening through his/her course of treatment.   18. Transportation a. Transportation services are the arrangement and provision of an appropriate mode of Transportation for Enrollees to receive medical care services. The Health Plan shall comply with the limitations and exclusions in the Medicaid Transportation Coverage, Limitations & Reimbursement Handbook (the “Transportation Handbook”) except where compliance conflicts with the terms of this Contract, the Contract terms shall take precedence. In no instance may the limitations or exclusions imposed by the Health Plan be more stringent than those specified in the Transportation Handbook. b. The Health Plan shall have the option to provide Transportation services directly through the Health Plan’s network of Transportation Providers, or through a Provider contract relationship, which may include the Commission for the Transportation Disadvantaged (CTD). c. Regardless of whether the Health Plan chooses to coordinate with a Transportation Provider or provide Transportation services directly, the Health Plan shall be responsible for monitoring the provision of services. The Health Plan:   (1) Shall assure that Transportation providers are appropriately licensed and insured in accordance with the provisions of the Transportation Handbook;   (2) Must provide Transportation Services for all Enrollees seeking necessary Medicaid services;   (3) Is not obligated to follow the requirements of the Commission for the Transportation Disadvantaged or the Transportation Coordinating Boards as set forth in Chapter 427, F.S., 2004; unless the Health Plan has chosen to coordinate services with the CTD;   (4) Shall be responsible for the cost of transporting an Enrollee from a nonparticipating facility or Hospital to a participating facility or Hospital if the reason for transport is solely for the Health Plan's convenience; and   (5) Shall approve claims for Transportation Services providers in accordance with the requirements set forth in this Contract. d. The Health Plan may delegate the provision of Transportation Services to a third party.   (1) The Health Plan shall provide a copy of the model Participating Transportation Subcontract to the Bureau of Managed Health Care.   (2) The Health Plan may subcontract with more than one Transportation services Provider.   (3) The Health Plan shall maintain oversight of any third party providing services on the Health Plan's behalf. e. The Health Plan shall provide the following non-emergency Transportation, at a minimum, as part of its line of Transportation Services: (1) Ambulatory Transportation; (2) Long haul ambulatory Transportation; (3) Wheelchair Transportation; (4) Stretcher Transportation; (5) Multiload Transportation; (6) Mass transit Transportation; (7) Over-the-road bus; (8) Over-the-road train; (9) Private volunteer Transportation;  (10) Escort services (including medical escort); and (11) Commercial air carrier Transportation. f. Before providing Transportation Services, the Health Plan shall provide to the Bureau of Managed Health Care a copy of its policies and procedures relating to the following:   (1) How the Health Plan will determine eligibility for each Enrollee;   (2) The Health Plan's course of action as to how it will determine what type of Transportation to provide to a particular Enrollee;   (3) The Health Plan's procedure for providing Prior Authorization to Enrollees requesting Transportation Services;   (4) The Health Plan's comprehensive employee training program to investigate potential fraud;   (5) How the Health Plan will review Transportation Providers who demonstrate a pattern or practice of: (a) Falsified encounter or service reports; (b) Overstated reports or up-coded levels of service; and/or (c) Fraud or abuse, as defined in section 409.913, F.S.   (6) How the Health Plan will review Transportation Providers that: (a) Alter, falsify or destroy records prior to the end of the five (5) year records retention requirement; (b) Make false statements about credentials; (c) Misrepresent medical information to justify referrals; (d) Failed to provide scheduled Transportation for Enrollees; (e) Charge Enrollees for covered services; and/or (f) Have, or been suspected of committing, fraud or abuse, as defined in section 409.913, F.S.   (7) How the Health Plan will provide Transportation Services outside of the Health Plan's service area. The Health Plan shall state clearly the guidelines it will use in order to control costs when providing Transportation Services outside of the Health Plan's service area. g. The Health Plan shall report immediately, in writing to the Agency Contract Manager, the Bureau of Medicaid Program Integrity (MPI), and Medicaid Fraud Control Unit (MFCU), any aspect of Transportation Service delivery, by any Transportation services provider, any adverse or untoward incident. (See section 641.55, F.S.) The Health Plan shall also report, immediately upon identification, in writing to the Agency Contract Manager, the MPI and the MFCU, all instances of suspected Enrollee or Transportation Services Provider fraud or abuse.( As defined in section 409.913, F.S.) The Health Plan shall file a written report with the MPI, the MFCU, and the Agency Contract Manager immediately upon the detection of a potentially or suspected fraudulent or abusive action by a Transportation services provider. At a minimum, the report must contain the name, tax identification number and contract information of the Transportation services provider and a description of the suspected fraudulent or abusive act. The report shall be in the form of a narrative. h. Insurance, Safety Requirements and Standards (Including, but not limited to, 41-2, F.A.C.)   (1) The Health Plan shall ensure compliance with the minimum liability insurance requirement of $100,000 per person and $200,000 per incident for all Transportation services purchased or provided for the Transportation disadvantaged through the Health Plan. See section 768.28(5), F.S. The Health Plan shall indemnify and hold harmless the local, State, and federal governments and their entities and the Agency from any liabilities arising out of or due to an accident or negligence on the part of the Health Plan and/or all Transportation Providers under contract to the Health Plan. The Health Plan may act as a Transportation Provider, in which case it must follow all requirements set forth below for Transportation Providers.   (2) The Health Plan, and all Transportation Providers, shall ensure that all operations and services are in compliance with all federal and State safety requirements, including, but not limited to, section 341.061(2)(a), Florida Statutes, and Chapter 14-90, F.A.C.   (3) The Health Plan, and all Transportation Providers, shall ensure continuing compliance with all applicable State or federal laws relating to drug testing, including, but not limited to, to section 112.0455, Florida Statutes, 2004, Rule 14-17.012, Chapters 59A-24 and 60L-19, F.A.C., 41 U.S.C. 701, 49 C.F.R., Parts 29 and 382, and 46 C.F.R., Parts 4, 5, 14, and 16.   (4) The Health Plan and all Transportation Providers shall adhere to the following standards, including, but not limited to, the following: (a) Drug and alcohol testing for safety sensitive job positions relating to the provision of Transportation Services regarding pre-employment, randomization, post-accident, and reasonable suspicion as required by the Federal Highway Administration and the Federal Transit Administration; (b) Use of child safety restraint devices, where the use of such devices would not interfere with the safety of a child (for example, a child in a wheelchair); (c)  Enrollee property that can be carried by the passenger and/or driver, and can be stowed safely on the vehicle, shall be transported with the passenger at no additional charge. The driver shall provide Transportation of the following items, as applicable, within the capabilities of the vehicle:   i. Wheelchairs;   ii. Child seats;   iii. Stretchers;   iv. Secured oxygen;   v. Personal assistive devices; and/or   vi. Intravenous devices. (d) Vehicle transfer points shall provide shelter, security, and safety of Enrollees; (e) Maintain inside all vehicles copies of the Health Plan’s toll-free phone number for Enrollee complaints; (f) The interior of all vehicles shall be free from dirt, grime, oil, trash, torn upholstery, damaged or broken seats, protruding metal or other objects or materials which could soil items placed in the vehicle or provide discomfort for Enrollees; (g) Maintain a passenger/trip database for each Enrollee transported by the Health Plan/Transportation Provider; (h) Ensure adequate seating for paratransit services for each Enrollee and escort, child, or personal care attendant, and shall ensure that the vehicle does not transport more passengers than the registered passenger seating capacity in a vehicle at any time; (i) Ensure adequate seating space for transit services for each Enrollee and escort, child, or personal care attendant, and shall ensure that transit vehicles provide adequate seating or standing space to each rider, and shall ensure that the vehicle does not transport more passengers than the registered passenger seating or standing capacity in a vehicle at any time; (j) Drivers for paratransit services shall identify themselves by name and company in a manner that is conducive to communications with the specific passenger, upon pickup of each Enrollee, group of Enrollees, or representative, guardian, or associate of the Enrollee, except in situations where the driver regularly transports the Enrollee on a recurring basis; (k)  Each driver must have photo identification that is viewable by the passenger. Name patches, inscriptions or badges that affix to driver clothing are acceptable. For transit services, the driver photo identification shall be in a conspicuous location in the vehicle; (l) The paratransit driver shall provide the Enrollee with boarding assistance, if necessary or requested, to the seating portion of the vehicle. The boarding assistance shall include, but not be limited to, opening the vehicle door, fastening the seat belt or utilization of wheel chair securement devices, storage of mobility assistive devices and closing the vehicle door. In the door-through-door paratransit service category, the driver shall open and close doors to buildings, except in situations in which assistance in opening and/or closing building doors would not be safe for passengers remaining in the vehicle. The driver shall provide assisted access in a dignified manner. Drivers may not assist wheelchair passengers up or down more than one (1) step, unless it can be performed safely as determined by the Enrollee, guardian, and driver; (m) Smoking, eating and drinking are prohibited in any vehicle, except in cases in which, as a Medical Necessity, the Enrollee requires fluids or sustenance during transport; (n)  Ensure that all vehicles are equipped with two-way communications, in good working order and audible to the driver at all times, by which to communicate with the Transportation Services hub or base of operations; (o) Ensure that all vehicles have working air conditioners and heaters. The Health Plan shall ensure that all vehicles that do not have a working air conditioner or heater are removed from the vehicle pool and scheduled for repair or replacement; (p) Develop and implement a first aid policy and cardiopulmonary resuscitation policy; (q) Ensure that all drivers providing Transportation Services undergo a background screening; (r) Establish Enrollee pick-up windows and communicate these windows to Transportation Providers and Enrollees; (s)  Establish a minimum 24-hour advance notification policy to obtain Transportation Services. The Health Plan shall communicate said policy to Transportation Providers and Enrollees; (t) Establish a performance measure to evaluate the safety of the Transportation Services provided by Transportation Providers; (u) Establish a performance measure to evaluate the reliability of the vehicles utilized by Transportation Providers; (v) Establish a performance measure to evaluate the quality of service provided by a Transportation Provider; (w) The Health Plan shall submit these performance measures to the Agency for written approval by the end of the first month of this contract term; (x) The Health Plan shall report the results of these evaluation to the Agency as described in Section XI; and (y) Ensure that all drivers speak English. i. Operational Standards - Each Health Plan shall implement, or ensure that each Transportation Provider has implemented, policies and procedures that, at a minimum, comply with the following (For reference, see 14-90, F.A.C.):   (1) Address the following safety elements and requirements: (a) Safety policies and responsibilities; (b) Vehicle and equipment standards and procurement criteria; (c) Operational standards and procedures; (d) Vehicle driver and employee selection; (e) Driving requirements; (f) Vehicle driver and employee training; (g) Vehicle maintenance; (h) Investigations of events described below; (i) Hazard identification and resolution; (j) Equipment for transporting wheelchairs; (k) Safety data acquisition and analysis; (l) Safety standards for private contract vehicle transit system(s) that provide(s) Transportation services for compensation as a result of a contractual agreement with the vehicle transit system.   (2) Shall submit an annual safety certification to the Agency verifying the following: (a) Adoption of policies and procedures that, at a minimum, establish standard set forth in this Section; and (b) The Health Plan/Transportation Provider is in full compliance with the policies and procedures relating to Transportation Services, and that it has performed annual safety inspections on all vehicles operated by the Health Plan/Transportation Provider, by persons meeting the requirements set forth below.   (3) The Health Plan shall suspend immediately a Transportation Provider if, in the sole discretion of the Health Plan, and at any time, continued use of that Transportation Provider, is unsafe for passenger service or poses a potential danger to public safety.   (4) Address the following security requirements: (a) Security policies, goals, and objectives; (b) Organization, roles, and responsibilities; (c) Emergency management processes and procedures for mitigation, preparedness, response, and recovery; (d) Procedures for investigation of any event involving a vehicle, or taking place on vehicle transit system controlled property, resulting in a fatality, injury, or property damage as discussed below; (e) Procedures for the establishment of interfaces with emergency response organizations; (f) Employee security and threat awareness training programs; (g) Conduct and participate in emergency preparedness drills and exercises; and (h) Security requirements for Transportation Providers that provide Transportation Services for compensation as a result of a contractual agreement with the Health Plan/Transportation Provider.   (5) Shall establish criteria and procedures for selection, qualification, and training of all drivers. The criteria shall include, at a minimum, the following: (a) Driver qualifications and background checks with minimum hiring standards; (b) Driving and criminal background checks for all new drivers; (c) Verification and documentation of valid driver licenses for all employees who drive vehicles; (d) Training and testing to demonstrate and ensure adequate skills and capabilities to safely operate each type of vehicle or vehicle combination before driving unsupervised; (e) At a minimum, drivers shall be given explicit instructional and procedural training and testing in the following areas:   i. The Health Plan’s/Transportation Provider’s safety and operational policies and procedures;   ii. Operational vehicle and equipment inspections;   iii. Vehicle equipment familiarization;   iv. Basic operations and maneuvering;   v. Boarding and alighting passengers;   vi. Operation of wheelchair lift and other special equipment and driving conditions;   vii. Defensive driving;   viii. Passenger assistance and securement;   ix. Handling of emergencies and security threats; and   x. Security and threat awareness. (f) Shall provide written operational and safety procedures to all vehicle drivers before the drivers are allowed to drive unsupervised. These procedures and instructions shall address, at a minimum, the following:   i. Communication and handling of unsafe conditions, security threats, and emergencies;   ii. Familiarization and operation of safety and emergency equipment, wheelchair lift equipment, and restraining devices; and   iii. Application and compliance with applicable federal and State rules and regulations. The provisions in Sections 10.8.14.h.5(e) and (f), above, shall not apply to personnel licensed and authorized by the Plan/Transportation Provider to drive, move, or road test a vehicle in order to perform repairs or maintenance services where it has been determined that such temporary operation does not create an unsafe operating condition or create a hazard to public safety. (g) Shall maintain the following records for at least five (5) years:   i. Records of vehicle driver background checks and qualifications;   ii. Detailed descriptions of training administered and completed by each vehicle driver;   iii. A record of each vehicle driver’s duty status, which shall include total days worked, on-duty hours, driving hours and time of reporting on- and off-duty each day; and   iv. Any documents required to be prepared by this Contract. (h) Shall establish a drug-free workplace policy statement, in accordance with 49 C.F.R. Part 29, and a substance abuse management and testing program; in accordance with 49 C.F.R. Parts 40 and 655, and (i) Shall require that drivers write and submit a daily vehicle inspection report, pursuant to Rule 14-90.006, F.A.C.   (6) Shall establish a maintenance policy and procedures for preventative and routine maintenance for all vehicles. The maintenance policy and procedures shall ensure, at a minimum, that: (a) All vehicles, all parts and accessories on such vehicles, and any additional parts and accessories which may affect the safety of vehicle operation, including frame and frame assemblies, suspension systems, axles and attaching parts, wheels and rims, and steering systems, are regularly and systematically inspected, maintained and lubricated in accordance with the standards developed and established according to the vehicle manufacturer’s recommendations and requirements; (b) That a recording and tracking system is established for the types of inspections, maintenance, and lubrication intervals, including the date or mileage when these services are due. Required maintenance inspections shall be more comprehensive than daily inspections performed by the driver; (c) That proper preventive maintenance is performed when on all vehicles; and (d) That the Health Plan/Transportation Provider maintains and provides written documentation of preventive maintenance, regular maintenance, inspections, lubrication, and repairs performed for each vehicle under their control. Such records shall be maintained by the Health Plan/Transportation Provider for at least five (5) years and include, at a minimum, the following information:   i. Identification of the vehicle, including make, model, and license number or other means of positive identification and ownership;   ii. Date, mileage, and type of inspection, maintenance, lubrication, or repair performed;   iii. Date, mileage, and description of each inspection, maintenance, and lubrication intervals performed;   iv. If not owned by the Health Plan/Transportation Provider, the name of any person or lessor furnishing any vehicle; and   v. The name and address of any entity or contractor performing an inspection, maintenance, lubrication, or repair.   (7) The Health Plan/Transportation Provider shall investigate, or cause to be investigated, any event involving a vehicle or taking place on Health Plan/Transportation Provider controlled property resulting in a fatality, injury, or property damage as follows: (a)  A fatality, where an individual is confirmed dead, within three (3) days of a Transportation Services related event, excluding suicides and deaths from illnesses. The Health Plan must file detailed report of the incident with the Agency within ten (10) days of the event (See section 641.55(6), F.S.); (b) Injuries requiring immediate medical attention away from the scene for two (2) or more individuals; (c) Property damage to Health Plan/Transportation Provider vehicles, other Health Plan/Transportation Provider property or facilities, or any other property, except the Health Plan/Transportation Provider shall have the discretion to investigate events resulting in property damage totaling less than $1,000; (d) Evacuation of a vehicle due where there is imminent danger to passengers on the vehicle, excluding evacuations due to vehicle operation issues; (e) Each investigation shall be documented in a final report that includes a description of investigation activities, identified causal factors and a corrective action plan;   i. Each corrective action plan shall identify the action to be taken by the Health Plan/Transportation Provider and the schedule for its implementation; and   ii. The Health Plan/Transportation Provider must monitor and track the implementation of each corrective action plan. (f) The Health Plan/Transportation Provider shall maintain all investigation reports, corrective action plans, and related supporting documentation for a minimum of five (5) years from the date of completion of the investigation. j. Medical Examinations for Drivers - The Health Plan/Transportation Provider shall establish medical examination requirements for all applicants for driver positions and for existing drivers. The medical examination requirements shall include a pre-employment examination for applicants, an examination at least once every two (2) years for existing drivers, and a return to duty examination for any driver prior to returning to duty after having been off duty for thirty (30) or more days due to an illness, medical condition, or injury.   (1) Medical examinations may be performed and recorded according to qualification standards adopted by the Health Plan/Transportation Provider, provided the medical examination qualification standards adopted by the Health Plan/Transportation Provider meet or exceed those provided in Department Form Number 725-030-11, Medical Examination Report for Bus Transit System Driver, Rev. 07/05, hereby incorporated by reference. Copies of Form Number 725-030-11 are available from the Florida Department of Transportation, Public Transit Office, 605 Suwannee Street, Mail Station 26, Tallahassee, Florida 32399-0450 or on-line at www.dot.state.fl.us/transit.   (2) Medical examinations shall be performed by a Doctor of Medicine or Osteopathy, a Physician Assistant (PA) or ARNP licensed or certified by the State of Florida. The examination shall be conducted in person, and not via the Internet. If medical examinations are performed by a PA or ARNP, they must be performed under the supervision or review of a Doctor of Medicine or Osteopathy. (a) An ophthalmologist or optometrist licensed by the State of Florida may perform as much of the examination as pertains to visual acuity, field of vision and color recognition. (b) Upon completion of the examination, the examining medical professional shall complete, sign, and date the medical examination report.   (3) The Health Plan/Transportation Provider shall have on file proof of medical examination, i.e., a completed and signed medical examination report for each driver, dated within the past 24 months. Medical examination reports of employee drivers shall be maintained by the Health Plan/Transportation Provider for a minimum of five (5) years from the date of the examination. k. Operational and Driving Requirements   (1) The Health Plan/Transportation Provider shall not permit a driver to drive a vehicle when such driver’s license has been suspended, canceled or revoked. The Health Plan/Transportation Provider shall require a driver who receives a notice that his or her license to operate a motor vehicle has been suspended, canceled, or revoked notify his or her employer of the contents of the notice immediately, and no later than the end of the business day following the day he or she received the notice.   (2) At all times, the Health Plan/Transportation Provider shall operate vehicles in compliance with applicable traffic regulations, ordinances and laws of the jurisdiction in which they are being operated.   (3) The Health Plan/Transportation Provider shall not permit or require a driver to drive more than twelve (12) hours in any one 24-hour period, or drive after having been on duty for sixteen (16) hours in any one twenty-four (24) hour period. The Health Plan/Transportation Provider shall not permit a driver to drive until the driver fulfills the requirement of a minimum eight (8) consecutive hours off-duty. A driver’s work period shall begin from the time he or she first reports for duty to his or her employer. A driver is permitted to exceed his or her regulated hours in order to reach a regularly established relief or dispatch point, provided the additional driving time does not exceed one (1) hour.   (4) The Health Plan/Transportation Provider shall not permit or require a driver to be on duty more than seventy-two (72) hours in any period of seven (7) consecutive days; however, twenty-four (24) consecutive hours off-duty shall constitute the end of any such period of seven (7) consecutive days. The Health Plan/Transportation Provider shall ensure that a driver who has reached the maximum 72 hours of on-duty time during the seven (7) consecutive days has a minimum of twenty-four (24) consecutive hours off-duty before returning to on-duty status.   (5) A driver is permitted to drive for more than the regulated hours for safety and protection of the public due to conditions such as adverse weather, disaster, security threat, a road or traffic condition, medical emergency or an accident.   (6) The Health Plan/Transportation Provider shall not permit or require any driver to drive when his or her ability is impaired, or likely to be impaired, by fatigue, illness, or other causes, as to make it unsafe for the driver to begin or continue driving.   (7) The Health Plan/Transportation Provider shall require pre-operational or daily inspection of all vehicles and reporting of all defects and deficiencies likely to affect safe operation or cause mechanical malfunctions. (a) The Health Plan/Transportation Provider shall maintain a log detailing a daily inspection or test of the following parts and devices to ascertain that they are in safe condition and in good working order:   i. Service brakes;   ii. Parking brakes;   iii. Tires and wheels;   iv. Steering;   v. Horn;   vi. Lighting devices;   vii. Windshield wipers;   viii. Rear vision mirrors;   ix. Passenger doors and seats;   x. Exhaust system;   xi. Equipment for transporting wheelchairs; and   xii. Safety, security, and emergency equipment. (b) The Health Plan/Transportation Provider shall review daily inspection reports and document corrective actions taken as a result of any deficiencies identified by any inspections. (c) The Health Plan/Transportation Provider shall retain records of all inspections and any corrective action documentation for five (5) years. (8) The driver shall not operate a vehicle with passenger doors in the open position when passengers are aboard. The driver shall not open the vehicle’s doors until the vehicle comes to a complete stop. The Health Plan/Transportation Provider shall not operate a vehicle with inoperable passenger doors with passengers aboard, except to move the vehicle to a safe location. (9) During darkness, interior lighting and lighting in stepwells on vehicles shall be sufficient for passengers to enter and exit safely. (10) Passenger(s) shall not be permitted in the stepwell(s) of any vehicle while the vehicle is in motion, or to occupy an area forward of the standee line. (11) Passenger(s) shall not be permitted to stand on or in vehicles not designed and constructed for that purpose. (12) The Health Plan/Transportation Provider shall not refuel vehicles in a closed building. The Health Plan/Transportation Provider shall minimize the number of times a vehicle shall refuel when passengers are onboard. (13) The Health Plan/Transportation Provider shall require the driver to be properly secured to the driver’s seat with a restraining belt at all times while the vehicle is in motion. (14) The driver shall not leave vehicles unattended with passenger(s) aboard for longer than five (5) minutes. The Health Plan/Transportation Provider shall ensure that the driver sets the parking or holding brake any time the vehicle is left unattended. (15) The Health Plan/Transportation Provider shall not leave vehicles unattended in an unsafe condition with passenger(s) aboard at any time. l. Vehicle Equipment Standards and Procurement Criteria   (1) The Health Plan/Transportation Provider shall ensure that vehicles procured and operated meet the following requirements, at a minimum: (a) The capability and strength to carry the maximum allowed load and not exceed the manufacturer’s gross vehicle weight rating (GVWR), gross axle weighting, or tire rating; (b) Structural integrity that mitigates or minimizes the adverse effects of collisions; and (c) Federal Motor Vehicle Safety Standards (FMVSS), 49 C.F.R. Part 571, Sections 102, 103, 104, 105, 108, 207, 209, 210, 217, 220, 221, 225, 302, 403, and 404, October 1, 2004, are hereby incorporated by reference.   (2) Proof of strength and structural integrity tests on new vehicles procured shall be submitted by manufacturers or the Health Plan/Transportation Providers to the Department of Transportation. (See 14-90, F.A.C.)   (3) The Health Plan/Transportation Provider shall ensure that every vehicle operated in the State in connection with this Contract shall be equipped as follows: (a) Mirrors - There must be at least two (2) exterior rear vision mirrors, one (1) at each side. The mirrors shall be firmly attached to the outside of the vehicle and so located as to reflect to the driver a view to the rear along both sides of the vehicle.   i. Each exterior rear vision mirror, on Type I buses shall have a minimum reflective surface of fifty (50) square inches and the right (curbside) mirror shall be located on the bus so that the lowest part of the mirror and its mounting is a minimum eighty (80) inches above the ground. All Type I buses shall be equipped with an inside rear vision mirror capable of giving the driver a clear view of seated or standing passengers. Buses having a passenger exit door that is located inconveniently for the driver’s visual control shall be equipped with additional interior mirror(s), enabling the driver to view the passenger exit door. The exterior right (curbside) rear vision mirror and its mounting on Type I buses may be located lower than 80 inches from the ground, provided such buses are used exclusively for paratransit services.  See section 341.031, F.S.   ii. In lieu of interior mirrors, trailer buses and articulated buses may be equipped with closed circuit video systems or adult monitors in voice control with the driver. (b) Wiring and Battery - Electrical wiring shall be maintained so as not to come in contact with moving parts, or heated surfaces, or be subject to chafing or abrasion which may cause insulation to become worn.   i. Every Type I bus manufactured on or after February 7, 1988, shall be equipped with a storage battery(ies) electrical power main disconnect switch. The disconnect switch shall be practicably located in an accessible location adjacent to or near to the battery(ies) and be legibly and permanently marked for identification.   ii. Every storage battery on each public-sector bus shall be mounted with proper retainment devices in a compartment which provides adequate ventilation and drainage. (c) Brake Interlock Systems - All Type I buses having a rear exit door shall be equipped with a rear exit door/brake interlock that automatically applies the brake(s) upon driver activation of the rear exit door to the open position. Interlock brake application shall remain activated until deactivation by the driver and the rear exit door returns to the closed position. The rear exit door interlock on such buses shall be equipped with an identified override switch enabling emergency release of the interlock function, which shall not be located within reach of the seated driver. Air pressure application to the brake(s) during interlock operation, on buses equipped with rear exit door/brake interlock, shall be regulated at the original equipment manufacturer’s specifications.   (4) Standee Line and Warning - Every vehicle designed and constructed to allow standees shall be plainly marked with a line of contrasting color at least two (2) inches wide or be equipped with some other means to indicate that any passenger is prohibited from occupying a space forward of a perpendicular plane drawn through the rear of the driver’s seat and perpendicular to the longitudinal axis of the vehicle. A sign shall be posted at or near the front of the vehicle stating that it is a violation for a vehicle to be operated with passengers occupying an area forward of the line.   (5) Handrails and Stanchions - Every vehicle designed and constructed to allow standees shall be equipped with overhead grab rails for standee passengers. Overhead grab rails shall be continuous, except for a gap at the rear exit door, and terminate into vertical stanchions or turn up into a ceiling fastener. Every Type I and Type II bus designed for carrying more than sixteen (16) passengers shall be equipped with grab handles, stanchions, or bars at least ten (10) inches long and installed to permit safe on-board circulation, seating and standing assistance, and boarding and unloading by elderly and handicapped persons. Type I buses shall be equipped with a safety bar and panel directly behind each entry and exit stepwell.   (6) Flooring, Steps, and Thresholds - Flooring, steps, and thresholds on all vehicles shall have slip resistant surfaces without protruding or sharp edges, lips, or overhangs, to prevent tripping hazards. All step edges and thresholds shall have a band of color(s) running the full width of the step or edge which contrasts with the step tread and riser, either light-on-dark or dark-on-light.   (7) Doors - Power activated doors on all vehicles shall be equipped with a manual device designed to release door closing pressure.   (8) Emergency Exits - All vehicles shall have an emergency exit door, or in lieu thereof, shall be provided with emergency escape push-out windows. Each emergency escape window shall be in a form of a parallelogram with dimensions of not less than 18" by 24", and each shall contain an area of not less than 432 square inches. There shall be a sufficient number of such push-out or kick-out windows in each vehicle to provide a total escape area equivalent to 67 square inches per seat, including the driver’s seat. (a) No less than forty percent (40%) of the total escape area shall be on one (1) side of the vehicle. Emergency escape kick-out or push-out windows and emergency exit doors shall be conspicuously marked by a sign or light and shall always be kept in good working order so that they may be readily opened in an emergency. (b) All such windows and doors shall not be obstructed by bars or other such means located either inside or outside so as to hinder escape. Vehicles equipped with an auxiliary door for emergency exit shall be equipped with an audible alarm and light indicating to the driver when a door is ajar or opened while the engine is running. (c) Supplemental security locks operable by a key are prohibited on emergency exit doors unless these security locks are equipped and connected with an ignition interlock system or an audio visual alarm located in the driver’s compartment. Any supplemental security lock system used on emergency exits shall be kept unlocked whenever a vehicle is in operation.   (9) Tires and Wheels - Tires shall be properly inflated in accordance with manufacturer’s recommendations. (a) No vehicle shall be operated with a tread groove pattern depth:   i. Less than 4/32 (1/8) of an inch, measured at any point on a major tread groove for tires on the steering axle of all vehicles. The measurements shall not be made where tie bars, humps, or fillets are located.   ii. Less than 2/32 (1/16) of an inch, measured at any point on a major tread groove for all other tires of all vehicles. The measurements shall not be made where tie bars, humps, or fillets are located. (b) The Health Plan/Transportation Provider shall not operate any vehicle with recapped, regrooved, or retreaded tires on the steering axle. (c) The Health Plan/Transportation Provider shall ensure that all wheels are visibly free from cracks and distortion and shall not have missing, cracked, or broken mounting lugs. (10) Suspension - The suspension system of all vehicles, including springs, air bags, and all other suspension parts as applicable, shall be free from cracks, leaks, or any other defect which would or may cause its impairment or failure to function properly. (11) Steering and Front Axle - The steering system of all vehicles shall have no indication of leaks which would or may cause its impairment to function properly, and shall be free from cracks and excessive wear of components that would or may cause excessive free play or loose motion in the steering system or above normal effort in steering control. (12) Seat Belts - Every vehicle shall be equipped with an adjustable driver’s restraining belt in compliance with the requirements of FMVSS 209, “Seat Belt Assemblies” (See 49 C.F.R. 571.209) and FMVSS 210, “Seat Belt Assembly Anchorages.” (See 49 C.F.R. 571.210) (13) Safety Equipment - Every vehicle shall be equipped with one (1) fully charged dry chemical or carbon dioxide fire extinguisher, having at least a 1A:BC rating and bearing the label of Underwriter’s Laboratory, Inc. (a) Each fire extinguisher shall be securely mounted on the vehicle in a conspicuous place or a clearly marked compartment and be readily accessible. (b) Each fire extinguisher shall be maintained in efficient operating condition and equipped with some means of determining if it is fully charged. (c) Every Type I bus shall be equipped with portable red reflector warning devices (See section 316.300, F.S.). (14) Vehicles used for the purpose of transporting individuals with disabilities shall meet the requirements set forth in 49 C.F.R. Part 38, hereby incorporated by reference, and the following: (a) Installation of a wheelchair lift or ramp shall not cause the manufacturer’s GVWR, gross axle weight rating, or tire rating to be exceeded. (b) Except in locations within 3 1/2 inches of the vehicle floor, all readily accessible exposed edges or other hazardous protrusions of parts of wheelchair lift assemblies or ramps that are located in the passenger compartment shall be padded with energy absorbing material to mitigate injury in normal use and in case of a collision. This requirement shall also apply to parts of the vehicle associated with the operation of the lift or ramp. (c) The controls for operating the lift shall be at a location where the driver or lift attendant has a full view, unobstructed by passengers, of the lift platform, its entrance and exit, and the wheelchair passenger, either directly or with partial assistance of mirrors. Lifts located entirely to the rear of the driver’s seat shall not be operable from the driver’s seat, but shall have an override control at the driver’s position that can be activated to prevent the lift from being operated by the other controls (except for emergency manual operation upon power failure). (d) The installation of the wheelchair lift or ramp and its controls and the method of attachment in the vehicle body or chassis shall not diminish the structural integrity of the vehicle nor cause a hazardous imbalance of the vehicle. No part of the assembly, when installed and stowed, shall extend laterally beyond the normal side contour of the vehicle or vertically beyond the lowest part of the rim of the wheel closest to the lift. (e) Each wheelchair lift or ramp assembly shall be legibly and permanently marked by the manufacturer or installer with the following minimum information: i. The manufacturer’s name and address; ii. The month and year of manufacture; and iii. A certificate that the wheelchair lift or ramp securement devices, and their installation, conform to State of Florida requirements applicable to accessible vehicles. (15) Wheelchair lifts, ramps, securement devices, and restraints shall be inspected and maintained as specified above. Instructions for normal and emergency operation of the lift or ramp shall be carried or displayed in every vehicle. m. Vehicle Safety Inspections   (1) The Health Plan/Transportation Provider shall require that all vehicles be inspected in accordance with the vehicle inspection procedures set forth above.   (2) It is the Health Plan’s/Transportation Provider’s responsibility to ensure that each individual performing a vehicle safety inspection is qualified as follows: (a) Understands the requirements set forth in 14-90, F.A.C., 2004 and can identify defective components; (b) Is knowledgeable of, and has mastered the methods, procedures, tools, and equipment used when performing an inspection; and (c) Has at least one (1) year of training and/or experience as a mechanic or inspector in a vehicle maintenance program and has sufficient general knowledge of vehicles owned and operated by the Health Plan/Transportation Provider to recognize deficiencies or mechanical defects.   (3) The Health Plan/Transportation Provider shall ensure that each vehicle receiving a safety inspection is checked for compliance with the safety devices and equipment requirements as referenced or specified above. Specific operable equipment and devices include the following: (a) Horn; (b) Windshield wipers; (c) Mirrors; (d) Wiring and battery(ies); (e) Service and parking brakes; (f) Warning devices; (g) Directional signals; (h) Hazard warning signals; (i) Lighting systems and signaling devices; (j) Handrails and stanchions; (k) Standee line and warning; (l) Doors and interlock devices; (m) Stepwells and flooring; (n) Emergency exits; (o) Tires and wheels; (p) Suspension system; (q) Steering system; (r) Exhaust system; (s) Seat belts; (t) Safety equipment; and (u) Equipment for transporting wheelchairs.   (4) A safety inspection report shall be prepared by the individual(s) performing the inspection and shall include the following: (a) Identification of the individual(s) performing the inspection; (b) Identification of the Health Plan/Transportation Provider operating the vehicle; (c) The date of the inspection; (d) Identification of the vehicle inspected; (e) Identification of the equipment and devices inspected including the identification of equipment and devices found deficient or defective; and (f) Identification of corrective action(s) for deficient or defective items and date(s) of completion of corrective action(s).   (5) Records of annual safety inspections and documentation of any required corrective actions shall be retained, for compliance review, a minimum of five (5) years by the Health Plan/Transportation Provider. n. Certification - Each Health Plan/Transportation Provider shall submit an annual safety and security certification in accordance with 14-90.10, F.A.C., 2004 and shall submit to any and all safety and security inspections and reviews in accordance with 14-90.12, F.A.C., 2004. o. The Health Plan shall report the following by August 15th of each year:   (1) The estimated number of one-way passenger trips to be provided in the following categories, as defined in the Transportation Handbook: (a) Ambulatory Transportation; (b) Long haul ambulatory Transportation; (c) Wheelchair Transportation; (d) Stretcher Transportation; (e) Ambulatory multiload Transportation; (f) Wheelchair multiload Transportation; (g) Mass transit pending Transportation; (h) Mass transit Transportation; (i) Mass transit Transportation (Enrollee has pass); and (j) Mass transit Transportation (sent pass to Enrollee).   (2) The actual amount of funds expended and the total number of trips provided during the previous fiscal year; and   (3) The operating financial statistics for the previous fiscal year. p. The Health Plan shall provide the total number of vehicles in each category, other than public Transportation, that will serve each county as well as a provider directory for all Transportation Services. REMAINDER OF PAGE INTENTIALLY LEFT BLANK   -------------------------------------------------------------------------------- Section VI Behavioral Health Care A.  General Provisions   1. The Health Plan shall provide Medically Necessary Behavioral Health Services for all Enrollees pursuant to this Contract. The Health Plan shall provide a full range of Behavioral Health Services authorized under the State Plan and specified by this Contract.   2. The Health Plan shall provide the following services as described in the Hospital Inpatient Handbook, Mental Health Targeted Case Management Coverage & Limitations Handbook, and the Community Behavioral Health Services Coverage & Limitations Handbook (the Handbooks). The Health Plan shall not alter the amount, duration and scope of such services from that specified in the Handbooks. The Health Plan shall not establish service limitations that are lower than, or inconsistent with the Handbooks.   a. Inpatient hospital care for psychiatric conditions (ICD-9-CM codes 290 through 290.43, 293.0 through 298.9, 300 through 301.9, 302.7, 306.51 through 312.4 and 312.81 through 314.9, 315.3, 315.31, 315.5, 315.8, and 315.9);   b. Outpatient hospital care for psychiatric conditions (ICD-9-CM codes 290 through 290.43, 293 through 298.9, 300 through 301.9, 302.7, 306.51 through 312.4 and 312.81 through 314.9, 315.3, 315.31, 315.5, 315.8, and 315.9);   c. Psychiatric physician services (for psychiatric specialty codes 42, 43, 44 and ICD-9-CM codes 290 through 290.43, 293.0 through 298.9, 300 through 301.9, 302.7, 306.51 through 312.4 and 312.81 through 314.9, 315.3, 315.31, 315.5, 315.8, and 315.9);   d. Community mental health services (ICD-9-CM codes 290 through 290.43, 293.0 through 298.9, 300 through 301.9, 302.7, 306.51 through 312.4 and 312.81 through 314.9, 315.3, 315.31, 315.5, 315.8, and 315.9); and for these procedure codes H0001, H0001HN; H0001H0, H0001TS; H0031; H0031 HO; H0031HN; H0031TS; H0032; H0032TS; H0046; H0047; H2000; H2000HO; H2000HP; H2010HO; H2010HE; H2010HF; H2010HQ; H2012; H2012HF; H2017; H2019; H2019HM; M2019HN; H2019HO; H2019HQ; H2019HR; H2030; T1007; T1007TS; T1015; T1015HE; T1015HF; T1023HE; or T1023HF.   e. Mental Health Targeted Case Management (Children: T1017HA; Adults: T1017); and   f. Mental Health Intensive Targeted Case Management (Adults: T1017HK). 3. Non Covered Services The following services are not covered by the Health Plan. Should the Health Plan determine the need for, or be advised of the need for, these or other services not customarily covered by the Health Plan, the Health Plan shall refer the Enrollee to the appropriate provider:   a. Specialized Therapeutic Foster Care;   b. Therapeutic Group Care Services;   c. Behavioral Health Overlay Services;    d. Community Substance Abuse Services, except as required by this Contract;   e. Residential Care;   f. Sub-acute Inpatient Psychiatric Program (SIPP) Services;   g. Clubhouse Services.   h. Comprehensive Behavioral Assessment, and   i. Florida Assertive Community Treatment Services (FACT)           The PSN shall NOT be responsible for the provision of mental health services to enrollees assigned to a FACT team by the DCF Substance Abuse and Mental Health Program (SAMH) Office. These individuals will be disenrolled from the plan and receive all mental health services through the funding mechanism developed by DCF/SAMH and AHCA and re-enrolled in the plan upon discharge from the FACT Team Services. The FACT Team providers are responsible for notifying Medicaid of admissions and discharges 4. The Health Plan shall provide Outpatient Medical Services in accordance with Section V, Covered Services, of this Contract. 5. If an Enrollee makes a request for services to the Health Plan, the Health Plan shall provide the Enrollee with the name (or names) of qualified Behavioral Health Care Providers, and if requested, assist the Enrollee with making an appointment with the Provider that is within the required access times indicated in Section VII.D., Appointment Waiting Times and Geographic Access Standards, and Section VII.E., Behavioral Health Services. 6. Services available under the Health Plan shall represent a comprehensive range of appropriate services for both Children/Adolescents and adults who experience impairments ranging from mild to severe and persistent. This Section outlines the Agency’s expectations and requirements related to each of the categories of service.   Optional services may be provided and are defined as additional services that will enhance the services mandated in the contract. A list of possible optional services is included in the Additional Service Requirements section as an example of services that may be beneficial for plan enrollees. Optional services may be provided under the Contract as a downward substitution of care. When a service is intended to be provided as a downward substitution, the provider must use clinical rationale for determining the benefit of the service for the enrollee. REMAINDER OF PAGE INTENTIONALLY LEFT BLANK     B.    Expanded Services   1. Inpatient Hospital Services Inpatient Hospital services are medically necessary mental health care services provided in a hospital setting (see Section V.B.8, Covered Services, Hospital Services - Inpatient, in this Contract). Services may be provided in a general Hospital psychiatric unit or in a specialty Hospital. The inpatient care and treatment services that an Enrollee receives must be under the direction of a licensed physician with the appropriate Medicaid specialty requirements. a. A hospital’s per diem (daily rate) for inpatient mental health hospital care and treatment covers all services and items furnished during a 24-hour period. The facilities, supplies, appliances, and equipment furnished by the hospital during the inpatient stay are included in the per diem as well as the related nursing, social, and other services furnished by the hospital during the inpatient stay. b.  For all Child/Adolescent Enrollees, the Health Plan shall be responsible for the provision of up to 365 days of mental health-related Hospital inpatient care for each year. c.  For all Enrollees, the Health Plan shall pay for inpatient mental health-related Hospital days determined Medically Necessary by the Health Plan’s medical director or designee, up to the maximum number of days required under the Contract. d. If an Enrollee is admitted to a Hospital for a non-psychiatric diagnosis and during the same hospitalization transfers to a psychiatric unit or the treatment of a psychiatric diagnosis, the Health Plan is at risk for the Medically Necessary mental health treatment inpatient days up to the maximum number of days required under the Contract. e. The Health Plan shall be responsible to cover the cost of all Enrollees’ Medically Necessary stays resulting from a mental health emergency, until such time as Enrollees can be safely transported to a designated facility. f. Crisis Stabilization Units may be used as a downward substitution for inpatient psychiatric hospital care when determined medically appropriate. These bed days are included toward the 45-day coverage count discussed above in A.1. They are calculated on a two for one basis. Two CSU days count toward one inpatient day. Beds funded by the Department of Children and Families, Substance Abuse and Mental Health (SAMH) cannot be used for Enrollees if there are non-funded clients in need of the beds. If CSU beds are at capacity, and some of the beds are occupied by Enrollees, and a non-funded client presents in need of services, the Enrollees must be transferred to an appropriate facility to allow the admission of the non-funded client. Therefore, the Health Plan must demonstrate adequate capacity for inpatient hospital care in anticipation of such transfers.   2. Outpatient Hospital Services Outpatient Hospital services are Medically Necessary mental health care services provided in a hospital setting. The outpatient care and treatment services that an Enrollee receives must be under the direction of a licensed physician with the appropriate specialty..     3. Physician Services a. Physician services are those services rendered by a licensed physician who possesses the appropriate Medicaid specialty requirements when applicable. A psychiatrist must be certified as a psychiatrist by the American Board of Psychiatry and Neurology or the American Osteopathic Board of Neurology and Psychiatry, or have completed a psychiatry residency accredited by the Accreditation Council for Graduate Medical Education (ACGME) or the Royal College of Physicians and Surgeons of Canada. b. Physician services include specialty consultations for evaluations. A physician consultation shall include an examination and evaluation of the Enrollee with information from family member(s) or significant others as appropriate. The consultation shall include written documentation on an exchange of information with the attending Provider. The components of the evaluation and management procedure code and diagnosis code must be documented in the Enrollee's medical record. A Hospital visit to an Enrollee in an acute care Hospital for a mental health diagnosis must be documented with a mental health procedure code and mental health diagnosis code. All procedures with a minimum time requirement shall be documented in the medical record to show the time spent providing the service to the Enrollee. The Health Plan must be responsive to requests for consultations made by the PCP. c. Physicians are required to coordinate Medically Necessary mental health care with the PCP and other Providers involved with the care of the Enrollee. The Health Plan shall have a set of protocols that indicate when such coordination will be required.   4. Community Mental Health Services - Covered Services a. General Provisions   Community mental health services include mental health services that are provided for the maximum reduction of the Enrollee’s mental health disability and restoration to the best possible functional level. Community mental health services can reasonably be expected to improve the Enrollee’s condition or prevent further regression so that the services will no longer be needed. The health plan must provide services that are medically necessary and are rendered or recommended by a physician, psychiatrist, or licensed mental health professional and included in an individualized treatment plan. Medically Necessary community mental health services must be provided to Enrollees of all ages from very young children through the geriatric population. Provision of services very early may reduce the provision of expensive services later, and the health plan is encouraged to use creativity, flexibility, and outreach to provide mental health services to its enrollees. Services should be age appropriate and sensitive to the developmental level of the enrollee. The services provided must meet the intent of the services covered in the Florida Medicaid Community Mental Health Services Coverage and Limitations Handbook. Although the Health Plan can provide flexible services, the service limits and medical necessity criteria cannot be more restrictive than those in Medicaid policy as stated in Medicaid handbooks and this Contract. Additionally, the Health Plan may have available additional services, but must have the core services available as outlined and discussed below. The health plan shall establish “Medical Necessity” criteria, including admission criteria, continuing stay criteria, and discharge criteria for all mandatory and optional services. Criteria must be specific to enrollee ages and diagnoses and must account for orders for involuntary outpatient placement pursuant to 394.4655, F.S. These criteria must be submitted for review by the Agency and approval. The following describes basic categories of mental health care services considered core services. The frequency, duration, and content of the services should be consistent with the age, developmental level and level of functioning of the enrollee. The health plan shall develop clinical care criteria appropriate for each service to be provided. The health plan shall consult the most recent the Community Behavioral Health Services Coverage and Limitations Handbook published by the Agency. b. Treatment Plan Development and Modification Treatment planning includes working with the Enrollee, their natural support system, and all involved treating Providers to develop an individualized plan for addressing identified clinical needs. A Behavioral Health Care Provider must complete a face-to-face interview with the Enrollee during the development of the plan. The Individualized Treatment Plan shall: • be recovery-oriented and promote resiliency; • be enrollee-directed; • accurately reflect the presenting problems of the enrollee; • be based on the strengths of the enrollee, family, and other natural support systems; • provide outcome-oriented objectives for the enrollee; • include an outcome-oriented schedule of services that will be provided to meet the enrollee’s needs; • include the coordination of services not covered by the plan such as school- based services, vocational rehabilitation, housing supports, Medicaid fee-for service substance abuse treatment, and physical health care.   Individualized Treatment Plan reviews shall be conducted at six-month intervals to assure that the services being provided are effective and remain appropriate for addressing individual needs. Additionally, a review is expected whenever clinically significant events occur. The provider is expected to use the Individualized Treatment Plan review process in the utilization management of medically necessary services. For further guidance see the most recent Community Behavioral Health Services and Coverage Handbook. c.  Assessment Services   (1) These services include psychological testing (standardized tests) and evaluations that assess the enrollee’s functioning in all areas. All evaluations must be appropriate to the age, developmental level and functioning of the enrollee. All evaluations must include a clinical summary that integrates all the information gathered and identifies enrollee’s needs. The evaluation should prioritize the clinical needs, evaluate the effectiveness of any prior treatment, and include recommendations for interventions and services to be provided. (2) Evaluation or assessment services, when determined medically necessary, must include assessment of mental status, functional capacity, strengths, and service needs by trained mental health staff. Also included in this category is the administration of the functional assessments that are required by the Agency, DCF, the EQRO, or academic research center. (3) Prior to receiving any community mental health services, children ages 0-5 must have a current assessment (within one year) of presenting symptoms and behaviors; developmental and medical history; family psychosocial and medical history; assessment of family functioning; a clinical interview with the primary caretaker and an observation of the child’s interaction with the caretaker; and an observation of the child’s language, cognitive, sensory, motor, self-care, and social functioning.   d. Medical and Psychiatric Services (1) These services include Medically Necessary interventions that require the skills and expertise of a psychiatrist, psychiatric ARNP, or physician. (2) Medical psychiatric interventions include the prescribing and management of medications, monitoring of side effects associated with prescribed medications, individual or group medical psychotherapy, psychiatric evaluation, psychiatric review of treatment records for diagnostic purposes, and psychiatric consultation with an enrollee’s family or significant others, primary care providers, and other treatment providers. (3) Interventions related to specimen collections, taking vital signs and administering injections are also a covered service. (4) These services are distinguished from the physician services outlined in Section C in that they are provided through a community mental health center. Psychiatric or physician services must be available at sites where substantial amounts of community mental health services are provided.   e. Behavioral Health Therapy Services: (1) These services include individual and family therapy, group therapy, and behavioral health day services. These services include psychotherapy or supportive counseling focused on assisting enrollees with the problems or symptoms identified in an assessment. The focus should be on identifying and utilizing the strengths of the enrollee, family, and other natural support systems. Therapy services should be geared to the individual needs of the enrollee and should be sensitive to the age, developmental level, and functional level of the enrollee. (2) Family or marital therapy is also included in this category. Examples of interventions include those that focus on resolution of a life crisis or an adjustment reaction to an external stressor or developmental challenge. (3) Behavioral Day Services are designed to enable individuals to function successfully in the community in the least restrictive environment and to restore or enhance ability for social and prevocational life management services. The primary functions of behavioral health day services are stabilization of the symptoms related to a behavioral health disorder to reduce or eliminate the need for more intensive levels of care, to provide transitional treatment after an acute episode, or to provide a level of therapeutic intensity not possible in a traditional outpatient setting.   f. Community Support and Rehabilitative Services (1) These services include: Psychosocial Rehabilitation Services and Clubhouse services. Clubhouse services are excluded from the health plan’s covered services. Psychosocial rehabilitation services may be provided in a facility, home, or community setting. These services assist enrollees in functioning within the limits of a disability or disabilities resulting from a mental illness. Services focus on restoration of a previous level of functioning or improving the level of functioning. Services must be individualized and directly related to goals for improving functioning within a major life domain. (2) The coverage must include a range of social, educational, vocational, behavioral, and cognitive interventions to improve enrollees’ potential for social relationships, occupational/educational achievement and living skills development. Skills training development is also included in this category and includes activities aimed toward restoration of enrollees’ skills/abilities that are essential for managing their illness, actively participating in treatment, and conducting the requirements of daily independent living. Providers must offer the services in a setting best suited for desired outcomes, i.e., home or community-based settings. (3) Psychosocial Rehabilitative Services may also be provided to assist individuals in finding or maintaining appropriate housing arrangements or to maintain employment. Interventions should focus on the restoration of skills/abilities that are adversely affected by the mental health illness and supports required to manage the individual’s housing or employment needs. The provider must be knowledgeable about the local TANF initiative and is responsible for medically necessary mental health services that will assist the individual in finding and maintaining employment.   g. Therapeutic Behavioral On-Site Services for Children and Adolescents (TBOS):     Therapeutic Behavioral On-Site Services are community services and natural supports for children with serious emotional disturbances. Clinical services include the provision of a professional level therapeutic service that may include the teaching of problem solving skills, behavioral strategies, normalization activities and other treatment modalities that are determined to be medically necessary. These services should be designed to maximize strengths and reduce behavior problems or functional deficits stemming from the existence of a mental health disorder. Social services include interventions designed for the restoration, modification, and maintenance of social, personal adjustment and basic living skills.     These services are intended to maintain the child in the home and to prevent reliance upon a more intensive, restrictive, and costly mental health placement. They are also focused on helping the child possess the physical, emotional, and intellectual skills to live, learn and work in their own communities. Coverage must include the provision of these services outside of the traditional office setting. The services must be provided where they are needed, in the home, school, childcare centers or other community sites. h.  Services for Children Ages 0 through 5-Years   Services to these children include behavioral health day services and Therapeutic Behavioral On-Site Services for Children Ages 0 through 5 years. Prior to receiving these services, the children in this age group must meet the criteria as stated in the Medicaid Community Behavioral Health Service Coverage and Limitations Handbook. i. Crisis Intervention Mental Health Services and Post-Stabilization Care Services   Crisis intervention services include intervention activities of less than 24-hour duration (within a 24-hour period) designed to stabilize an individual in a Psychiatric emergency. Post-stabilization care services include any of the mandatory services that a treating physician views as medically necessary, that are provided after an enrollee is stabilized from an emergency mental health condition in order to maintain the stabilized condition, or under the circumstances described in 42 CFR 438.114(e) to improve or resolve the enrollee’s condition. j. Substance Abuse Services Health plan Enrollees will receive Medicaid funded substance abuse services through the fee-for- service system. The health plan shall develop methods of coordinating and integrating mental health and substance abuse services for plan enrollees. The plan shall be required to use the Florida Supplement to the American Society of Addictions Medicine Patient Placement Criteria for the coordination of mental health treatment with substance abuse providers as part of the integration effort (Second Edition ASAM PPC-2, July 1998.) the coordination shall be reflected in their individualized Treatment Plan for enrollees with co-occurring disorder. The protocol for integrating mental health services with substance abuse services shall be monitored through the Quality of Care monitoring activities completed by the Agency’s EQRO contractor and the Quality Improvement requirements in Section D.34   5. Mental Health Targeted Case Management a. The Health Plan must provide targeted Case Management services to Children/Adolescents with serious emotional disturbances and adults with a severe mental illness as defined below. The Health Plan shall meet the intent of the services as outlined below and in the Medicaid Mental Health Targeted Case Management Coverage and Limitations Handbook. The Health Plan shall set criteria and clinical guidelines for Case Management services. Service limits and criteria developed cannot be more restrictive than those in Medicaid policy and as stated below. At a minimum, case management services are to incorporate the principles of a strengths-based approach. Strengths-based case management services are an alternative service modality for working with individuals and families. This method stresses building on the strengths of individuals that can be used to resolve current problems and issues, countering more traditional approaches that focus almost exclusively on individuals’ deficits or needs. b. Target Populations:   (1) The Health Plan shall have Case Management services available to Children/Adolescents who have a serious emotional disturbance as defined as: a Child/Adolescent with a defined mental disorder; a level of functioning which requires two or more coordinated mental health services to be able to live in the community; and be at imminent risk of out of home mental health treatment placement.   (2) The health plan must have case management services available for adults who: •  Have been denied admission to a long-term mental health institution or residential treatment facility; or •  Have been discharged from a long-term mental health institution or residential treatment facility. •  Require numerous services from different providers and also require advocacy and coordination to implement or access services; •  Would be unable to access or maintain consistent care within the service delivery system without case management services; •  Do not possess the strengths, skills, or support system to allow them to access or coordinate services; The health plan will not be required to seek approval from the Department of Children and Families, District Substance Abuse and Mental Health (SAMH) Office for individual eligibility or mental health targeted case management agency or individual provider certification. The staffing requirements for case management services are listed below. Refer to section d. Additional Requirement For Case Management.   (3) Mental health targeted Case Management services shall be available to all Enrollees within the principles and guidelines described as follows: (a) Enrollees, who require numerous services from different providers and also require advocacy and coordination to implement or access services are appropriate for Case Management services; (b) Enrollees who would be unable to access or maintain consistent care within the service delivery system without Case Management services are appropriate for the service; (c) Enrollees who do not possess the strengths, skills, or support system to allow them to access or coordinate services are appropriate for Case Management services; (d) Enrollees without the skills or knowledge necessary to access services may benefit from Case Management. Case Management provides support in gaining skills and knowledge needed to access services and enhances the Enrollee’s level of independence.   (4) The Health Plan will not be required to seek approval from the DCF, District Substance Abuse and Mental Health Program Office for client eligibility or mental health targeted Case Management agency or individual provider certification. The staffing requirements for Case Management services are found in Section VII.E..7, Provider Network, Behavioral Health Services, in this Contract.   c. Required Mental Health Targeted Case Management Services   (1) Mental Health Targeted Case Management services include working with the Enrollee and the Enrollee’s natural support system to develop and promote a needs assessment-based service plan. The service plan reflects the services or supports needed to meet the needs identified in an individualized assessment of the following areas: education or employment, physical health, mental health, substance abuse, social skills, independent living skills, and support system status. The approach used should identify and utilize the strengths, abilities, cultural characteristics, and informal supports of the enrollee, family, and other natural support systems. Targeted case managers focus on overcoming barriers by collaborating and coordinating with Providers and the Enrollee to assist in the attainment of service plan goals. The targeted case manager takes the lead in both coordinating services/treatment and assessing the effectiveness of the services provided. A strengths-based approach to providing services is consistent with the values of individuality and uniqueness and promotes participant self-direction and choice. The planning process is vital to achieving desired outcomes for the individual. The person must have a sense of ownership about his/her goals, and the goals must have true meaning and vitality for him/her.   (2) When targeted case management recipients enrolled in the health plan are hospitalized in an acute care setting or held in a county jail or juvenile detention facility, the health plan shall maintain contact with the individual and shall participate actively in the discharge planning processes.   (3) Case managers are also responsible for coordination and collaboration with the parents or guardians of Children/Adolescents who receive mental health targeted Case Management services. The Health Plan shall make reasonable efforts to assure that case managers include the parents or guardians of Enrollees in the process of providing targeted Case Management services. Integration of the parent’s input and involvement with the case manager and other Providers shall be reflected in Medical Record documentation and monitored through the Health Plan’s quality of care monitoring activities. Involvement with the child’s school and/or childcare center must also be a component of case management with children d. Additional Requirements for Targeted Case Management   (1) The Health Plan shall have a Case Management program, including clinical guidelines and protocol that addresses the issues below: (a) Caseloads must be set to achieve the desired results. Size limitations must clearly state the ratio of enrollees to each individual case manager. The limits shall be specified for children and adults, with a description of the clinical rationale for determining each limitation. If the health plan permits “mixed” caseloads, i.e., children and adults, a separate limitation is expected along with the rationale for the determination. Ratios must be no greater than the requirements set forth in the Medicaid Mental Health Targeted Case Management Coverage and Limitations Handbook. (b) A system shall be in place to manage caseloads when positions become vacant. (c) The modality of service provision, and the location that services will be provided, shall be described. (d) Case Management protocol and clinical practice guidelines, which outline the expected frequency, duration and intensity of the service, shall be available. (e) Clinical guidelines shall address issues related to recovery and self-care, including services that will assist Enrollees in gaining independence from the mental health and Case Management system.   (2) The Case Management program shall have services available based on the individual needs of the Enrollees receiving the service. The service should reflect a flexible system that allows movement within a continuum of care that addresses the changing needs and abilities of Enrollees. (a) Case management staff must have expertise and training necessary to competently and promptly assist enrollees in working with Social Security Administration or Disability Determination in maintaining benefits from SSI and SSDI. For clients who wish to work, case management staff must have the expertise and training necessary to assist enrollees to access Social Security Work Incentives including development of Plans for Achieving Self-Support (PASS). (b) At a minimum, case management services are to incorporate the principles of a strengths-based approach. Strengths-based case management services are a preferred service modality for work with individuals and families. This method stresses building on the strengths of individuals and families that can be used to resolve current problems and issues. This approach counters more traditional approaches that focus almost exclusively on individuals’ deficits or needs. Service limits and criteria developed cannot be more restrictive than those in Medicaid policy.   6. Intensive Case Management a. Intensive Case Management is intended to provide intensive team Case Management to highly recidivistic adults who have a severe and persistent mental illness. The service is intended to help Enrollees remain in the community and avoid institutional care. Clinical care criteria for this level of Case Management shall address the same elements required above, as well as expanded elements related to access and twenty-four (24) hour coverage as described below. Additionally, the intensive Case Management team composition shall be expanded to include members of the team selected specifically to assist with the special needs of this population. The Health Plan shall include the team composition and how it will assist with special needs in the description of how this service will be provided. b. The Health Plan shall provide this service for all Enrollees for whom the service is determined to be Medically Necessary, to include enrollees who meet the following criteria: ·   Has resided in a state mental health treatment facility for at least 6 months in the past 36 months; ·   Resides in the community and has had two or more admissions to a state mental health treatment facility in the past 36 months; ·   Resides in the community and has had three or more admissions to a crisis stabilization unit, short-term residential facility, inpatient psychiatric unit, or any combination of these facilities within the past 12 months; or ·   Resides in the community and, due to a mental illness, exhibits behavior or symptoms that could result in long-term hospitalization if frequent interventions for an extended period of time were not provided. c. Intensive Case Management provides services through the use of a team of case managers. The team can be expanded to include other specialists that are qualified to address identified needs of the Enrollees receiving intensive Case Management. This level of care for Case Management is the most intensive and serves Enrollees with the most severe and disabling mental conditions. Services are frequent and intense with a focus on assisting the Enrollee with attaining the skills and supports needed to gain independent living skills. Intensive Case Management services are provided primarily in the Enrollee’s residence and include community-based interventions. d. The Health Plan shall provide this service in the least restrictive setting with the goal of improving the Enrollee’s level of functioning, and providing ample opportunities for rehabilitation, recovery, and self-sufficiency. Intensive Case Management services shall be accessible twenty-four (24) hours per day, seven (7) days per week. The Health Plan shall demonstrate adequate capacity to provide this service for the targeted population within the guidelines outlined. e. Intensive Case Management teams shall provide the same coordination and Case Management services for Enrollees admitted to inpatient facilities, State mental Hospitals, and forensic or corrections facilities as those listed above for mental health targeted case management services. 7. Community Treatment of Patients Discharged from State Mental Health Hospitals a.  The health plan shall provide Medically Necessary Behavioral Health Services to Enrollees who have been discharged from any State mental Hospital, including, but not limited to, follow-up services and care. All Enrollees who have previously received services at the State mental Hospital must receive follow up and care. The plan of care shall be aimed at encouraging Enrollees to achieve a high quality of life while living in the community in the least restrictive environment that is medically appropriate and reducing the likelihood that the Enrollees will be readmitted to a State mental Hospital. b.  The health plan shall follow the progress of all Enrollees who were enrolled in the health plan to admission to a State mental Hospital until the one hundred-eightieth (180th) day after Disenrollment from the health plan shall use behavioral health targeted case managers to follow the progress of Enrollees. The behavioral health targeted case manager must attend and participate in the discharge planning activities at the facility. Targeted case managers are responsible for working with the former Enrollee before discharge from the State facility to assure that Benefits are reinstated as soon as possible, and that the Enrollee receives community Behavioral Health Services within twenty-four (24) hours of his/her discharge from the State facility. c.   If the Enrollee remains in the State facility more than one hundred eighty (180) days after Disenrollment, the health plan shall cooperate with DCF and the Enrollee to ensure that the Enrollee is assigned a DCF funded Case Management provider who will bear the responsibility of ongoing monthly follow-up care and discharge planning until such time that the Enrollee is again eligible for and enrolled in a Health plan. d. The health plan shall develop a cooperative agreement with the behavioral health care facility to enable the health plan to anticipate those Medicaid Recipients who were Enrollees of the health plan prior to admission to the Facility, and will be soon discharged from the Facility. The cooperative agreement must address arrangements for Medicaid Recipients, whom the Facility is discharging, but who are not eligible for immediate re-enrollment.   8. Community Services for Enrollees Involved with the Criminal Justice System The Health Plan shall provide medically necessary community-based services for plan enrollees who have criminal justice system involvement as follows: a. Establish a linkage to pre-booking sites for assessment, screening or diversion related to mental health services; b. Provide immediate access (within 24 hours of release) for psychiatric services upon release from a jail or a juvenile detention facility to assure that prescribed medications are available for all health plan enrollees; and c. Establish a linkage to post-booking sites for discharge planning and assuring that prior health plan Enrollees receive necessary services upon release from the facility. Health plan Enrollees must be linked to services and receive routine care within seven (7) days from the date they are released. d. Provide outreach to homeless and other populations of plan enrollees at risk of criminal justice system involvement, as well as those plan enrollees currently involved in this system, to assure that services are accessible and provided when necessary. This activity should be oriented toward preventative measures to assess mental health needs and provide services that can potentially prevent the need for future inpatient services or possible deeper involvement in the criminal justice system. e. The health plan shall develop a cooperative agreement with corrections facilities to enable the health plan to anticipate Enrollees who were health plan Enrollees prior to incarceration who will be released from these institutions. The cooperative agreement must address arrangement for persons who are to be released, but for whom re-Enrollment may not take effect immediately. All Enrollees who were health plan Enrollees prior to incarceration and Medicaid Recipients who are likely to enroll in the health plan upon return to the community must receive a community mental health service within twenty-four (24) hours of discharge from the corrections facility   9. Treatment and Coordination of Care for Enrollees with Medically Complex Conditions a. The Health Plan shall ensure that there are appropriate treatment resources available to address the treatment of complex conditions that reflect both mental health and physical health involvement. The following conditions must be addressed: (1)   Mental health disorders due to or involving a general medical condition, specifically -9-CM Diagnoses 293.0 through 294.1, 294.9, 307.89, and 310.1; and  (2) Eating disorders - ICD-9-CM Diagnoses 307.1, 307.50, 307.51, and 307.52 b. The Health Plan shall provide medically necessary community mental health services to enrollees who exhibit the above diagnoses and shall develop a plan of care that includes all appropriate collateral providers necessary to address the complex medical issues involved. Clinical care criteria shall address modalities of treatment that are effective for each diagnosis. The Health Plan’s provider network must include appropriate treatment resources necessary for effective treatment of each diagnosis within the required access time periods.   10. Monitoring of Enrollees Admitted to Children’s Residential Treatment (Levels I - IV) Programs a. The Health Plan shall maintain contact with children who are disenrolled from the plan due to placement in a residential treatment facility (Statewide Inpatient Psychiatric Program (SIPP), Therapeutic Group Care Services (TGCS), or Behavioral Health Overlay Services (BHOS)). The health plan shall participate in discharge planning, assist the enrollee and their caregiver to locate community-based services, and notify Medicaid when the enrollee is discharged from the facility. The Health Plan’s contract manager or designee shall re-enroll the enrollee in the plan upon notification of discharge into the community. b. Children placed in SIPP, TGCS, or BHOS facilities will be disenrolled from the Health Plan and then covered under Medicaid Fee-for-Service for mental health services. The Medicaid contract manager or designee will be responsible for the disenrollment process. The Department of Juvenile Justice, residential providers, and/or the assigned Mental Health Targeted Case Management providers will be responsible for notifying Medicaid of all admissions and discharges. A specific agreement regarding the disenrollment and re-enrollment process will be developed between the Agency, residential providers, and the departments. c. Upon notification of the Enrollee's discharge from the facility the health plan shall notify the Choice Counselor/Enrollment Broker for re-Enrollment into the health plan , if it is within 6 months (180 days) from the disenrollment.   11. Coordination of Children’s Services a. The delivery and coordination of children’s mental health services shall be provided for all children who exhibit the symptoms and behaviors of an emotional disturbance. The delivery of services must address the needs of any child served in an SED or EH school program. Developmentally appropriate early childhood mental health services must be available to children age birth to 5 years old and their families. b. Services for all children shall be delivered within a strengths-based, culturally competent service design. The service design shall recognize and ensure that services are family-driven and include the participation of family, significant others, informal support systems, school personnel, and any state entities or other service providers involved in the child’s life. c. For all children receiving services under the plan, the vendor shall work with the parents, guardians, or other responsible parties to monitor the results of services and determine whether progress is occurring. Active monitoring of the child’s status shall occur to detect potential risk situations and emerging needs or problems. Services shall be conducted in a manner that maximizes the participation of all involved parties, such as providing services at alternative sites or times. d. When the court mandates a parental mental health assessment, and the parent is a plan enrollee, the vendor must complete an assessment of the parent’s mental health status and the effects on the child. Time frames for completion of this service shall be determined by the mandates issued by the courts. 12.  Evaluation and Treatment Services for Enrolled Children/Adolescents a. The health plan shall provide all Medically Necessary evaluation and treatment services for Children/Adolescents referred to the health plan by DCF, DJJ and by schools (elementary, middle, and secondary schools). b. The health plan shall provide Medically Necessary Children/Adolescent mental health services in such a way as to minimize disruption of services available to high-risk populations served by DCF. The health plan shall promptly evaluate, provide psychological testing, and deliver mental health services to Children/Adolescents (including delinquent and dependent Children/Adolescent) referred by DCF in accordance with Medical Necessity. As well, the health plan shall adhere to the minimum staffing, availability and access standards described in this Contract. c. The health plan shall provide court ordered evaluation and treatment required for Children/Adolescents who are Enrollees.55 d. The health plan must participate in all DCF or school staffings that may result in the provision of mental health services to an enrolled Child/Adolescent. e. The plan shall refer Children/Adolescents to DCF when residential treatment is Medically Necessary. The health plan shall not be responsible for providing any residential treatment for Children/Adolescents. The DCF, Substance Abuse and Mental Health ("SAMH") or DJJ District office shall coordinate the placement of the Enrolled Child/Adolescent with the health plan. f.  The health plan's Case Management of Children/Adolescents shall include those persons, schools, programs, networks and agencies that figure importantly in the Child's/Adolescent's life. g.  The health plan shall make determinations about care based on a comprehensive evaluation, consultation with those persons, schools, programs, networks and agencies that figure importantly in the Child's/Adolescent's life, and appropriate protocols for admission and retention. h. The health plan shall monitor services for adequacy in conformity with the cooperative agreement between the health plan and the facility.   C. Psychiatric Evaluations for Enrollees Applying for Nursing Home Admission  The Health Plan shall, upon request from the Substance Abuse and Mental Health (SAMH) Offices, promptly arrange for and authorize psychiatric evaluations for enrollees who are applying for admission to a nursing facility pursuant to OBRA 1987, and who, on the basis of a screening conducted by Comprehensive Assessment and Review for Long Term Care (CARES) workers, are thought to need mental health treatment. The examination shall be adequate to determine the need for “specialized treatment” under the Act. Evaluations must be completed within five working days from the time the request from the DCF SAMH Program Office is received. State regulations have been interpreted by the state to permit any of the “mental health professionals” listed in Section 394.455, Florida Statutes, to make the observations preparatory to the evaluation, although a psychiatrist must sign such evaluations. The Health Plan will not be responsible for resident reviews or for providing services as a result of a Pre-Admission Screening and Resident Review (PASRR) evaluation.   D. Assessment and Treatment of Mental Health Residents Who Reside in Assisted Living Facilities (ALF) that hold a Limited Mental Health License     The Health Plan must develop and implement a plan to ensure compliance with Section 394.4574, F.S., related to services provided to residents of licensed assisted living facilities that hold a limited mental health license. A cooperative agreement, as defined in 400.402, F.S., must be developed with the ALF if an enrollee is a resident of the ALF. The Health Plan must ensure that appropriate assessment services are provided to plan enrollees and that medically necessary mental health care services are available to all enrollees who reside in this type of setting.     A community living support plan, as defined in Section I, Definitions and Acronyms, must be developed for each enrollee who is a resident of an ALF, and it must be updated annually. The Health Plan case manager is responsible for ensuring that the community living support plan is implemented as written.   E. Individuals with Special Health Care Needs: The plan shall implement mechanisms for identifying, assessing and ensuring the existence of an Individualized Treatment Plan for individuals with special health care needs as defined in Section I, Definitions and Acronyms. Mechanisms shall include evaluation of risk assessments, claims data, and CPT/ICD-9 codes. Additionally, the plan shall implement a process for receiving and considering provider and enrollee input. In accordance with this contract and 42 CFR 438.208(c)(3), an Individualized Treatment Plan for an enrollee determined to need a course of treatment or regular care monitoring must be: ·   Developed by the enrollee's direct service mental health care professional with enrollee participation and in consultation with any specialists caring for the enrollee; ·   Approved by the plan in a timely manner if this approval is required; and ·   Developed in accordance with any applicable Agency quality assurance and utilization review standards. Pursuant to 42 CFR 438.208(c)(4), for Enrollees with special health care needs determined through an assessment by appropriate mental health care professionals (consistent with 42 CFR 438.208(c)(2)) to need a course of treatment or regular care monitoring, the plan must have a mechanism in place to allow Enrollees to directly access a mental health care specialist (for example, through a standing referral or an approved number of visits) as appropriate for the Enrollee's condition and identified needs. F. Crisis Support/Emergency Services The health plan shall operate, as part of its Crisis Support/Emergency Services, a crisis emergency hotline available to all Enrollees twenty-four (24) hours a day, seven (7) days a week.   G. Provision of Behavioral Health Services When Not Covered by the Health Plan 1. If the Health Plan determines that an Enrollee is in need of behavioral health services that are not covered under the Contract, the Health Plan shall refer the Enrollee to the appropriate provider. The Health Plan may request the assistance of the Agency’s local field office or the local DCF District ADM Office for referral to the appropriate service setting. 2. Long term care institutional services in a nursing facility, an institution for persons with developmental disabilities, specialized therapeutic foster care, children's residential treatment services or State Hospital services are not covered by the Health Plan. For Enrollees requiring those services, the Health Plan shall consult the Medicaid Field Office and/or the DCF District ADM Office to identify appropriate methods of assessment and referral. 3. The Health Plan is responsible for transition and referral of the Enrollee to appropriate providers. The Health Plan shall request Disenrollment of all Enrollees receiving the services described in this Section VI.B.8., Provision of Behavioral Health Care Services When Not Covered by the Health Plan.   H. Behavioral Health Services Care Coordination and Management The Health Plan shall be responsible for the coordination and management of Behavioral Health Services and continuity of care for all Enrollees. At a minimum, the Health Plan shall provide the following services to its Enrollees: 1. Minimize disruption to the Enrollee as a result of any change in behavioral health care providers or behavioral health care case managers that occur as a result of this Contract. For new Enrollees who had been receiving Behavioral Health Services, the Health Plan shall continue to authorize all valid claims for services until the Health Plan has:   a. Reviewed the Enrollee's treatment plan;   b. Developed an appropriate written transition plan; and c. Implemented the written transition plan. 2. If the previous behavioral health care provider is unable to allow the Health Plan access to the Enrollee's Medical Records because the Enrollee refuses to release his/her records, then the Health Plan shall provide:   .a Up to four (4) sessions of individual or group therapy;   .b One (1) psychiatric medical session;   .c Two (2) one-hour intensive therapeutic on-site; or   .d Six (6) days of day treatment services. 3.. Document all Emergency Behavioral Health Services received by an Enrollee, along with any follow-up services, in the Enrollee's behavioral health Medical Records. The Health Plan shall also assure the PCP receives the information about the Emergency Behavioral Health Services for filing in the PCP's Medical Record. 4. Document all referral services in the Enrollees’ behavioral health Medical Records. 5. Monitor Enrollees admitted to State mental health institutions by participating in discharge planning and community placement of Enrollees who are discharged within sixty (60) days of losing their Health Plan enrollment due to State institutionalization. The Agency shall sanction the Health Plan, as described in Section XIII, Sanctions, for any inappropriate over-utilization of State mental Hospital services for its Enrollees. 6. Coordinate Hospital and institutional discharge planning for psychiatric admissions and substance abuse detoxification to ensure inclusion of appropriate post-discharge care.   a. Enrollees admitted to an acute care facility (inpatient Hospital or crisis stabilization unit) shall receive appropriate services upon discharge from the acute care facility.   b. The Health Plan shall have follow-up services available to Enrollees within twenty-four (24) hours of discharge from an acute care facility, provided the acute care facility notified the Health Plan that it had provided services to the Enrollee.   c The Health Plan shall continue the medication prescribed by a State mental health facility to the Enrollee for at least ninety (90) days after the State mental health facility discharges the Enrollee, unless the Health Plan's prescribing psychiatrist, in consultation and agreement with the State mental health facility's prescribing physician, determines that the medications: (1) Are not Medically Necessary; or (2) Are potentially harmful to the Enrollee. 7. Provide appropriate referral of the Enrollee for non-covered services to the appropriate service setting. The Health Plan shall request referral assistance, as needed, from the Medicaid Field Office. The Health Plan is encouraged to use the Florida Supplement to the American Society of Addictions Medicine Patient Placement Criteria for coordination and treatment of substance abuse related disorders with substance abuse providers. The Health Plan is encouraged to use the Florida Supplement to the American Society of Addictions Medicine Placement Criteria for coordination and treatment of substance-related disorders with substance abuse Providers. The Health Plan shall provide coordination of care with community-based substance abuse agencies as part of its policies and procedures developed for continuity of care for Enrollees who are diagnosed with mental illness and substance abuse or dependency. 8. Provide court ordered mental health evaluations for Enrollees. The Health Plan shall also provide expert behavioral health testimony for Enrollees. 9. Provide appropriate screening, assessment, and crisis intervention in support for Enrollees who are in the care and custody of the State. See Specifications listed in the Medicaid Community Mental Health Services Coverage & Limitations Handbook. 10. Upon a request from an ALF, the Health Plan shall provide procedures for the ALF to follow should an emergent condition arise with an Enrollee that resides at the ALF. (See Section 409.912, F.S.) 11. The Health Plan shall participate in the SAMH planning process in each DCF district. (See Section 4098.912, F.S.) The Health Plan shall design and implement a Drug Utilization Review ("DUR") program. Once the Health Plan's pharmacy utilization indicates that an Enrollee is receiving an antipsychotic medication from a PCP or prescribing non-psychiatrist physician, the Health Plan shall request a consultation with the PCP or prescribing non-psychiatrist physician. Once the Health Plan's pharmacy utilization indicates that an Enrollee, who is being treated by a Behavioral Health Care Provider, receives medication for certain physical conditions (such as hypertension, diabetes, neurological disorders, cardiac problems, or any other serious medical condition) the Health Plan shall schedule a consultation with the PCP or prescribing physician to discuss coordination of care and concerns related to drug interactions. The Health Plan shall ensure coordination with the PCP or prescribing physician with regards to drug utilization and potential contraindications.   I. Discharge Planning Discharge Planning is the evaluation of an Enrollee's medical care needs, including mental health service needs, substance abuse service needs, or both, in order to arrange for appropriate care after discharge from one level of care to another level of care. The Health Plan shall: 1. Monitor all Enrollee discharge plans from behavioral health inpatient admissions to ensure that they incorporate the Enrollees’ needs for continuity in existing behavioral health therapeutic relationships. 2. Ensure that Enrollees' family members, guardians, outpatient individual practitioners and other identified supports are given the opportunity to participate in Enrollee treatment to the maximum extent practicable and appropriate, including behavioral health treatment team meetings and developing the discharge plan. For adult Enrollees, family members and other identified supports may be involved in the development of the Discharge Plan only if the Enrollee consents to their involvement. 3. Designate staff members who are responsible for identifying Enrollees who remain in the Hospital for non-clinical reasons (i.e., absence of appropriate treatment setting availability, high demand for appropriate treatment setting, high-risk Enrollees and Enrollees with multiple agency involvement). 4. Develop and implement a plan that monitors and ensures that clinically indicated Behavioral Health Services are offered and available to Enrollees within twenty-four (24) hours of discharge from an inpatient setting. 5. Ensure that a behavioral health program clinician provides medication management to Enrollees requiring medication monitoring within twenty-four (24) hours of discharge from a behavioral health program inpatient setting. The Health Plan shall ensure that the behavioral health program clinician is duly qualified and licensed to provide medication management. 6. Upon the admission of an Enrollee, the Health Plan shall make its best efforts to ensure the Enrollee’s smooth transition to the next service or to the community; and shall require that Behavioral Health Care Providers:   (a) Assign a case manager to oversee the care given to the Enrollee;   (b) Develop an individualized discharge plan, in collaboration with the Enrollee where appropriate, for the next service or program or the Enrollee's discharge, anticipating the Enrollee's movement along a continuum of services; and   (c) Make best efforts to ensure a smooth transition to the next service or community;   (d) Document all significant efforts related to these activities, including the Enrollee's active participation in discharge planning.   J. Transition Plan A transition plan is a detailed description of the process of transferring Enrollees from providers to the Health Plan's Behavioral Health Care Provider network to ensure optimal continuity of care. The transition plan shall include, but not be limited to, a timeline for transferring Enrollees, description of provider medical record transfers, scheduling of appointments, propose prescription drug protocols and claims approval for existing providers during the transition period. The Health Plan shall document its efforts relating to the transition plan. 1. The Health Plan shall minimize the disruption of treatment by an Enrollee's current behavioral health care provider by arranging for Enrollee use of services outside of the Health Plan's network. For Enrollees who have received Behavioral Health Services for at least six (6) months from a behavioral health care provider, whether the provider is in the Health Plan’s network or not, the Health Plan shall continue to authorize all valid claims until the Health Plan reviews the Enrollee's treatment plan and implements an appropriate written transition plan. 2. During the first three (3) months that the Enrollee receives Behavioral Health Services under this Contract, the Health Plan shall not deny requests for Behavioral Health Services outside the network under the following conditions:   (1) The Enrollee is a patient at a community behavioral health center and the center has discussed the Enrollee's care with the Health Plan.   (2) If, following contact with the Health Plan, there is no Behavioral Health Care Provider readily available and the Enrollee's condition would not permit a delay in treatment. 3. If the previous treating Provider is unable to allow the Health Plan access to the Enrollee's Medical Records because the Enrollee refuses to release the records, then the Health Plan shall approve the provider’s claims for:   (a) Four (4) sessions of outpatient behavioral health counseling or therapy;   (b) One (1) outpatient psychiatric physician session;   (c) Two (2) one-hour intensive therapeutic on-site sessions; or   (d) Six (6) days of day treatment services. 4. Any disputes related to coverage of services necessary for the transition of Enrollees from their current behavioral health care provider to a Behavioral Health Care Provider shall follow the process set forth in Section IX, Grievance System, of this Contract. 5. The Health Plan shall approve claims from providers for authorized out-of-plan non-emergency services, provided such claims are submitted within twelve (12) months of the date of service. The Plan must process such claims within the time period specified in section 641.3155, F.S.   K. Functional Assessments 1. The Health Plan shall ensure that all Behavioral Health Care Providers administer functional assessments using the Functional Assessment Rating Scales (FARS) for all Enrollees over the age of eighteen (18) and Child Functional Assessment Rating Scale (CFARS) for all Enrollees age eighteen (18) and under. 2. The Health Plan shall ensure that all Behavioral Health Care Providers administer and maintain the FARS and CFARS according to the FARS and CFARS manuals to all Enrollees receiving Behavioral Health Services and upon termination of providing such services. 3. The results of the FARS and CFARS assessments shall be maintained in each Enrollee's medical record, including a chart trending the results of the functional assessments. 4. The Health Plan shall submit the FARS/CFARS reports as required in Section XI, Reporting Requirements.   L. Outreach Program The Health Plan shall have an outreach program designed to encourage Enrollees to seek Behavioral Health Services through the Health Plan when the Health Plan, or Providers, perceive a need for Behavioral Health Services. In addition, the outreach program, at a minimum, shall provide for the following: 1. Outreach program Enrollee communications that are written at the fourth (4th) grade reading level; 2. Outreach program communications that are written the primary language spoken by the Enrollee; 3. A program designed to assist PCP's in the identification and management, including referral and other resources, to aid in the treatment of:   (a) Enrollees with severe and persistent mental illness;   (b) Children/Adolescents with severe emotional disturbances; and   (c) Enrollees with clinical depression. 4. A program to identify and manage Enrollees who are homeless.   M. Behavioral Health Subcontracts If the Health Plan subcontracts with a Managed Behavioral Health Organization ("MBHO") for the provision of Behavioral Health Services stipulated in this Section, the MBHO must be accredited by at least one (1) of the recognized national accreditation organizations. 1. The Health Plan shall submit to the Agency the staff psychiatrist subcontract, if any, and the model Provider contracts for each Behavioral Health Services specialist type or facility. 2. All Provider contracts and subcontracts must adhere to the requirements set forth in this Contract, including Section XVI.Q., Terms and Conditions, Subcontracts, in this Contract.   N. Optional Services The Health Plan is encouraged to provide additional services that will enhance the Health Plan’s Covered Services for Enrollees. To the degree possible, the Health Plan should use existing community resources. Below is a list of possible optional services that could be provided with the savings achieved or as downward substitutions. This list is not intended to be all-inclusive and the Health Plan is encouraged to use creativity in developing new and innovative services to expand the array of services and meet the needs of recipients. 1.  Respite Care Services 2.  Prevention Services in the Community 3.  Supportive Living Services 4.  Supported Employment Services 5.  Foster Homes for Adults 6.  Parental Education Programs   7.  Drop-In Centers and other consumer operated programs (beyond the elements provided under the Opportunities for Recovery and Reintegration component)   8.  Intensive Therapeutic On-Site Services for Adults 9.  Home and Community Based Rehabilitation Services for Adults   10.  Any other new and innovative interventions or services designed to benefit enrollees receiving Mental Health services     O. Community Coordination and Collaboration The provider must be or become a vital part of the community services and support system. They must actively participate with and support community programs and coalitions that promote school readiness, that assist persons to return to work and provide for prevention programs. The provider must have linkages with numerous community programs that will assist enrollees in obtaining housing, economic assistance and other supports.   P. Behavioral Health Managed Care Local Advisory Group 1. There will be an advisory group for the Health Plan that convenes quarterly and reports to the Agency on advocacy and programmatic concerns. The local advisory group is responsible for providing technical and policy advice to the Agency regarding the Health Plan’s provision of services. The local advisory group does not have access to Enrollee Medical Records. 2. The role of the local advisory group is to report to the Agency information related to practical and real events that occur related to the activities of Medicaid Health Plans. Concerns about services, program changes, Quality of care, difficulties, advocacy issues, and reports about positive outcomes are presented by members of the advisory group and are addressed by the agency as part of the ongoing monitoring of the Health Plan contracts. The Agency presents information about actions taken related to issues presented by the group. If the group determines that it is appropriate, the advisory group members also vote to present their issues to the Agency in writing. 3. The group may request information to be presented at each meeting that will keep the group up-to-date regarding the contract and activities of each Health Plan. Minutes of the meetings are kept and distributed to all members and attendees. The voting membership of the group is updated periodically. This is a public meeting and may be attended by anyone in the community.   4. The local advisory group is coordinated by Agency area staff (who are not part of the voting membership) and consists of providers, consumer representatives, advocacy groups, and other relevant groups as identified by the Agency, which represent the counties within the service area. Such relevant groups include the Agency’s Medicaid Office, including Health Plan representatives; SAMH and Family Safety representatives; representatives from any community based care Providers contracted with DCF; the Florida Drop-In Center Association; the Human Rights Advocacy Committee; the Alliance for the Mentally Ill; the Florida Consumer Action Council; and the Substance Abuse and Mental Health Planning Council. In addition, the Health Plan provides representation to the local advisory group. The advisory group elects a chairperson and vice-chairperson from the voting membership, who facilitates the meetings and prepares any written correspondence on behalf of the group. 5. The Health Plan’s responsibility related to the advisory group is as follows: ·   Assure representation at all scheduled meetings; ·   Provide information requested by advisory group members; ·   Follow up on identified issues of concern related to the provision of services or administration of the Health Plan; and ·   Share pertinent information about Quality improvement findings and outreach activities with the group. REMAINDER OF PAGE INTENTIALLY LEFT BLANK   -------------------------------------------------------------------------------- Section VII Provider Network A.  General Provisions   1. The Health Plan shall have sufficient facilities, service locations, service sites and personnel to provide the Covered Services described in Section V and Behavioral Health Care described in Section VI.   2. The Health Plan shall provide the Agency with adequate assurances that the Health Plan has the capacity to provide Covered Services to all Enrollees up to the maximum enrollment level in each county, including assurances that the Health Plan: a. Offers an appropriate range of services and accessible preventive and primary care services such that the Health Plan can meet the needs of the maximum enrollment level in each county, and b. Maintains a sufficient number, mix and geographic distribution of Providers, including Providers who are accepting new Medicaid patients as specified in Section 1932(b)(7) of the Social Security Act, as enacted by Section 4704(a) of the Balanced Budget Act of 1997.   3. When designing the Provider network, the Health Plan shall take the following into consideration as required by 42 CFR 438.206: a. The anticipated number of Enrollees; b. The expected utilization of services, taking into consideration the characteristics and health care needs of specific Medicaid populations represented; c. The numbers and types (in terms of training, experience, and specialization) of providers required to furnish the Covered Services; d. The numbers of network providers who are not accepting new Enrollees; e. The geographic location of providers and Enrollees, considering distance, travel time, the means of transportation ordinarily used by Enrollees and whether the location provides physical access for Medicaid enrollees with disabilities; and f. There is to be no discrimination against particular providers that serve high-risk populations or specialize in conditions that require costly treatments.   4. Health Maintenance Organizations and other licensed managed care organizations shall enroll all network providers with the Agency’s Fiscal Agent, no later than November 30, 2006, using the Agency’s streamlined Provider Enrollment process. All Capitated PSNs shall use the streamlined Provider Enrollment process to enroll network providers prior to contract execution.   5. Each Provider shall maintain Hospital privileges if Hospital privileges are required for the delivery of Covered Services. The Health Plan may use admitting panels to comply with this requirement.   6. If the Health Plan is unable to provide Medically Necessary services to an Enrollee, the Health Plan must cover these services by using providers and services that are not providers in the Health Plan's network, in an adequate and timely manner, for as long as the Health Plan is unable to provide the Medically Necessary services within the Health Plan's network.   7. The Health Plan shall allow each Enrollee to choose his or her Providers to the extent possible and appropriate.   8. The Health Plan shall require each Provider to have a unique Florida Medicaid Provider number, in accordance with the requirement of Section X, C. jj., of this Contract. By May 2007, the Health Plan shall require each Provider to have a National Provider Identifier (NPI) in accordance with section 1173(b) of the Social Security Act, as enacted by section 4707(a) of the Balanced Budget Act of 1997.   9. The Health Plan shall provide the Agency with documentation of compliance with access requirements: a. Upon the effective date of the Contract; and b. At any time there has been a significant change in the Health Plan's operations that would affect adequate capacity and services, including, but not limited to, the following:   (1) Changes in Health Plan services or Service Area; and   (2) Enrollment of a new population in the Health Plan.   10. The Health Plan shall have procedures to inform Potential Enrollees and Enrollees of any changes to service delivery and/or the Provider network including the following: a. Inform Potential Enrollees and Enrollees of any restrictions to access to Providers, including Providers who are not taking new patients, upon request and, for Enrollees, at least on a six (6) month basis. b. An explanation to all Potential Enrollees that an enrolled family may choose to have all family members served by the same PCP or they may choose different PCPs based on each family member’s needs. c. Inform Potential Enrollees and Enrollees of objections to providing counseling and referral services based on moral or religious grounds within ninety (90) days after adopting the policy with respect to any service.   11. The Health Plan shall have procedures to document when a decision is made to not include individual or groups of providers in its network and must give the affected providers written notice of the reason for its decision.   B. Primary Care Providers     1. The Health Plan shall enter into agreements with a sufficient number of PCPs to ensure adequate accessibility for Enrollees of all ages. The Health Plan shall select and approve its PCPs. The Health Plan shall ensure its approved PCPs agree to the following:  (a) The PCP’s agreement to accept the associated Case Management responsibilities. (b) The PCP’s agreement to provide or arrange for coverage of services, consultation or approval for referrals twenty four (24) hours per day, seven days per week by Medicaid enrolled providers who will accept Medicaid reimbursement. This coverage must consist of an answering service, call forwarding, provider call coverage or other customary means approved by the Agency. The chosen method of twenty four (24) hour coverage must connect the caller to someone who can render a clinical decision or reach the PCP for a clinical decision. The after hours coverage must be accessible using the medical office’s daytime telephone number. The PCP or covering medical professional must return the call within thirty (30) minutes of the initial contact. (c) The PCP’s agreement to arrange for coverage of primary care services during absences due to vacation, illness or other situations which require the PCP to be unable to provide services. Coverage must be provided by a Medicaid enrolled PCP.    2. The Health Plan shall provide the following: a. At least one (1) FTE PCP per county including, but not limited to, the following specialties:   (1) Family Practice;   (2) General Practice;   (3) Obstetrics or Gynecology;   (4) Pediatrics; and   (5) Internal Medicine. b. At least one (1) FTE PCP per 1,500 Enrollees. The Health Plan may increase the ratio by 750 Enrollees for each FTE ARNP or FTE PA affiliated with a PCP. c. The Health Plan shall allow pregnant Enrollees to choose the Health Plan’s obstetricians as their PCPs to the extent that the obstetrician is willing to participate as a PCP.   3. At least annually, the Health Plan shall review each PCPs average wait times to ensure services are in compliance with Section VII, D. Appointment Waiting Times and Geographic Access Standards.   4. The Health Plan shall assign a pediatrician or other appropriate primary care physician to all pregnant Enrollees for the care of their newborn babies no later than the beginning of the last trimester of gestation. If the Health Plan was not aware that the Enrollee was pregnant until she presented for delivery, the Health Plan shall assign a pediatrician or a primary care physician to the newborn baby within one (1) Business Day after birth. The Health Plan shall advise all Enrollees of the Enrollees’ responsibility to notify their Health Plan and their DCF public assistance specialists (case workers) of their pregnancies and the births of their babies. C.  Minimum Standards   1. Emergency Services and Emergency Services Facilities The Health Plan shall ensure the availability of Emergency Services and Care twenty-four (24) hours a day, seven (7) days a week.   2. General Acute Care Hospital The Health Plan shall provide one (1) fully accredited general acute care Hospital bed per 275 enrollees. The Agency may waive this accreditation requirement, in writing, for Rural areas.   3. Birth Delivery Facility The Health Plan shall provide one (1) birth delivery facility, licensed under Chpater 383, F.S., or a Hospital with birth delivery facilities, licensed under Chapter 395, F.S. The birth delivery facility may be part of a Hospital or a freestanding facility.   4. Birthing Center The Health Plan shall provide a birthing center, licensed under Chapter 383, F.S. that is accessible to low risk Enrollees.   5. Regional Perinatal Intensive Care Centers (RPICC) The Health Plan shall assure access for Enrollees in one (1) or more of Florida's Regional Perinatal Intensive Care Centers (RPICC), (see sections 383.15 through 383.21, F.S.) or a Hospital licensed by the Agency for Neonatal Intensive Care Unit (NICU) Level III beds.   6. Neonatal Intensive Care Unit (NICU) The Health Plan shall ensure that care for medically high risk perinatal Enrollees is provided in a facility with a NICU sufficient to meet the appropriate level of need for the Enrollee.   7. Certified Nurse Midwife Services The Health Plan shall ensure access to certified nurse midwife services or licensed midwife services for low risk Enrollees.   8. Pharmacy If the Health Plan elects to use a more restrictive pharmacy network than the non-Medicaid Reform Fee-for-Service network, the Health Plan shall provide one (1) licensed pharmacy per 2,500 Enrollees. The Health Plan shall ensure that its contracted pharmacies comply with the Settlement Agreement to Hernandez, et. al. v. Medows (case number 02-20964 Civ-Gold/ Simonton) (HSA).   9. Access for Persons with Disabilities The Health Plan shall ensure that all facilities have access for persons with disabilities.   10. Health, Cleanliness and Safety The Health Plan shall ensure adequate space, supplies, proper sanitation, and smoke-free facilities with proper fire and safety procedures in operation. D.  Appointment Waiting Times and Geographic Access Standards   1. The Health Plans must assure that PCP services and referrals to Participating Specialists are available on a timely basis, as follows: a. Urgent Care — within one (1) day, b. Routine Sick Patient Care — within one (1) week, and c. Well Care Visit — within one (1) month.   2. All PCP's and Hospital services must be available within an average of thirty (30) minutes travel time from an Enrollee's residence. All Participating Specialists and ancillary services must be within an average of sixty (60) minutes travel time from an Enrollee's residence. The Agency may waive this requirement, in writing, for Rural areas and where there are no PCPs or Hospitals within the thirty (30) minute average travel time.   3. The Health Plan shall provide a designated emergency services facility within an average of thirty (30) minutes travel time from an Enrollee's residence, that provides care on a twenty-four (24) hours a day, seven (7) days a week basis. Each designated emergency service facility shall have one (1) or more physicians and one (1) or more nurses on duty in the facility at all times. The Agency may waive the travel time requirement, in writing, in Rural areas.         4. For Rural areas, if the Health Plan is unable to enter into an agreement with specialty or ancillary service providers within the required sixty (60) minute average travel time, the Agency may waive, in writing, the requirement.   5. At least one (1) pediatrician or one (1) CHD, FQHC or RHC within an average of thirty (30) minutes travel time from an Enrollee's residence, provided that this requirement remains consistent with the other minimum time requirements of this Contract. In order to meet this requirement, the pediatrician(s), CHD, FQHC, and/or RHC must provide access to care on a twenty-four (24) hours a day, seven days a week basis. The Agency may waive this requirement, in writing, for Rural areas and where there are no pediatricians, CHDs, FQHCs or RHCs within the thirty (30) minute average travel time. E.  Behavioral Health Services     1. The Health Plan shall have at least one (1) certified adult psychiatrist and at least one (1) board certified child psychiatrist (or one (1) child psychiatrist who meets all education and training criteria for Board Certification) that are available within thirty (30) minutes average travel time for Urban areas and sixty (60) minutes average travel time for Rural areas of all Enrollees.   2. For Rural areas, if the Health Plan does not have a Provider with the necessary experience, the Agency may waive, in writing, the requirements in E.1 above.   3. The Health Plan shall ensure that outpatient staff includes at least one (1) FTE Direct Service Behavioral Health Provider per 1,500 Enrollees. The Agency expects the Health Plan’s staffing pattern for direct service Providers to reflect the ethnic and racial composition of the community.   4. The Health Plan’s array of Direct Service Behavioral Health Providers for adults and Children/Adolescents shall include Providers that are licensed or eligible for licensure, and demonstrate two (2) years of clinical experience in the following specialty areas or with the following populations: a. Adoption; b. Child protection or foster care; c. Dual diagnosis (mental illness and substance abuse); d. Dual diagnosis (mental illness and developmental disability); e. Developmental disabilities; f. Behavior analysis; g. Behavior management and alternative therapies for Children/Adolescents; h. Separation and loss; i. Victims and perpetrators of sexual abuse (Children/Adolescents and adults); j. Victims and perpetrators of violence and violent crimes (Children/Adolescents and adults); k. Court ordered mental health evaluations including assessment of parental mental health issues and parental competency as it relates to mental health; and l. Expert witness testimony.   5. All Direct Service Behavioral Health Providers and mental health targeted case managers serving the Children/Adolescent population shall be certified by DCF to administer CFARS (or other rating scale required by DCF or the Agency).   6. Mental health targeted case managers shall not be counted as Direct Service Behavioral Health Providers.   7. For Case Management services, the Health Plan shall provide staff that meets the following minimum requirements: a.  Have a baccalaureate degree from an accredited university, with major course work in the areas of psychology, social work, health education or a related human service field and, if working with Children/Adolescents, have a minimum of one-(1) year full time experience or equivalent experience, working with the target population. Prior experience is not required if working with the adult population; or b.  Have a baccalaureate degree from an accredited university and if working with Children/Adolescents, have at least three (3) years full time or equivalent experience, working with the target population. If working with adults, the case manager must have two (2) years of experience. (Note: case managers who were certified by the Department prior to July 1, 1999, who do not meet the degree requirements, may provide Case Management services if they meet the other requirements; and c. Have completed a training program within six (6) months of employment. The training program must be prior approved by the Agency. The training must include a review of the local resources and a thorough presentation of the applicable State and federal statutes and promote the knowledge, skills, and competency of all case managers through the presentation of key core elements relevant to the target population. The case manager must also be able to demonstrate an understanding of the Health Plan’s Case Management policies and procedures.   8. Case Management supervision must be provided by a person who has a master’s degree in a human services field and three (3) years of professional full time experience serving this target population or a person with a bachelor’s degree and five (5) years of full time or equivalent Case Management experience. For supervising case managers who work only with adults, two (2) years of full time experience is required. The supervisors must have had the approved Health Plan training in Case Management or have documentation that they have prior equivalent training.   9. The Health Plan shall have access to no less than one (1) fully accredited psychiatric community Hospital bed per 2,000 Enrollees, as appropriate for both Children/Adolescents and adults. Specialty psychiatric Hospital beds may be used to count toward this requirement when psychiatric community Hospital beds are not available within a particular community. Additionally, the Health Plan shall have access to sufficient numbers of accredited Hospital beds on a medical/surgical unit to meet the need for medical detoxification treatment.   10. The Health Plan’s facilities must be licensed, as required by law and rule, accessible to the handicapped, in compliance with federal Americans with Disabilities Act guidelines, and have adequate space, supplies, good sanitation, and fire, safety, and disaster preparedness and recovery procedures in operation.   11. The Health Plan shall ensure that it has Providers that are qualified to serve Enrollees and experienced in serving severely emotionally disturbed Children/Adolescents and severely and persistent mentally ill adults. The Health Plan shall maintain documentation of its Providers’ experience in the Providers' credentialing file.   12. The Health Plan shall adhere to the staffing ratio of at least one (1) FTE Behavioral Health Care Case Manager for twenty (20) Children/Adolescents and at least one (1) FTE Behavioral Health Care Case Manager per forty (40) adults. Direct Service Behavioral Health Care Providers shall not count as Behavioral Health Care Case Managers.   13. Prior to commencement of Behavioral Health Services, the Health Plan shall enter into agreements for coordination of care and treatment of Enrollees, jointly or sequentially served, with county community mental health care center(s) that are not a part of the Health Plan's Participating Provider network. The Health Plan shall enter into similar agreements with agencies funded pursuant to Chapter 394, F.S., 2004. The Agency shall approve all model agreements between the Health Plan and county community mental health center(s)/agencies before the Health Plan enters into the agreement. This requirement shall not apply if the Health Plan provides the Agency with documentation that shows the Health Plan has made a good faith effort to contract with county community mental health center(s)/agencies, but could not reach an agreement.   14. The Health Plan shall request current behavioral health care provider information from all new Enrollees upon enrollment. The Health Plan shall solicit these behavioral health services providers to participate in the Health Plan's network. The Health Plan may request in writing that the Agency grant exemption to a Health Plan from soliciting a specific behavioral health services provider on a case-by-case basis.   15. To the maximum extent possible, the Health Plan shall contract for the provision of Behavioral Health Services with the State's community mental health centers designated by the Agency and DCF. F.  Specialists and Other Providers   1. In addition to the above requirements, the Health Plan shall assure the availability of the following specialists, as appropriate for both adults and pediatric members, on at least a referral basis. The Health Plan shall use Participating Specialists with pediatric expertise for Children/Adolescents when the need for pediatric specialty care is significantly different from the need for adult specialty care (for example a pediatric cardiologist for Children/Adolescents with congenital heart defects). a. Allergist, b. Cardiologist, c. Endocrinologist, d. General Surgeon, e. Obstetrical/Gynecology (OB/GYN), f. Neurologist, g. Nephrologist, h. Orthopedist, i. Urologist, j. Dermatologist, k. Otolaryngologist, l. Pulmonologist, m. Chiropractic Physician, n. Podiatrist, o. Ophthalmologist, p. Optometrist, q. Neurosurgeon, r. Gastroenterologist, s. Oncologist, t. Radiologist, u. Pathologist, v. Anesthesiologist, w. Psychiatrist, x. Oral surgeon, y. Physical, respiratory, speech and occupational therapists, and z. Infectious disease specialist.   2. If the infectious disease specialist does not have expertise in HIV and its treatment and care, then the Health Plan must have another Provider with such expertise.   3. The Health Plan shall make a good faith effort to execute memoranda of agreement with the local CHDs to provide services which may include, but are not limited to, family planning services, services for the treatment of sexually transmitted diseases, other public health related diseases, tuberculosis, immunizations, foster care emergency shelter medical screenings, and services related to Healthy Start prenatal and post natal screenings. The Health Plan shall provide documentation of its good faith effort upon the Agency’s request.   4. Notwithstanding Section VIII.B.2, Certain Public Providers, of this Contract, the Health Plan shall pay, without prior authorization, at the contracted rate or the Medicaid Fee-for-Service rate, all valid claims initiated by any CHD for office visits, prescribed drugs, laboratory services directly related to DCF emergency shelter medical screening, and tuberculosis. The Health Plan need not reimburse the CHD until the CHD notifies the Plan and provides the Plan with copies of the appropriate medical records and provides the Enrollee's PCP with the results of any tests and associated office visits.   5. The Health Plan shall make a good faith effort to execute a contract with a Federally Qualified Health Center (FQHC), and if applicable, a Rural Health Clinic (RHC). The Health Plan shall reimburse FQHCs and RHCs at rates comparable to those rates paid for similar services in the FQHC's or RHC's community. The Health Plan shall report to the Agency, on a quarterly basis, the payment rates and the payment amounts made to FQHCs and RHCs for contractual services provided by these entities.   6. The Health Plan shall permit female Enrollees to have direct access to a women's health specialist within the network for Covered Services necessary to provide women's routine and preventive health care services. This is in addition to an Enrollee's designated PCP, if that Provider is not a women's health specialist. G. Specialty Plan Provider Network A Health Plan that offers a Specialty Plan shall ensure its Provider network meets the following requirements:   1. The Provider network will be integrated and consist of PCPs and specialists who are trained to provide services for a particular condition or population;   2. If the Specialty Plan has been developed for individuals with a particular disease state, the network will contain a sufficient number of board certified specialists in the care and management of the disease. Because individuals have multiple diagnoses, there should be a sufficient number of specialists to manage different diagnoses as well;   3. A defined network of facilities used for inpatient care shall be included with accredited tertiary hospitals and hospitals that have been designated for specific conditions, appropriate for the Specialty Plan population (e.g., end stage renal disease centers, comprehensive hemophilia centers;   4. Specialty pharmacies when appropriate; and   5. A range of community based care options as alternatives to hospitalization and institutionalization. H.  Continuity of Care   1. The Health Plan shall allow Enrollees in active treatment to continue care with a terminated treating provider when such care is Medically Necessary, through completion of treatment of a condition for which the Enrollee was receiving care at the time of the termination, until the Enrollee selects another treating Provider, or during the next Open Enrollment period. None of the above may exceed six (6) months after the termination of the Provider's contract.   2. The Health Plan shall allow pregnant Enrollees who have initiated a course of prenatal care, regardless of the trimester in which care was initiated, to continue care with a terminated treating provider until completion of postpartum care.   3. Notwithstanding the provisions in this subsection, a terminated provider may refuse to continue to provide care to an Enrollee who is abusive or noncompliant.   4. For continued care under this subsection, the Health Plan and the terminated provider shall continue to abide by the same terms and conditions as existed in the terminated contract.   5. The requirements set forth in this subsection shall not apply to providers who have been terminated from the Health Plan for Cause.   6. The Health Plan shall develop and maintain policies and procedures for the above requirements. I. Network Changes   1. The Health Plan shall notify the Agency within seven (7) Business Days of any significant changes to the Health Plan network. A significant change is defined as: a. A decrease in the total number of PCPs by more than five percent (5%); b. A loss of all Participating Specialists in a specific specialty where another Participating Specialist in that specialty is not available within sixty (60) minutes; c. A loss of a Hospital in an area where another Health Plan Hospital of equal service ability is not available within thirty (30) minutes; or d. Other adverse changes to the composition of the network which impair or deny the Enrollee's adequate access to Providers.   2. The Health Plan shall have procedures to address changes in the Health Plan network that negatively affect the ability of Enrollees to access services, including access to a culturally diverse Provider network. Significant changes in network composition that negatively impact Enrollee access to services may be grounds for Contract termination or Agency determined sanctions.   3. If a PCP ceases participation in the Health Plan network, the Health Plan shall send written notice to the Enrollees who have chosen the Provider as their PCP. This notice shall be issued no less than ninety (90) Calendar Days prior to the effective date of the termination and no more than ten (10) Calendar Days after receipt or issuance of the termination notice. a. If an Enrollee is in a Prior Authorized ongoing course of treatment with any other Provider who becomes unavailable to continue to provide services, the Health Plan shall notify the Enrollee in writing within ten (10) Calendar Days from the date the Health Plan becomes aware of such unavailability. b. These requirements to provide notice prior to the effective dates of termination shall be waived in instances where a Provider becomes physically unable to care for Enrollees due to illness, a Provider dies, the Provider moves from the Service Area and fails to notify the Health Plan, or when a Provider fails credentialing. Under these circumstances, notice shall be issued immediately upon the Health Plan becoming aware of the circumstances. REMAINDER OF PAGE INTENTIALLY LEFT BLANK     -------------------------------------------------------------------------------- Section VIII Quality Management A.   Quality Improvement   1.   General Requirements a. The Health Plan shall have an ongoing Quality Improvement Program (QIP) that objectively and systematically monitors and evaluates the quality and appropriateness of care and services rendered, thereby promoting Quality of care and Quality patient outcomes in service performance to its Enrollees. b. The Health Plan’s written policies and procedures shall address components of effective health care management including, but not limited to anticipation, identification, monitoring, measurement, evaluation of Enrollee’s health care needs, and effective action to promote Quality of care. c. The Health Plan shall define and implement improvements in processes that enhance clinical efficiency, provide effective utilization, and focus on improved outcome management achieving the highest level of success. d. The Health Plan and its QIP shall demonstrate in its care management, specific interventions to better manage the care and promote healthier Enrollee outcomes. e. The Health Plan shall cooperate with the Agency and the External Quality Review Organization (EQRO). The Agency will set methodology and standards for QI (spell out first time) with advice from the EQRO. f. Prior to implementation, the Agency and/or the EQRO shall review the Health Plan QIP. g. The Health Plan must submit its QIP to the Agency no later than the execution date of the Contract. The QIP must be approved, in writing, by the Agency no later than three (3) months following the execution of this Contract.   2. Specific Required Components of the QIP a. The Health Plan’s governing body shall oversee and evaluate the QIP. The role of the Health Plan’s governing body shall include providing strategic direction to the QIP, as well as ensuring the QIP is incorporated into the operations throughout the Health Plan. b. The Health Plan shall have a QIP Committee. The Chairman of the Committee shall be the Health Plan Medical Director. Appropriate Health Plan staff representing the various departments of the organization shall have membership on the Committee. The Committee shall meet on a regular periodic basis. Its responsibilities shall include the following: (1) Development and implementation of a written QI plan, which incorporates the strategic direction provided by the governing body. (2) The QI plan shall reflect a coordinated strategy to implement the QIP including planning, decision making, intervention, and assessment of results. (3) The QI plan shall include a description of the Health Plan staff assigned to the QIP; their specific training regarding Medicaid; how they are organized; and their responsibilities. (4) The QI plan shall describe the role of its Providers in giving input to the QIP, whether that is by membership on the Committee, its Sub-Committees, or other means. (5) The Health Plan is encouraged to include an advocate representative on the QIP Committee. (6) The Health Plan shall submit its written QI plan to the Agency for written approval within thirty (30) days of the execution of the Contract. c. Direct and review QI activities, including, but not limited to: (1) Assure that QIP activities take place throughout the Health Plan; (2) Review and suggest new and/or improved QI activities; (3) Direct task forces/committees to review areas of concern in the provision of health care services to Enrollees; (4) Designate evaluation and study design procedures; (5) Report findings to appropriate executive authority, staff, and departments within the Health Plan; and (6) Direct and analyze periodic reviews of Enrollees' service utilization patterns.   d. Maintain minutes of all Committee and Sub-Committee meetings.   3. Health Plan QI Activities The Health Plan shall monitor and evaluate the quality and appropriateness of care and service delivery (or the failure to provide care or deliver services) to Enrollees through performance improvement projects (PIPs), medical record audits, performance measures, surveys, and related activities. a. PIPs The Health Plan shall perform no less than six (6) Agency approved performance improvement projects. (1) Each PIP must include a statistically significant sample of Enrollees. (2) At least one (1) of the PIPs must focus on Language and Culture, Clinical Health Care Disparities, or Culturally and Linguistically Appropriate Services. (3) At least two (2) of the PIPs must relate to Behavioral Health Services. (4) All PIPs by the Health Plan must achieve, through ongoing measurements and intervention, significant improvement to the Quality of care and service delivery, sustained over time, in both clinical care and non-clinical care areas that are expected to have a favorable effect on health outcomes and Enrollee satisfaction. (5) The PIPs must be completed in a reasonable time period so as to allow the Health Plan to evaluate the information drawn from them and to use the results of the analysis to improve Quality of care and service delivery every year. (6) Within three months of the execution of this Contract, the Health Plan shall submit, in writing, a description of each of the PIPs to the Agency for approval. The detailed description shall include: i.   An overview explaining how and why the project was selected, as well as its relevance to the Health Plan Enrollees and Providers; ii.   The study question; iii.   The study population; iv.   The quantifiable measures to be used, including a goal or benchmark; v.   Baseline methodology; vi.   Data sources; vii.   Data collection methodology; viii.   Data collection cycle; ix.   Data analysis cycle; x.   Results with quantifiable measures; xi.   Analysis with time period and the measures covered; xii.   Analysis and identification of opportunities for improvement; and xiii.   An explanation of all interventions to be taken. b. Behavioral Health QI Requirements (1)  The Health Plan's QIP shall include a Behavioral Health component in order to monitor and assure that the Health Plan's Behavioral Health Services are sufficient in quantity, of acceptable Quality and meet the needs of the Enrollees. (2) Treatment plans must: i.   Identify reasonable and appropriate objectives; ii.   Provide necessary services to meet the identified objectives; and iii.   Include retrospective reviews that confirm that the care provided, and its outcomes, were consistent with the approved treatment plans and appropriate for the Enrollees' needs. (3) In determining if Behavioral Health Services are acceptable according to current treatment standards, the Health Plan shall: i.   Perform a quarterly review of a random selection of ten percent (10%) or fifty (50) medical records, whichever is more, of Enrollees who received Behavioral Health Services during the previous quarter; and ii.   Elements of these reviews shall include, but not be limited to:   (a) Management of specific diagnoses;   (b) Appropriateness and timeliness of care;   (c) Comprehensiveness of and compliance with the plan of care;   (d) Evidence of special screening for high risk Enrollees and/or conditions; and   (e) Evidence of appropriate coordination of care. (4) In areas in which there is not an established local advisory group, the Health Plan is responsible for the development of local advisory group meetings within sixty (60) days of the effective date of the Contract. (5) In areas where there is more than one (1) Health Plan authorized to provide Behavioral Health Services, the Health Plans shall work together in establishing an area local advisory group. (6) Composition of local advisory groups shall follow Section X. Administration and Management, I., Health Plan Local Advisory Group. (7) The Health Plan shall send representation to the local advisory group’s meetings that convene quarterly and report to the Agency on the Behavioral Health advocacy and programmatic concerns. (8) Local advisory groups shall provide technical and policy advice to the Agency regarding Behavioral Health Services. c. Performance Measures (PMs)  The Health Plan shall collect data on patient outcome PMs, as defined by the Health Plan Employee Data and Information Set (HEDIS) or otherwise defined by the Agency and report the results of the measures to the Agency annually. The Agency may add or remove reporting requirements with 30-days advance notice. At a minimum, the following PMs shall be measured by the Health Plan: (1) Breast Cancer Screening; (2) Cervical Cancer Screening; (3) Colorectal Cancer Screening; (4) Well Child Visits in the First 15 Months of Life; (5) Well Child Visits in the Third, Fourth, Fifth and Sixth Years of Life; (6) Adolescent Well Care Visits; (7) Childhood Immunization Status; (8) Adolescent Immunization Status; (9) Preventive and Total Dental Visits for Children/Adolescents Between Three Years and Eleven Years and for Children/Adolescents Between Twelve Years and Twenty Years of Age; (10) Average number of days spent in the community by all Enrollees receiving Behavioral Health intensive case management services; (11) Number of enrollees admitted to the State Mental Hospital; (12) Amount of time between discharge from the State Mental Hospital and first date of service received from the Provider; and (13) Number of Enrollees who receive a psychiatric evaluation within required time frames prior to admission to a nursing facility. (14) Agency-specified data on the five Disease Management programs for chronic conditions specified in subsection B.6.a. of this Section. d. Consumer Assessment of Health Plans Survey (CAHPS) At the end of the first (1st) year under this Contract, the Agency shall conduct an annual Consumer Assessment of Health Plans Survey. The CAHPS survey shall be done on an annual basis thereafter. The Vendor shall a corrective action plan to address the results of the CAHPS Survey within two (2) months of the request from the Agency. e. Provider Satisfaction Survey The Health Plan shall submit a Provider satisfaction survey plan, including the questions to be asked, to the Agency for written approval by the end of the eighth (8th) month of this Contract. The Health Plan shall conduct the survey at the end of the first (1st) year of this Contract. The results of the Provider satisfaction survey shall be reported to the Agency within four (4) months of the beginning of the second year of this Contract.   f. Medical Record Review (1) If the Health Plan is not accredited, or if the Health Plan is accredited by an entity, that does not review the Medical Records of the Health Plan's PCPs, then the Health Plan shall conduct reviews of Enrollees’ Medical Records to ensure that PCPs provide high Quality health care that is documented according to established standards. (2) The standards, which must include all Medical Record documentation requirements addressed in this Contract, must be distributed to all Providers. (3) The Health Plan must conduct these reviews at all PCP sites that serve fifty (50) or more Enrollees. (4) Practice sites include both individual offices and large group facilities. (5) The Health Plan must review each practice site at least one (1) time during each two (2) year period.   (6) The Health Plan must review a reasonable number of records at each site to determine compliance. Five (5) to ten (10) records per site is a generally-accepted target, though additional reviews must be completed for large group practices or when additional data is necessary in specific instances.   (7) The Health Plan shall report the results of all Medical Record reviews to the Agency within thirty (30) Calendar Days of the review.   (8) The Health Plan must submit to the Agency for written approval and maintain a written strategy for conducting Medical Record reviews. The strategy must include, at a minimum, the following: i. Designated staff to perform this duty; ii. The method of case selection; iii. The anticipated number of reviews by practice site; iv. The tool that the Health Plan will use to review each site; and v. How the Health Plan will link the information compiled during the review to other Health Plan functions (e.g., QI, credentialing, Peer Review, etc.). g. Peer Review   (1) The Health Plan shall have a Peer Review process which: i. Reviews a Provider's practice methods and patterns, morbidity/mortality rates, and all Grievances filed against the Provider relating to medical treatment. ii. Evaluates the appropriateness of care rendered by Providers. iii. Implements corrective action(s) when the Health Plan deems it necessary to do so. iv. Develops policy recommendations to maintain or enhance the Quality of care provided to Enrollees. v. Conducts reviews which include the appropriateness of diagnosis and subsequent treatment, maintenance of a Provider's Medical Records, adherence to standards generally accepted by a Provider's peers and the process and outcome of a Provider's care. vi. Appoints a Peer Review Committee, as a Sub-Committee to the QIP Committee, to review provider performance when appropriate. The Medical Director or his/her designee shall chair the Peer Review Committee, and its membership shall be drawn from the Provider Network and include peers of the Provider being reviewed. vii. Receive and review all written and oral allegations of inappropriate or aberrant service by a Provider. viii. Educate Enrollees and Health Plan staff about the Peer Review process, so that Enrollees and the Health Plan staff can notify the Peer Review authority of situations or problems relating to Providers. h. Credentialing and Recredentialing   (1) The Health Plan shall be responsible the credentialing and recredentialing of its Provider network. Hospital ancillary Providers are not required to be independently credentialed if those Providers only provide services to the Health Plan Enrollees through the Hospital.   (2) The Health Plan shall establish and verify credentialing and recredentialing criteria for all professional Providers that, at a minimum, meet the Agency's Medicaid participation standards. The Agency’s criterion includes: i. A completed Medicaid Agreement with a copy of each Provider's current medical license sent to the Agency’s Fiscal Agent and verification that the Provider is an approved Medicaid provider. The Provider’s active licensure shall suffice in lieu of verification of education, training, and professional liability coverage requirements. ii. No receipt of revocation or suspension of the Provider's State License by the Division of Medical Quality Assurance, Department of Health. iii. No ongoing investigation(s) by Medicaid Program Integrity, Medicaid Fraud and Control Unit, Medicare, Medical Quality Assurance, or other governmental entities.   (3) The Health Plan's credentialing files must document the education, experience, prior training and ongoing service training for each staff member or Provider rendering Behavioral Health Services.   (4) The following additional requirements apply to physicians and must ensure compliance with 42 CFR 438.214: i. Good standing of privileges at the Hospital designated as the primary admitting facility by the PCP or if the Provider does not have admitting privileges, good standing of privileges at the Hospital by another physician with whom the PCP has entered into an arrangement for Hospital coverage. ii. Valid Drug Enforcement Administration (DEA) certificates, where applicable. iii. Attestation that the total active patient load (all populations with Medicaid Fee-for-Service (FFS), CMS Network, Health Maintenance Organization (HMO), Health Plan, Medicare or commercial coverage) is no more than 3,000 patients per PCP. An active patient is, one that is, seen by the Provider a minimum of three (3) times per year. iv. Passage of a criminal background check, within the previous twelve (12) months from the date of the Enrollment application, by the Provider, any officer, director, agent managing employee, affiliated person, or any partner or shareholder having an ownership interest of five percent (5%) or greater in the Provider. (If the Provider is a corporation, partnership, or other business entity.) v. A good standing report on a credentialing site visit survey. vi. Attestation to the correctness/completeness of the Provider's application. vii. Statement regarding any history of loss or limitation of privileges or disciplinary activity. viii. Current curriculum vitae, which includes at least five (5) years of work history.   4. Agency Oversight a. The Agency shall evaluate the Health Plan’s QIP and PMs at least one (1) time per year at dates to be determined by the Agency, or as otherwise specified by this Contract. b. The Health Plan, in conjunction with the Agency, shall participate in workgroups to design additional QI strategies and to learn to use the best practice methods for enhancing the Quality of health care provided to Enrollees. c. If the PIPs, CAHPS, the PMs, the annual Medical Record audit or the EQRO indicate that the Health Plan's performance is not acceptable, then the Agency may restrict the Health Plan’s Enrollment activities including, but not limited to, termination of Mandatory Assignments. d. If the Agency determines that the Health Plan’s performance is not acceptable, the Agency shall require the Health Plan to submit a corrective action plan (CAP). f the Health Plan fails to provide a CAP within the time specified by the Agency, the Agency shall sanction the Health Plan, in accordance with the provisions of Section XIV, Sanctions, and may immediately terminate all Enrollment activities and Mandatory Assignments. When considering whether to impose a limitation on Enrollment activities or Mandatory Assignment, the Agency may take into account the Health Plan’s cumulative performance on all QI activities. e. Annual Medical Record Audit   (1) The Health Plan shall furnish specific data requested by the Agency in order to conduct the Medical Record audit.   (2) If the Medical Record audit indicates that Quality of care is not acceptable, pursuant to contractual requirements, the Agency shall sanction the Health Plan, in accordance with the provisions of Section XIV, Sanctions, and may immediately terminate all Enrollment activities and Mandatory Assignments, until the Health Plan attains an acceptable level of Quality of care as determined by the Agency. f. Independent Medical Record Review by an EQRO   (1) The Health Plan shall provide all information requested by the EQRO and/or the Agency, including, but not limited to quality outcomes concerning timeliness of, and Enrollee access to, Covered Services.   (2) The Health Plan shall cooperate with the EQRO during the Medical Record review, which will be done at least one (1) time per year.   (3) If the EQRO indicates that the Quality of care is not within acceptable limits set forth in this Contract, the Agency shall sanction the Health Plan, in accordance with the provisions of Section XIV, Sanctions and may immediately terminate all Enrollment activities and Mandatory Assignments until the Health Plan attains a satisfactory level of Quality of care as determined by the EQRO. B.   Utilization Management (UM)     1. General Requirements The UM program shall be consistent with 42 CFR 456 and include, but not be limited to: a. Procedures for identifying patterns of over-utilization and under-utilization by Enrollees and for addressing potential problems identified as a result of these analyses. b. The Health Plan shall report Fraud and Abuse information identified through the Utilization Management program to the Agency’s contract manager, MPI and MFCU as described in Section X, and referenced in 42 C.F.R. 455.1(a)(1). c. A procedure for Enrollees to obtain a second medical opinion and that the Health Plan shall be responsible for authorizing claims for such services in accordance with section 641.51, F.S. d. Service Authorization protocols for Prior Authorization and denial of services; the process used to evaluate prior and con-current authorization; mechanisms to ensure consistent application of review criteria for authorization decisions; consultation with the requesting Provider when appropriate, Hospital discharge planning, physician profiling; and a retrospective review of both inpatient and ambulatory claims, meeting the predefined criteria below. The Health Plan shall be responsible for ensuring the consistent application of review criteria for authorization decisions and consulting with the requesting Provider when appropriate.   (1) The Health Plan must have written approval from the Agency for its Service Authorization protocols and for any changes to the original protocols.   (2) The Health Plan's Service Authorization systems shall provide the authorization number and effective dates for authorization to Participating Providers and non-participating Providers.   (3) The Health Plan's Service Authorization systems shall provide written confirmation of all denials of authorization to providers. (See 42 C.F.R. 438.210(c)). i. The Health Plan may request to be notified, but shall not deny claims payment based solely on lack of notification, for the following:   (a) Inpatient emergency admissions (within ten (10) days);   (b) Obstetrical care (at first visit);   (c) Obstetrical admissions exceeding forty-eight (48) hours for vaginal delivery and ninety-six (96) hours for caesarean section; and   (d) Transplants. ii. The Health Plan shall ensure that all decisions to deny a Service Authorization request, or limit a service in amount, duration, or scope that is less than requested, are made by Health Care Professionals who have the appropriate clinical expertise in treating the Enrollee’s condition or disease. (See 42 C.F.R. 438.210(b)(3))   (4) Only a licensed psychiatrist may authorize a denial for an initial or concurrent authorization of any request for Behavioral Health Services. The psychiatrist's review shall be part of the UM process and not part of the clinical review, which may be requested by a Provider or the Enrollee, after the issuance of a denial.   (5) The Health Plan shall provide post authorization to County Health Departments (CHD) for the provision of emergency shelter medical screenings provided for clients of DCF.   (6) Health Plans with automated authorization systems may not require paper authorization as a condition of receiving treatment.   2. Certain Public Providers a. The Health Plan shall authorize all claims, from a CHD, a migrant health center funded under Section 329 of the Public Health Services Act or a community health center funded under Section 330 of the Public Health Services Act, without Prior Authorization for the following:   (1) The diagnosis and treatment of sexually transmitted diseases and other communicable diseases, such as tuberculosis and human immunodeficiency syndrome;   (2) The provision of immunizations;   (3) Family planning services and related pharmaceuticals;   (4) School health services listed in (1), (2) and (3) above, and for services rendered on an urgent basis by such Providers; and,   (5) In the event that a vaccine-preventable disease emergency is declared, the Health Plan shall authorize claims from the County Health Department for the cost of the administration of vaccines. b. The providers specified in B.2.a. above, shall attempt to contact the Health Plan before providing health care services to Enrollees. Such providers shall provide the Health Plan with the results of the office visit, including test results, and shall be reimbursed by the Health Plan at the rate negotiated between the Health Plan and the public provider or the Medicaid Fee-for-Service rate. c. The Health Plan shall not deny claims for services delivered by the providers specified in B.2.a. above solely based on the period between the date of service and the date of clean claim submission, unless that period exceeds 365 Calendar Days.   3. Notice of Action a. The Health Plan shall notify the Enrollee, in writing, using language at, or below the fourth grade reading level, of any Action taken by the Health Plan to deny a Service Authorization request, or limit a service in amount, duration, or scope that is less than requested. (See 42 C.F.R. 438.404(a) and (c) and 42 C.F.R. 438.10(c) and (d))   b. The Health Plan must provide notice to the Enrollee as set forth below: (See 42 C.F.R. 438.404(a) and (c) and 42 C.F.R. 438.210(b) and (c))   (1) The Action the Health Plan has taken or intends to take.   (2) The reasons for the Action, customized for the circumstances of the Enrollee.   (3) The Enrollee’s or the Provider's (with written permission of the Enrollee) right to file an Appeal.   (4) The procedures for filing an Appeal.   (5) The circumstances under which expedited resolution is available and how to request it.   (6) Enrollee rights to request that Benefits continue pending the resolution of the Appeal, how to request that Benefits be continued, and the circumstances under which the Enrollee may be required to pay the costs of these services. c. The Health Plan must provide the notice of Action within the following time frames:   (1) At least ten (10) Calendar Days before the date of the Action or fifteen (15) Calendar Days if the notice is sent by Surface Mail (five [5] Calendar Days if the Health Plan suspects Fraud on the part of the Enrollee. (See 42 C.F.R. 431.211, 42 C.F.R. 431.213 and 42 C.F.R. 431.214)   (2) For denial of the claim, at the time of any Action affecting the claim.   (3) For standard Service Authorization decisions that deny or limit services, as quickly as the Enrollee’s health condition requires, but no later than fourteen (14) Calendar Days following receipt of the request for service. (See 42 C.F.R. 438.201(d)(1))   (4) If the Health Plan extends the time frame for notification, it must: 1.   i. Give the Enrollee written notice of the reason for the extension and inform the Enrollee of the right to file a Grievance if the Enrollee disagrees with the Health Plan’s decision to extend the time frame. ii. Carry out its determination as quickly as the Enrollee's health condition requires, but in no case later than the date upon which the fourteen (14) Calendar Day extension period expires. (See 42 C.F.R. 438.210(d)(1)) 2.     (5) If the Health Plan fails to reach a decision within the time frames described above, the failure on the part of the Health Plan shall be considered a denial and is an Action adverse to the Enrollee. (See 42 C.F.R. 438.210(d))   (6) For expedited Service Authorization decisions, within the three (3) Business Days (with the possibility of a fourteen (14) Calendar Day extension) (See 42 C.F.R. 438.210(d)(2))   (7) The Health Plan shall provide timely approval or denial of authorization of out-of-network use through the assignment of a Prior Authorization number, which refers to and documents the approval. The Health Plan shall provide written follow-up documentation of the approval or the denial to the out-of-network provider within five (5) Business Days from the request for approval.   (8) The Health Plan shall determine when exceptional referrals to out-of-network specially qualified providers are needed to address the unique medical needs of an Enrollee (e.g., when an Enrollee’s medical condition requires testing by a geneticist). The Health Plan shall develop and maintain policies and procedures for such referrals.   4. Care Management The Health Plan shall be responsible for the management of medical care and continuity of care for all Enrollees. The Health Plan shall maintain written Case Management and continuity of care protocols that include the following minimum functions: a. Appropriate referral and scheduling assistance of Enrollees needing specialty health care/Transportation services, including those identified through Child Health Check-Up Program (CHCUP) Screenings. b. Determination of the need for Non-Covered Services and referral of the Enrollee for assessment and referral to the appropriate service setting (to include referral to WIC and Healthy Start) utilizing assistance as needed by the area Medicaid office. c. Case Management follow-up services for children, who the Health Plan identifies through blood Screenings as having abnormal levels of lead. d. Coordinated Hospital/institutional discharge planning that includes post-discharge care, including skilled, short-term, skilled nursing facility care, as appropriate. e. A mechanism for direct access to specialists for Enrollees identified as having special health care needs, as is appropriate for their condition and identified needs. f. The Health Plan shall have an outreach program and other strategies for identifying every pregnant Enrollee. This shall include case management, claims analysis, and use of health risk assessment, etc. The Health Plan shall require its participating Providers to notify the Health Plans of any Medicaid Enrollee who is identified as being pregnant. g. Documentation of referral services in Enrollees’ medical records, including results. h. Monitoring of Enrollees with ongoing medical conditions and coordination of services for high utilizers such that the following functions are addressed as appropriate: acting as a liaison between the Enrollee and Providers, ensuring the Enrollee is receiving routine medical care, ensuring that the Enrollee has adequate support at home, assisting Enrollees who are unable to access necessary care due to their medical or emotional conditions or who do not have adequate community resources to comply with their care, and assisting the Enrollee in developing community resources to manage the member’s medical condition. i. Documentation of emergency care encounters in Enrollees’ records with appropriate medically indicated follow-up. j. Coordination of hospital/institutional discharge planning that includes post-discharge care, including skilled short-term rehabilitation, and skilled nursing facility care, as appropriate. k. Share with other MCOs, PIHPs, and PAHPs serving the Enrollee the results of its identification and assessment of any enrollee with special health care needs so that those activities need not be duplicated. l. Ensure that in the process of coordinating care, each Enrollee's privacy is protected consistent with the confidentiality requirements in 45 CFR parts 160 and 164. 45 CFR Part 164 specifically describes the requirements regarding the privacy of individually identifiable health information.   5. New Enrollee Procedures a. The Health Plan shall not delay Service Authorization if written documentation is not available in a timely manner. b. The Health Plan shall contact each new Enrollee at least two (2) times, if necessary, within ninety (90) Calendar Days of the Enrollee's Enrollment to schedule the Enrollee's initial appointment with the PCP for the purpose of obtaining a health risk assessment and/or CHCUP Screening. For this subsection, "contact" is defined as mailing a notice to, or telephoning, an Enrollee at the most recent address or telephone number available. c. The Health Plan shall urge Enrollees to see their PCPs within 180 Calendar Days of Enrollment. d. The Health Plan shall contact each new Enrollee within thirty (30) Calendar Days of Enrollment to request that the Enrollee authorize the release of his or her Medical Records (including those related to Behavioral Health Services) to the Health Plan, or the Health Plan's health services subcontractor, from those providers who treated the Enrollee prior to the Enrollee's Enrollment with the Health Plan. Also, the Health Plan shall request or assist the Enrollee's new PCP by requesting the Enrollee's Medical Records from the previous providers. e. The Health Plan shall use the Enrollee's health risk assessments and/or released Medical Records to identify Enrollee's who have not received CHCUP Screenings in accordance with the Agency approved periodicity schedule. f. The Health Plan shall contact, up to two (2) times if necessary, any Enrollee more than two (2) months behind in the Agency approved periodicity Screening schedule to urge those Enrollees, or their legal representatives, to make an appointment with the Enrollees' PCPs for a Screening visit. g. Within thirty (30) Calendar Days of Enrollment, the Health Plan shall notify Enrollees of, and ensures the availability of, a Screening for all Enrollees known to be pregnant or who advise the Health Plan that they may be pregnant. The Health Plan shall refer Enrollees who are, or may be, pregnant to the appropriate Provider stating that the Enrollee can obtain appropriate prenatal care. h. The Health Plan shall honor any written documentation of Prior Authorization of ongoing Covered Services for a period of thirty (30) Business Days after the effective date of Enrollment, or until the Enrollee's PCP reviews the Enrollee's treatment plan for the following types of Enrollees:   (1) Enrollees who voluntarily enrolled; and   (2) Those Enrollees who were automatically reenrolled after regaining Medicaid eligibility. i. For Mandatory Assignment Enrollees, the Health Plan shall honor any written documentation of Prior Authorization of ongoing services for a period of one (1) month after the effective date of Enrollment or until the Mandatory Assignment Enrollee's PCP reviews the Enrollee's treatment plan, whichever comes first. j. For all Enrollees, written documentation of Prior Authorization of ongoing services includes the following, provided that the services were prearranged prior to Enrollment with the Health Plan:   (1) Prior existing orders;   (2) Provider appointments, e.g. dental appointments, surgeries, etc.; and   (3) Prescriptions (including prescriptions at non-participating pharmacies). k. The Health Plan shall not delay Service Authorization if written documentation is not available in a timely manner. The Health Plan is not required to approve claims for which it has received no written documentation. l. The Health Plan shall not deny claims submitted by an out-of-network provider solely based on the period between the date of service and the date of clean claim submission, unless that period exceeds 365 days. m. The Enrollee's guardian, next of kin or legally authorized responsible person is permitted to act on the Enrollee's behalf in matters relating to the Enrollee's Enrollment, plan of care, and/or provision of services, if the Enrollee:    (1) Was adjudicated incompetent in accordance with the law;   (2) Is found by his or her Provider to be medically incapable of understanding his or her rights; or   (3) Exhibits a significant communication barrier. n. The Health Plan shall take immediate action to address any identified urgent medical needs. "Urgent medical needs" means any sudden or unforeseen situation which requires immediate action to prevent hospitalization or nursing home placement. Examples include hospitalization of spouse or caregiver or increased impairment of in Enrollee living alone who suddenly cannot manage basic needs without immediate help, hospitalization or nursing home placement.   6. Disease Management a. The Health Plan shall develop and implement disease management programs for Enrollees living with chronic conditions. The disease management initiatives shall include, but are not limited to asthma, HIV/AIDS, diabetes, congestive heart failure, and hypertension. The Health Plan may develop and implement additional disease management programs for its Enrollees. b. The disease management programs shall include the following components:   (1) Provider and Enrollee profiling;   (2) Specialized disease-specific physician care;   (3) Intensive care management;   (4) Provider education;   (5) Enrollee education;   (6) Clinical practice guidelines;   (7) Severity and risk assessments of the Enrollee population;   (8) Screening to verify the Enrollee’s initial diagnosis, any complications and the severity of the Enrollee’s illness; and   (9) Interventions designed to improve compliance and prevent acute events, which may include: i. Implementation of standard clinical guidelines for recommended treatments for each disease process; and ii. Enrollee and Provider education focusing on self-management by the Enrollee. c. The Health Plan must develop and use a plan of treatment for chronic disease follow-up care that is tailored to the individual Enrollee. The purpose of the plan of treatment is to assure appropriate ongoing treatment reflecting the highest standards of medical care designed to minimize further deterioration and complications. The plan of treatment shall be on file for each Enrollee with a chronic disease and shall contain sufficient information to explain the progress of treatment. d. As indicated below, the Health Plan must conduct Agency-specified patient satisfaction surveys for each of the five chronic conditions specified in subsection a. above, for a statistically valid sample of the respective Enrollee population identified with each chronic conditions.  These patient satisfaction surveys must be completed on a quarterly-rotational basis so that the Health Plans submit the respective patient satisfaction surveys results by the 15th of the month following the quarter being reported. The Agency may use the results of these surveys in Health Plan comparison information provided by the Choice Counselor/Enrollment Broker to Potential Enrollees. i.  If the Health Plan implements Disease Management programs for other chronic conditions in addition to the five chronic conditions specified in subsection B.6.a. above, it may request approval from the Agency to replace no more than two of the required patient satisfaction surveys with patient satisfaction surveys on other Health Plan-implemented Disease Management programs for chronic conditions. ii. For the first (1st) Contract Year, the Health Plan must begin conducting the first patient satisfaction surveys by January 1, 2007, with a completion date no later than August 31, 2007. The Health Plan can choose how it divides the patient satisfaction surveys during the first (1st) Contract Year. For example, the Health Plan can conduct three (3) of the patient satisfaction surveys during the quarter beginning January 1, 2007 and the last two (2) patient satisfaction surveys during the quarter beginning April 1, 2007. iii. For the second (2nd) and third (3rd) Contract Years, the Health Plan shall commence conducting patient satisfaction surveys on September 1, 2008 and September 1, 2009, respectively, with completion of the patient satisfaction surveys by August 31, 2009 and August 31, 2010, respectively. As with the first Contract Year, the Health Plan may choose which patient satisfaction surveys to conduct each quarter. For example, the Health Plan may choose to conduct 1 patient satisfaction survey for the first three quarters of the second Contract Year and two in the last quarter for a total of five. In the third Contract Year, the health Plan may choose to conduct one patient satisfaction survey in the first, third and fourth quarters of the Contract Year, and two during the second quarter of the third Contract Year. iv. By October 1, 2006, the Health Plan must submit its sampling methodology and patient satisfaction survey schedule for each of the Disease Management chronic conditions for the first Contract Year to the Agency for review and approval.  If the Health Plan is requesting to replace any of the required patient satisfaction surveys with patient satisfaction surveys on other Health Plan-implemented Disease Management programs, then it must submit its request with the October 1, 2006, sampling methodology and scheduling submittal.  For each Contract Year thereafter, the Health Plan must submit to the Agency its sampling methodology, patient satisfaction survey schedule, and all requests for survey replacement by the April 1 prior to the beginning of the next Contract Year. v. The Health Plan shall submit patient satisfaction survey results must be submitted in the format and with the information prescribed by the Agency.   7. Incentive Programs a. The Health Plan may offer incentives for Enrollees to receive preventive care services. The incentives shall not duplicate those included in the Enhanced Benefits Program. The Health Plan shall receive written approval from the Agency before offering any incentives. The Health Plan shall make all incentives available to all Enrollees. The Health Plan shall not use incentives to direct individuals to select a particular Provider. b. The Health Plan may inform Enrollees, once they are enrolled, about the specific incentives available. c. The Health Plan shall not include the provision of gambling, alcohol, tobacco or drugs in any of the Health Plan's incentives. d. The Health Plan's incentives shall have some health or child development related function (e.g., clothing, food, books, safety devices, infant care items, magazine subscriptions to publications which devote at least ten percent (10%) of their copy to health related subjects, membership in clubs advocating educational advancement and healthy lifestyles, etc.). Incentive dollar values shall be in proportion to the importance of the health service to be utilized (e.g., a T-shirt for attending one (1) prenatal class, but a car seat for completion of a series of classes). e. Incentives shall be limited to a dollar value of ten dollars ($10), except in the case of incentives for the completion of a series of services, health education classes or other educational activities, in which case the incentive shall be limited to a dollar value of fifty dollars ($50). The Agency will allow a special exception to the dollar value relating to infant car seats, strollers, and cloth baby carriers, or slings. f. The Health Plan shall not include in the dollar limits on incentives any money spent on the transportation of Enrollees to services or child care provided during the provision of services. g. The Health Plan may offer an Agency approved program for pregnant women in order to encourage the commencement of prenatal care visits in the first (1st) trimester of pregnancy. The Health Plan's prenatal and postpartum care Incentive Program must be aimed promoting early intervention and prenatal care to decrease infant mortality and low birth weight and to enhance healthy birth outcomes. The prenatal and postpartum incentives may include the provision of maternity and health related items and education as an incentive. h. The Health Plan's request for approval of all incentives shall contain a detailed description of the incentive and its mission.   8. Practice Guidelines a. The Health Plan shall adopt practice guidelines that meet the following requirements:   (1) Are based on valid and reliable clinical evidence or a consensus of Health Care Professionals in a particular field;   (2) Consider the needs of the Enrollees;   (3) Are adopted in consultation with Providers; and   (4) Are reviewed and updated periodically, as appropriate. ( See 42 CFR 438.236(b)) b. The Health Plan shall disseminate any revised practice guidelines to all affected Providers and, upon request, to Enrollees and Potential Enrollees. c. The Health Plan shall ensure consistency with regard to all decisions relating to UM, Enrollee education, Covered Services and other areas to which the practice guidelines apply. 9.  Changes to Utilization Management Components  The Health Plan shall provide no less than thirty (30) Calendar Days written notice before making any changes to the administration and/or management procedures and/or authorization, denial or review procedures, including any delegations, as described in this section.   10. Out-of-Plan Use of Non-Emergency Services Unless otherwise specified in this Contract, where an Enrollee utilizes services available under the Health Plan other than emergency services from a non-contract provider, the Health Plan shall not be liable for the cost of such utilization unless the Health Plan referred the Enrollee to the non-contract provider or authorized such out-of-plan utilization. The Health Plan shall provide timely approval or denial of authorization of out-of-plan use through the assignment of a prior authorization number, which refers to and documents the approval. A Health Plan may not require paper authorization as a condition of receiving treatment if the plan has an automated authorization system. Written follow up documentation of the approval must be provided to the out-of-plan provider within one (1) Business Day from the request for approval. The Enrollee shall be liable for the cost of such unauthorized use of contract-covered services from non-contract providers. In accordance with section 409.912, F.S., the Health Plan shall reimburse any hospital or physician that is outside the Health Plan’s authorized geographic service area for Health Plan authorized services provided by the hospital or physician to plan members at a rate negotiated with the hospital or physician for the provision of services or according to the lesser of the following: a. The usual and customary charge made to the general public by the hospital or physician; or b. The Florida Medicaid reimbursement rate established for the hospital or physician. The plan shall reimburse all out-of-plan providers pursuant to section 641.3155, F.S.     -------------------------------------------------------------------------------- Section IX Grievance System A.  General Requirements 1.   The Health Plan must develop, implement, and maintain a Grievance System that complies with federal laws and regulations, including 42 CFR 431.200 and 438, Subpart F, “Grievance System.” 2.   The Grievance System must include an external grievance resolution process modeled after the subscriber assistance program panel, as created in section 408.7056, F.S., and referred to in this contract as the Beneficiary Assistance Program. 3.   The Grievance System must include written policies and procedures that are approved in writing, by the Agency. 4.   The Health Plan must give Enrollees reasonable assistance in completing forms and other procedural steps, including, but not limited to, providing interpreter services and toll-free numbers with TTY/TDD and interpreter capability. 5.   The Health Plan must acknowledge receipt of each Grievance and Appeal. 6.   The Health Plan must ensure that decision makers about Grievances and Appeals were not involved in previous levels of review or decision making and are Health Care Professionals with appropriate clinical expertise in treating the Enrollee’s condition or disease when deciding any of the following: a. An Appeal of a denial based on lack of Medical Necessity; b. A Grievance regarding denial of expedited resolution of an Appeal; or c. A Grievance or Appeal involving clinical issues. 7.   The Health Plan shall provide information regarding the Grievance System to Enrollees as described in Section IV., A., 2. and 3. The information shall include, but not be limited to: a.   Enrollee rights to file Grievances and Appeals and requirements and time frames for filing. b.   The availability of assistance in the filing process. c.   The address, toll-free telephone number, and the office hours of the Grievance coordinator. d.   The method for obtaining a Medicaid fair hearing, the rules that govern representation at the hearing, and the DCF address for pursuing a fair hearing, which is: Office of Public Assistance Appeals Hearings 1317 Winewood Boulevard, Building 5, Room 203 Tallahassee, Florida 32399-0700 e.   A description of the Beneficiary Assistance Program, the types of Grievances and Appeals that can be forwarded to the Beneficiary Assistance Program and directions for doing so. f.   A statement assuring Enrollees that the Health Plan, its Providers or the Agency will not retaliate against an Enrollee for submitting a Grievance, an Appeal or a request for a Medicaid fair hearing. g.   Enrollee rights to request continuation of Benefits during an Appeal or Medicaid fair hearing process and, if the Health Plan’s Action is upheld in a hearing, the fact that the Enrollee may be liable for the cost of said Benefits. h.   Notice that the Health Plan must continue Enrollee Benefits if:   (1) The Appeal is filed timely, meaning on or before the later of the following: i.   Within ten (10) Calendar Days of the date on the notice of Action (Fifteen (15) Calendar Days if the notice is sent via Surface Mail), and ii.   The intended effective date of the Health Plan’s proposed Action.   (2) The Appeal involves the termination, suspension, or reduction of a previously authorized course of treatment.   (3) The services were ordered by an authorized provider.   (4) The authorization period has not expired.   (5) The Enrollee requests extension of Benefits. i.   The Health Plan must provide information about the Grievance System and its respective policies, procedures, and timeframes, to all Providers and subcontractors at the time they enter into a subcontract/Provider contract. The Health Plan must clearly specify all procedural steps in the Provider manual, including the address, telephone number, and office hours of the Grievance coordinator. 8.   The Health Plan must maintain records of Grievances and Appeals for tracking and trending for QI and to fulfill reporting requirements as described in Section XII., Reporting Requirements. B.  Grievance Process 1.   Filing a Grievance a.   A Grievance is any expression of dissatisfaction by an Enrollee, about any matter other than an Action. A Provider, acting on behalf of the Enrollee and with the Enrollee’s written consent, may also file a Grievance. b.   A Grievance may be filed orally. 2.   Grievance Resolution a.   The Health Plan must resolve each Grievance and provide the Enrollee with a notice of the Grievance disposition within ninety (90) days of its receipt. b.   The Grievance must be resolved more expeditiously, within twenty four (24) hours, if the Enrollee’s health condition requires, as found in s409.91211(3)(q), F.S. c.   The notice of disposition must be in writing and include the results and the date of Grievance resolution. d.   The Health Plan must provide the Agency with a copy of the notice of disposition upon request. e.   The Health Plan must ensure that punitive action is not taken against a Provider who files a Grievance on an Enrollee’s behalf or supports an Enrollee’s Grievance as required in s. 409.9122(12), F.S. 3.   Submission to the Beneficiary Assistance Program a. The original Grievance must be filed with the Health Plan in writing. b. The submission of the Grievance to the Beneficiary Assistance Program must be done within one (1) year of the date of the occurrence which initiated the Grievance. c. The Grievance may be filed if it concerns:   (1) The quality of health care services; or   (2) Matters pertaining to the contractual relationship between an Enrollee and the Health Plan. C.   Appeal Process 1.   Filing an Appeal a. An Enrollee may request a review of a Health Plan Action by filing an Appeal. b. An Enrollee may file an Appeal, and a Provider, acting on behalf of the Enrollee and with the Enrollee’s written consent, may file an Appeal. The Appeal procedure must be the same for all Enrollees. c. The Appeal must be filed within thirty (30) days of the date of the notice of Action. If the Health Plan fails to issue a written notice of Action, the Enrollee or Provider may file an Appeal within one (1) year of the Action. d. The Enrollee or Provider may file an Appeal either orally or in writing and must follow an oral filing with a written, signed Appeal. For oral filings, time frames for resolution begin on the date the Health Plan receives the oral filing. 2.   Resolution of Appeals The Health Plan must: a. Ensure that oral inquiries seeking to appeal an Action are treated as Appeals and acknowledge receipt of those inquiries, as well as written Appeals, in writing, unless the Enrollee or the Provider requests expedited resolution. b. Provide a reasonable opportunity for the Enrollee/Provider to present evidence, and allegations of fact or law, in person as well as in writing.   c. Allow the Enrollee and their representative the opportunity, before and during the Appeals process, to examine the Enrollee’s case file, including Medical Records and any other documents and records. d. Consider the Enrollee representative, or estate representative of a deceased Enrollee as parties to the Appeal. e. Resolve each Appeal and provide notice within forty-five (45) days from the day the Health Plan receives the Appeal. f. Resolve the Appeal more expeditiously if the Enrollee’s health condition requires. g. The Health Plan may extend the resolution time frames by up to fourteen (14) Calendar Days if the Enrollee requests the extension or the Health Plan documents that there is need for additional information and that the delay is in the Enrollee’s interest. If the extension is not requested by the Enrollee, the Health Plan must give the Enrollee written notice of the reason for the delay. h. Continue the Enrollee's Benefits if:   (1) The Appeal is filed timely, meaning on or before the later of the following: i. Within ten (10) Calendar Days of the date on the notice of Action or fifteen (15) Calendar Days if sent by Surface Mail, or ii. The intended effective date of the Health Plan’s proposed Action.   (2) The Appeal involves the termination, suspension, or reduction of a previously authorized course of treatment.   (3) The services were ordered by an authorized provider.   (4) The Authorization period has not expired.   (5) The Enrollee requests extension of Benefits. i. If the Health Plan continues or reinstates Enrollee Benefits while the Appeal is pending, the Benefits must be continued until one of following occurs:   (1) The Enrollee withdraws the Appeal.   (2) Ten (10) Calendar Days (Fifteen (15) Calendar Days if the notice is sent via Surface Mail) pass from the date of the Health Plan’s adverse decision, and the Enrollee has not requested a Medicaid fair hearing with continuation of Benefits.   (3) A Medicaid fair hearing decision adverse to the Enrollee is made.   (4) The authorization expires or authorized service limits are met. j. Provide written notice of disposition that includes the results and date of Appeal resolution, and for decisions not wholly in the Enrollee’s favor, also includes:   (1) Notice of the Enrollee’s right to request a Medicaid fair hearing.   (2) Information about how to request a Medicaid fair hearing, including the DCF address for pursuing a Medicaid fair hearing, which is: Office of Public Assistance Appeals Hearings 1317 Winewood Boulevard, Building 5, Room 203 Tallahassee, Florida 32399   (3) Notice of the right to continue to receive Benefits pending a Medicaid fair hearing.   (4) Information about how to request the continuation of Benefits.   (5) Notice that if the Health Plan’s action is upheld in a Medicaid fair hearing, the Enrollee may be liable for the cost of any continued Benefits. k. Provide the Agency with a copy of the written notice of disposition upon request. l. Ensure that punitive action is not taken against a Provider who files an Appeal on an Enrollee’s behalf or supports an Enrollee’s Appeal. 3.   Post Appeal Resolution a. If the final resolution of the Appeal in a fair hearing is adverse to the Enrollee, the Agency may recover the cost of the services furnished while the Appeal was pending, to the extent that they were furnished solely because of the requirements of this section. b. The Health Plan must authorize or provide the disputed services promptly, and as expeditiously as the Enrollee's health condition requires, if the services were not furnished while the Appeal was pending and the disposition reverses a decision to deny, limit, or delay services. c. The Health Plan must pay for disputed services, in accordance with State policy and regulations, if the services were furnished while the Appeal was pending and the disposition reverses a decision to deny, limit, or delay services.   4.   Expedited Process a. The Health Plan must establish and maintain an expedited review process for Grievances and Appeals when the Health Plan determines (if requested by the Enrollee) or the Provider indicates (in making the request on the Enrollee's behalf or supporting the Enrollee's request) that taking the time for a standard resolution could seriously jeopardize the Enrollee's life or health or ability to attain, maintain, or regain maximum function.   b. The Enrollee or Provider may file an expedited Appeal either orally or in writing. No additional Enrollee follow-up is required. The Health Plan must:   (1) Inform the Enrollee of the limited time available for the Enrollee to present evidence and allegations of fact or law, in person and/or in writing.   (2) Resolve each expedited Appeal and provide notice, as expeditiously as the Enrollee’s health condition requires, not to exceed seventy-two (72) hours after the Health Plan receives the Appeal.   (3) Provide written notice of disposition that includes the results and date of expedited Appeal resolution, and for decisions not wholly in the Enrollee’s favor, that includes: i. Notice of the Enrollee’s right to request a Medicaid fair hearing. ii. Information about how to request a Medicaid fair hearing, including the DCF address for pursuing a fair hearing, which is: Office of Public Assistance Appeals Hearings 1317 Winewood Boulevard, Building 5, Room 203 Tallahassee, Florida 32399-0700 iii.  Notice of the right to continue to receive Benefits pending a hearing. iv. Information about how to request the continuation of Benefits. v. Notice that if the Health Plan’s action is upheld in a hearing, the Enrollee may be liable for the cost of any continued Benefits. c. If the Health Plan denies a request for expedited resolution of an Appeal, the Health Plan must:   (1) Transfer the Appeal to the standard time frame of no longer than forty-five (45) days from the day the Health Plan receives the Appeal with a possible fourteen (14) day extension.   (2) Make reasonable efforts to provide prompt oral notice of the denial.   (3) Provide written notice of the denial within two (2) Calendar Days.   (4) Fulfill all general Health Plan duties listed above. 5.   Submission to the Beneficiary Assistance Program a. The submission of the Appeal to the Beneficiary Assistance Program must be done within one (1) year of the date of the occurrence that initiated the Appeal. b. An Enrollee may submit an Appeal to the Beneficiary Assistance Program if it concerns:   (1) The availability of health care services or the coverage of Benefits, or an adverse determination about Benefits made pursuant to UM; or   (2) Claims payment, handling, or reimbursement for Benefits. c. If the Enrollee has taken the Appeal to a Medicaid fair hearing, the Enrollee cannot submit the Appeal to the Beneficiary Assistance Program. D.  Medicaid Fair Hearing System 1.   Request for a Medicaid Fair Hearing   a. An Enrollee may request a Medicaid fair hearing either upon receipt of a notice of Action from the Health Plan or upon receiving an adverse decision from the Health Plan, after filing an Appeal with the Health Plan. b. A Provider, acting on behalf of the Enrollee and with the Enrollee’s written consent, may request a Medicaid fair hearing under the same circumstances as the Enrollee. c. Parties to the Medicaid fair hearing include the Health Plan, as well as the Enrollee and his or her representative or the representative of a deceased Enrollee’s estate. d. The Enrollee or Provider may request a Medicaid fair hearing within ninety (90) Calendar Days of the date of the notice of Action from the Health Plan regarding an Enrollee Appeal. e. The Enrollee or Provider may request a Medicaid fair hearing by contacting DCF at: The Office of Public Assistance Appeals Hearings 1317 Winewood Boulevard, Building 5, Room 203 Tallahassee, Florida 32399-0700 2.   Health Plan Responsibilities The Health Plan must: a. Continue the Enrollee's Benefits while the Medicaid fair hearing is pending if:   (1) The Medicaid fair hearing is filed timely, meaning on or before the later of the following: i. Within ten (10) Calendar Days of the date on the notice of Action (Fifteen (15) Calendar Days if the notice is sent via Surface Mail); or ii. The intended effective date of the Health Plan’s proposed Action.   (2) The Medicaid fair hearing involves the termination, suspension, or reduction of a previously authorized course of treatment.   (3) The services were ordered by an authorized provider.   (4) The authorization period has not expired.   (5) The Enrollee requests extension of Benefits. b. Ensure that punitive action is not taken against a Provider who requests a Medicaid fair hearing on the Enrollee’s behalf or supports an Enrollee’s request for a Medicaid fair hearing. c. If the Health Plan continues or reinstates Enrollee Benefits while the Medicaid fair hearing is pending, the Benefits must be continued until one of following occurs:   (1) The Enrollee withdraws the request for a Medicaid fair hearing.   (2) Ten (10) Calendar Days pass from the date of the Health Plan’s adverse decision and the Enrollee has not requested a Medicaid fair hearing with continuation of Benefits until a Medicaid fair hearing decision is reached. (Fifteen (15) Calendar Days if the notice is sent via Surface Mail)   (3) A Medicaid fair hearing decision adverse to the Enrollee is made.   (4) The authorization expires or authorized service limits are met. 3.   Post Medicaid Fair Hearing Decision a. If the final resolution of the Medicaid fair hearing is adverse to the Enrollee, the Health Plan may recover the cost of the services furnished while the Medicaid fair hearing was pending, to the extent that they were furnished solely because of the requirements of this section. b. The Health Plan must authorize or provide the disputed services promptly, and as expeditiously as the Enrollee's health condition requires, if the services were not furnished while the Medicaid fair hearing was pending and the Medicaid fair hearing officer reverses a decision to deny, limit, or delay services. c. The Health Plan must pay for disputed services, in accordance with State policy and regulations, if the services were furnished while the Medicaid fair hearing was pending and the Medicaid fair hearing officer reverses a decision to deny, limit, or delay services. REMAINDER OF PAGE INTENTIALLY LEFT BLANK   -------------------------------------------------------------------------------- Section X Administration and Management A. General Provisions 1. The Health Plan’s governing body shall set forth policy and has overall responsibility for the organization of the Health Plan. The Health Plan shall be responsible for the administration and management of all aspects of this Contract, including all Subcontracts, employees, agents and services performed by anyone acting for or on behalf of the Health Plan. The Health Plan shall have a centralized executive administration, which shall serve as the contact point for the Agency, except as otherwise specified in the Contract. 2. The Health Plan shall be responsible for the administration and management of all aspects of this Contract, such as, but not limited to, the delivery of services, provider network, provider education, and claims resolution and assistance.   3. The Health Plan must provide that compensation to individuals or entities that conduct utilization management activities is not structured so as to provide incentives for the individual or entity to deny, limit, or discontinue medically necessary services to any Enrollee. B. Staffing 1. Minimum Staffing Requirements a. Contract Manager: The Health Plan shall designate a contract manager to work directly with the Agency. The contract manager shall be a full-time employee of the Health Plan with the authority to revise processes or procedures and assign additional resources as needed to maximize the efficiency and effectiveness of services required under the Contract. The Health Plan shall meet in person or by telephone at the request of Agency representatives, but at least monthly, to discuss the status of the Contract, Health Plan performance, benefits to the State, necessary revisions, reviews, reports and planning. Formal summary reports shall be developed and presented to the Agency, or its Agent, as specified. b. Full-Time Administrator: The Health Plan shall have a full-time administrator specifically identified to administer the day-to-day business activities of this Contract. The Health Plan may designate the same person as the Contract Manager, the Full-time Administrator, or the Medical Director, but such person cannot be designated to any other position in this section, including in other lines of business within the Health Plan, unless otherwise approved by the Agency. c. Medical and Professional Support Staff: The Health Plan shall have medical and professional support staff sufficient to conduct daily business in an orderly manner, including having Enrollee services staff directly available during business hours for Enrollee services consultation, as determined through management and medical reviews. The Health Plan shall maintain sufficient medical staff, available twenty-four (24) hours per day, seven (7) days per week, to handle Emergency Services and Care inquiries. The Health Plan shall maintain sufficient medical staff during non-business hours, unless the Health Plan's computer system automatically approves all Emergency Services and care claims relating to Screening and treatment. d. Medical Director: The Health Plan shall have a full-time licensed physician to serve as medical director to oversee and be responsible for the proper provision of Covered Services to Enrollees, the Quality Management Program, and the Grievance System. The medical director shall be licensed in accordance with chapter 458 or 459, F.S. The medical director cannot be designated to serve in any other non-administrative position. e. Medical Records Review Coordinator: A designated person, qualified by training and experience, to ensure compliance with the Medical Records requirements as described in this Contract. The medical records review coordinator shall maintain Medical Record standards and conduct Medical Record reviews according to the terms of this Contract. f. Data Processing and Data Reporting Coordinator: The Health Plan shall have a person trained and experienced in data processing, data reporting, and claims resolution, as required to ensure that computer system reports that that the Health Plan provides to the Agency and its Agent are accurate, and that computer systems operate in an accurate and timely manner. g. Marketing Oversight Coordinator: If the Health Plan engages in Marketing, the Health Plan shall have a designated person, qualified by training and experience, to assure the Health Plan adheres to the marketing requirements of this Contract. h. QI and UM Professional: The Health Plan shall have a designated person, qualified by training and experience in QI and UM and who holds the appropriate clinical certification and/or license. i. Grievance System Coordinator: The Health Plan shall have a designated person, qualified by training and experience, to process and resolve Appeals and Grievances and to be responsible for the Grievance System. j. Compliance Officer: The Health Plan shall have a designated person qualified by training and experience, to oversee a Fraud and Abuse program to prevent and detect potential Fraud and Abuse activities pursuant to State and federal rules and regulations. k. Case Management Staff: The Health Plan shall have sufficient Case Management staff, qualified by training, experience and certification/licensure to conduct the Health Plan's Case Management functions. l. Claims/Encounter Manager: The Health Plan shall have a designated person qualified by training and experience to oversee claims and encounter submittal and processing and to ensure the accuracy, timeliness and completeness of processing payment and reporting. 2. Behavioral Health Staff Requirements a. The Health Plan must name a staff member to maintain oversight responsibility for Behavioral Health Services and to act as a liaison to the Agency. b. The Health Plan's Medical Director shall appoint a board certified, or board eligible, licensed psychiatrist (staff psychiatrist) to oversee the provision of Behavioral Health Services to Enrollees. The Health Plan may delegate this duty, by way of a written subcontract, to a third party. c. The Agency shall review and approve the Health Plan's Behavioral Health Services staff and any subcontracted Behavioral Health Care Providers in order to determine the Health Plan's compliance with all licensure requirements. C.  Provider Contracts Requirements 1. The Health Plan shall comply with all Agency procedures for Provider Contract review and approval submission. a. All Provider Contracts must comply with 42 CFR 438.230. b. All Providers must be eligible for participation in the Medicaid program. Any provider of service who has been involuntarily terminated from the Florida Medicaid program, other than those terminated for inactivity, is not considered to be an eligible Medicaid provider. c.  The Health Plan shall not employ or contract with individuals on the State or federal exclusions list. d. No Provider Contract which the Health Plan enters into with respect to performance under the Contract shall in any way relieve the Health Plan of any responsibility for the provision of services duties under this Contract. The Health Plan shall assure that all services and tasks related to the Provider Contract are performed in accordance with the terms of this Contract. The Health Plan shall identify in its Provider Contracts any aspect of service that may be subcontracted by the Provider. e. All model Provider Contracts and amendments must be submitted by the Health Plan to the Agency for approval and the Health Plan must receive approval by the Agency prior to use. 2. All Provider Contracts and amendments executed by the Health Plan must be in writing, signed, and dated by the Health Plan and the Provider. All model and executed Provider Contracts and amendments shall meet the following requirements: a. Prohibit the Provider from seeking payment from the Enrollee for any Covered Services provided to the Enrollee within the terms of the Contract; b. Require the Provider to look solely to the Agency or its Agent for compensation for services rendered, with the exception of nominal cost sharing, pursuant to the Florida State Medicaid Plan and the Florida Coverages and Limitations Handbooks, c. If there is a Health Plan physician incentive plan, include a statement that the Health Plan shall make no specific payment directly or indirectly under a physician incentive plan to a Provider as an inducement to reduce or limit Medically Necessary services to an Enrollee, and that all incentive plans shall not contain provisions which provide incentives, monetary or otherwise, for the withholding of Medically Necessary care; d. Specify that any contracts, agreements, or subcontracts entered into by the Provider for the purposes of carrying out any aspect of this contract must include assurances that the individuals who are signing the contract, agreement or subcontract are so authorized and that it includes all the requirements of this Contract; e. Require the Provider to cooperate with the Health Plan's peer review, grievance, QIP and UM activities, and provide for monitoring and oversight, including monitoring of services rendered to Enrollees, by the Health Plan (or its subcontractor) and for the Provider to provide assurance that all licensed Providers are Credentialed in accordance with the Health Plan’s and the Agency’s Credentialing requirements as found in Section VIII.A.3.h Credentialing and Recredentialing, of this Contract, if the Health Plan has delegated the Credentialing to a Subcontractor; f. Include provisions for the immediate transfer to another PCP or Health Plan if the Enrollee's health or safety is in jeopardy; g. Not prohibit a Provider from discussing treatment or non-treatment options with Enrollees that may not reflect the Health Plan's position or may not be covered by the Health Plan; h. Not prohibit a Provider from acting within the lawful scope of practice, from advising or advocating on behalf of an Enrollee for the Enrollee's health status, medical care, or treatment or non-treatment options, including any alternative treatments that might be self-administered; i. Not prohibit a Provider from advocating on behalf of the Enrollee in any Grievance System or UM process, or individual authorization process to obtain necessary health care services; j. Require Providers to meet appointment waiting time standards pursuant to this Contract; k. Provide for continuity of treatment in the event a Provider's agreement terminates during the course of an Enrollee's treatment by that Provider; l. Prohibit discrimination with respect to participation, reimbursement, or indemnification of any Provider who is acting within the scope of his or her license or certification under applicable State law, solely on the basis of such license or certification. This provision should not be construed as a willing Provider law, as it does not prohibit the Health Plan from limiting provider participation to the extent necessary to meet the needs of the Enrollees. This provision does not interfere with measures established by the Health Plan that are designed to maintain quality and control costs; m. Prohibit discrimination against Providers serving high-risk populations or those that specialize in conditions requiring costly treatments; n. Require an adequate record system be maintained for recording services, charges, dates and all other commonly accepted information elements for services rendered to the Health Plan. o. Require that records be maintained for a period not less than five (5) years from the close of the Contract and retained further if the records are under review or audit until the review or audit is complete. (Prior approval for the disposition of records must be requested and approved by the Health Plan if the Provider Contract is continuous.) p. Specify that DHHS, the Agency, including MPI and MFCU, shall have the right to inspect, evaluate, and audit all of the following related to the contract: i. Pertinent books, ii. Financial records, iii. Medical Records, and iv. Documents, papers, and records of any Provider involving transactions, financial or otherwise, related to this Contract; q. Specify Covered Services and populations to be served under the contract; r. Require that Providers comply with the Health Plan's cultural competency plan; s. Require that any marketing materials related to this Contract that are distributed by the Provider be submitted to the Agency for written approval before use; t. Provide for submission of all reports and clinical information required by the Health Plan, including Child Health Check-Up reporting (if applicable); u. Prohibit Providers from making referrals for designated health services to health care entities with which the Provider or a member of the Provider's family has a financial relationship; v. Require Providers of transitioning Enrollees to cooperate in all respects with providers of other Health Plans to assure maximum health outcomes for Enrollees; w. Require Providers to submit notice of withdrawal from the network at least ninety (90) Calendar Days prior to the effective date of such withdrawal; x. Require that all Providers agreeing to participate in the network as PCPs fully accept and agree to perform the Case Management responsibilities and duties associated with the PCP designation; y. Require all Providers to notify the Health Plan in the event of a lapse in general liability or medical malpractice insurance, or if assets fall below the amount necessary for licensure under Florida Statute; z. Require Providers to offer hours of operation that are no less than the hours of operation offered to commercial enrollees or comparable to non-Reform Medicaid FFS Recipients if the Provider serves only Medicaid Recipients. aa. Require safeguarding of information about Enrollees according to 42 CFR, Part 438.224. bb. Require compliance with HIPAA privacy and security provisions. cc. Require an exculpatory clause, which survives Subcontract termination including breach of Subcontract due to insolvency, that assures that Medicaid Recipients or the Agency may not be held liable for any debts of the Subcontractor. dd. Contain a clause indemnifying, defending and holding the Agency and the Health Plan Enrollees harmless from and against all claims, damages, causes of action, costs or expense, including court costs and reasonable attorney fees to the extent proximately caused by any negligent act or other wrongful conduct arising from the Provider Contract:   i. This clause must survive the termination of the Provider Contract, including breach due to Insolvency, and   ii. The Agency may waive this requirement for itself, but not Health Plan Enrollees, for damages in excess of the statutory cap on damages for public entities if the Provider is a public health entity with statutory immunity (all such waivers must be approved in writing by the Agency); ee.   Require that the Provider secure and maintain during the life of the Provider Contract worker's compensation insurance (complying with the Florida's Worker's Compensation Law) for all of its employees connected with the work under this Contract unless such employees are covered by the protection afforded by the Health Plan; ff.   Make provisions for a waiver of those terms of the Provider Contract, which, as they pertain to Medicaid Recipients, are in conflict with the specifications of this Contract; gg.   Contain no provision that in any way prohibits or restricts the Provider from entering into a commercial contract with any other plan (pursuant to s. 641.315, F.S.); hh.   Contain no provision requiring the Provider to contract for more than one Health Plan product or otherwise be excluded (pursuant to s. 641.315, F.S.); ii.   Contain no provision that prohibits the Provider from providing inpatient services in a contracted hospital to an Enrollee if such services are determined to be medically necessary and covered services under this Contract;. jj.   Require all Providers to apply for a National Provider Identification number (NPI) within ninety (90) days of final execution of this Contract or within ninety (90) days of final execution of the Provider contract, whichever is later. Providers can obtain their NPIs through the National Plan and Provider Enumerator System located at: . Additionally, the Provider contract shall require the Provider to submit all NPIs for its physicians and other health care providers to the Health Plan within fifteen (15) Business Days of receipt. The Health Plan shall report the Providers’ NPIs as part of its Provider Network Report, in a manner to be determined by the Agency, and in its Provider Directory, to the Agency or its Choice Counselor/Enrollment Broker, as set forth in Section XII, Reporting Requirements. a. The Health Plan need not obtain an NPI from the following Providers: (1) Individuals or organizations that furnish atypical or nontraditional services that are only indirectly related to the provision of health care (examples include taxis, home and vehicle modifications, insect control, habilitation and respite services); and (2) Individuals ore businesses that only bill or receive payment for, but do not furnish, health care services or supplies (examples include billing services, repricers and value-added networks). kk.   Require Providers to cooperate fully in any investigation by the Agency, Medicaid Program Integrity (MPI), or Medicaid Fraud Control Unit (MFCU), or any subsequent legal action that may result from such an investigation. D.  Provider Termination  1. The Health Plan shall comply with all State and federal laws regarding Provider termination. In its Provider contracts, the Health Plan shall: a. Specify that in addition to any other right to terminate the Provider contract, and not withstanding any other provision of this Contract, the Agency or the Health Plan may request immediate termination of a Provider contract if, as determined by the Agency, a Provider fails to abide by the terms and conditions of the Provider contract, or in the sole discretion of the Agency, the Provider fails to come into compliance with the Provider contract within fifteen (15) Calendar Days after receipt of notice from the Health Plan specifying such failure and requesting such Provider abide by the terms and conditions thereof; and b. Specify that any Provider whose participation is terminated pursuant to the Provider contract for any reason shall utilize the applicable appeals procedures outlined in the Provider contract. No additional or separate right of appeal to the Agency or the Health Plan is created as a result of the Health Plan's act of terminating, or decision to terminate any Provider under this Contract. Notwithstanding the termination of the Provider contract with respect to any particular Provider, this Contract shall remain in full force and effect with respect to all other Providers; and 2. The Health Plan shall notify the Agency at least ninety (90) Calendar Days prior to the effective date of the suspension, termination, or withdrawal of a Provider from participation in the Health Plan network. If the termination was for "Cause" the Health Plan shall provide to the Agency the reasons for termination; and 3. The Health Plan shall notify Enrollees in accordance with the provisions of this Contract; and 4. The Health Plan shall provide sixty (60) Calendar Days’ advance written notice to the Provider before canceling, without cause, the contract with the Provider, except in a case in which a patient's health is subject to imminent danger or a physician's ability to practice medicine is effectively impaired by an action by the Board of Medicine or other governmental Agency, in which case notification shall be provided to the Agency immediately. A copy of the notice shall be submitted simultaneously to the Agency. REMAINDER OF PAGE INTENTIONALLY LEFT BLANK     E.  Provider Services   1. General Provisions a. The Health Plan shall provide sufficient information to all Providers in order to operate in full compliance with this Contract and all applicable federal and State laws and regulations. b. The Health Plan shall monitor Provider knowledge and understanding of Provider requirements, and take corrective actions to ensure compliance with such requirements. c. The Health Plan shall submit to the Agency for written approval all materials and information to be distributed and/or made available to Providers.   2. Provider Handbooks The Health Plan shall develop and issue a Provider handbook to all Providers at the time the Provider contract is signed. The Health Plan may choose not to distribute the Provider handbook via Surface Mail, provided it submits a written notification to all Providers that explains how to obtain the Provider handbook from the Health Plan’s Web site. This notification shall also detail how the Provider can request a hard-copy from the Health Plan at no charge to the Provider. All Provider handbooks and bulletins shall be in compliance with State and federal laws. The Provider handbook shall serve as a source of information regarding Health Plan Covered Services, policies and procedures, statutes, regulations, telephone access and special requirements to ensure all Contract requirements are met. At a minimum, the Provider handbook shall include the following information: a. Description of the program; b. Covered Services; c. Emergency Service responsibilities; d. Child Health Check-Up program services and standards; e. Policies and procedures that cover the Provider complaint system. This information shall include, but not be limited to, specific instructions regarding how to contact the Health Plan’s Provider services to file a Provider complaint and which individual(s) has the authority to review a Provider complaint; f. Information about the Grievance System, the timeframes and requirements, the availability of assistance in filing, the toll-free numbers and the Enrollee’s right to request continuation of Benefits while utilizing the Grievance System; g. Medical Necessity standards and practice guidelines; h. Practice protocols, including guidelines pertaining to the treatment of chronic and complex conditions; i. PCP responsibilities; j. Other Provider or Subcontractor responsibilities; k. Prior Authorization and referral procedures; l. Medical Records standards; m. Claims submission protocols and standards, including instructions and all information necessary for a clean or complete claim; n. Notice that the amount paid to Providers by the Agency shall be the Medicaid fee schedule amount less any applicable co-payments; o. Notice that Provider complaints regarding claims payment should be sent to the Health Plan; p. The Health Plan’s cultural competency plan; q. Enrollee rights and responsibilities; and r. The Health Plan shall disseminate bulletins as needed to incorporate any needed changes to the Provider handbook.   3. Education and Training a. The Health Plan shall provide training to all Providers and their staff regarding the requirements of this Contract and special needs of Enrollees. The Health Plan shall conduct initial training within thirty (30) Calendar Days of placing a newly Contracted Provider on active status. The Health Plan shall also conduct ongoing training as deemed necessary by the Health Plan or the Agency in order to ensure compliance with program standards and this Contract. b. The Health Plan shall submit the Provider training manual and training schedule to the Agency for written approval.   4. Provider Relations The Health Plan shall establish and maintain a formal Provider relations function to timely and adequately respond to inquiries, questions and concerns from network Providers. The Health Plan shall implement policies addressing the compliance of Providers with the requirements of this Contract, institute a mechanism for Provider dispute resolution and execute a formal system of terminating Providers from the Health Plan’s network.   5. Toll-free Provider Telephone Help Line a. The Health Plan shall operate a toll-free telephone help line to respond to Provider questions, comments and inquiries. b. The Health Plan shall develop telephone help line policies and procedures that address staffing, personnel, hours of operation, access and response standards, monitoring of calls via recording or other means, and compliance with standards. c. The Health Plan shall submit these telephone help line policies and procedures, including performance standards, to the Agency for written approval. d. The Health Plan’s call center systems shall have the capability to track call management metrics identified in Section IV.6., Enrollee Services and Marketing, Toll-free Enrollee Help Line. e. The telephone help line shall be staffed twenty-four (24) hours a day, seven (7) days a week to respond to Prior Authorization requests. This telephone help line shall have staff to respond to Provider questions in all other areas, including the Provider complaint system, Provider responsibilities, etc., between the hours of 7:00 am and 7:00 pm EST or EDT as appropriate, Monday through Friday, excluding State holidays. f. The Health Plan shall develop performance standards and monitor telephone help line performance by recording calls and employing other monitoring activities. All performance standards shall be submitted to the Agency for approval. g. The Health Plan shall ensure that after regular business hours the Provider services line (not the Prior Authorization line) is answered by an automated system with the capability to provide callers with information about operating hours and instructions about how to verify Enrollment for an Enrollee with an Emergency or Urgent Medical Condition. The requirement that the Health Plan shall provide information to providers about how to verify Enrollment for an Enrollee with an Emergency or Urgent Medical Condition shall not be construed to mean that the provider must obtain verification before providing Emergency Services and Care.   6. Provider Complaint System a. The Health Plan shall establish a Provider complaint system that permits a Provider to dispute the Health Plan’s policies, procedures, or any aspect of a Health Plan’s administrative functions, including proposed Actions. b. The Health Plan shall submit its Provider complaint system policies and procedures to the Agency for written approval.   c. The Health Plan shall include its Provider complaint system policies and procedures in its Provider handbook as described above. d. The Health Plan shall also distribute the Provider complaint system policies and procedures to out of network providers upon written or oral request. The Health Plan may distribute a summary of these policies and procedures, if the summary includes information about how the provider may access the full policies and procedures on the Health Plan’s Web site. This summary shall also detail how the provider can request a hard-copy from the Health Plan at no charge to the provider. e. As a part of the Provider complaint system, the Health Plan shall: (1) Allow providers forty-five (45) Calendar Days to file a written complaint; (2) Have dedicated staff for providers to contact via telephone, electronic mail, or in person, to ask questions, file a Provider complaint and resolve problems; (3) Identify a staff person specifically designated to receive and process provider complaints; (4) Thoroughly investigate each provider complaint using applicable statutory, regulatory, Contractual and Provider contract provisions, collecting all pertinent facts from all parties and applying the Health Plan’s written policies and procedures; and (5) Ensure that Health Plan executives with the authority to require corrective action are involved in the provider complaint process. f. In the event the outcome of the review of the provider complaint is adverse to the provider, the Health Plan shall provide a written notice of adverse action to the provider. F.  Medical Records Requirements   1. The Health Plan shall maintain Medical Records for each Enrollee in accordance with this section. Medical Records shall include the Quality, quantity, appropriateness, and timeliness of services performed under this Contract. a. The Health Plan must include/follow the Medical Record standards set forth below for each Enrollee's Medical Records, as appropriate: (1) The Enrollee’s identifying information, including name, Enrollee identification number, date of birth, sex and legal guardianship (if any). (2) Each record must be legible and maintained in detail. (3) A summary of significant surgical procedures, past and current diagnoses or problems, allergies, untoward reactions to drugs and current medications. (4) All entries must be dated and signed by the appropriate party. (5) All entries must indicate the chief complaint or purpose of the visit, the objective, diagnoses, medical findings or impression of the provider. (6) All entries must indicate studies ordered (e.g., laboratory, x-ray, EKG) and referral reports. (7) All entries must indicate therapies administered and prescribed. (8) All entries must include the name and profession of the provider rendering services (e.g., MD, DO, OD), including the signature or initials of the provider. (9) All entries must include the disposition, recommendations, instructions to the Enrollee, evidence of whether there was follow-up and outcome of services. (10) All records must contain an immunization history. (11) All records must contain information relating to the Enrollee’s use of tobacco products and alcohol/substance abuse. (12) All records must contain summaries of all Emergency Services and Care and Hospital discharges with appropriate medically indicated follow up. (13) Documentation of referral services in Enrollees' Medical Records. (14) All services provided by providers. Such services must include, but not necessarily be limited to, family planning services, preventive services and services for the treatment of sexually transmitted diseases. (15) All records must reflect the primary language spoken by the Enrollee and any translation needs of the Enrollee. (16) All records must identify Enrollees needing communication assistance in the delivery of health care services. (17) All records must contain documentation that the Enrollee was provided written information concerning the Enrollee’s rights regarding advance directives (written instructions for living will or power of attorney) and whether or not the Enrollee has executed an advance directive. Neither the Health Plan, nor any of its Providers shall, as a condition of treatment, require the Enrollee to execute or waive an advance directive. The Health Plan must maintain written policies and procedures for advance directives. b. Confidentiality of Medical Records (1) The Health Plan shall have a policy to ensure the confidentiality of Medical Records in accordance with 42 CFR, Part 431, Subpart F. This policy shall also include confidentiality of a minor’s consultation, examination, and treatment for a sexually transmissible disease in accordance with section 384.30(2), F.S. (2) The Health Plan shall have a policy to ensure compliance with the Privacy and Security provisions of the Health Insurance Portability and Accountability Act (HIPAA).   2. The Health Plan shall maintain a behavioral health Medical Record for each Enrollee. Each Enrollee's behavioral health Medical Record shall include: a. Documentation sufficient to disclose the Quality, quantity, appropriateness and timeliness of Behavioral Health Services performed; b. Must be legible and maintained in detail consistent with the clinical and professional practice which facilitates effective internal and external purity, medical audit and adequate follow-up treatment; and c. For each service provided, clear identification as to   (1) The physician or other service provider;   (2) Date of service;   (3) The units of service provided; and   (4) The type of service provided. G.  Claims Payment   1. The Health Plan shall reimburse providers for the delivery of authorized services pursuant to section 641.3155 F.S. including, but not limited to: a. Claims are considered received on the date the claims are received by the Health Plan at its designated claims receipt location. b. The provider must mail or electronically transfer (submit) the claim to the Health Plan within six (6) months of:   (1) The date of service or discharge from an inpatient setting; or   (2) The provider has been furnished with the correct name and address of the Enrollee’s Health Plan. c. When the Health Plan is the secondary payor, the provider must submit the claim to the Health Plan within ninety (90) days of the final determination of the primary payor.   2. The Health Plan shall reimburse providers for Medicare deductibles and co-insurance payments for Medicare dually eligible members according to the lesser of the following: a. The rate negotiated with the provider; or b. The reimbursement amount as stipulated in section 409.908 F.S.   3. In accordance with section 409.912 F.S., the Health Plan shall reimburse any Hospital or physician that is outside the Health Plan’s authorized geographic service area for Health Plan authorized services provided by the Hospital or physician to Enrollees: a. At a rate negotiated with the Hospital or physician; or b. The lesser of the following:   (1) The usual and customary charge made to the general public by the Hospital or physician; or   (2) The Florida Medicaid reimbursement rate established for the Hospital or physician.   4. The Health Plan shall have a process for handling and addressing the resolution of provider complaints concerning claims issues. The process shall be in compliance with 641 .3155 F.S.   5. The Health Plan shall have claims processing and payment performance metrics including those for quality, accuracy and timeliness and include a process for measurement and monitoring, and for the development and implementation of interventions for improvement. These metrics must be approved in writing by the Agency.   6. Pursuant to 42CFR447.45, the Health Plan shall have a claims processing and payment system, such that: a. Ninety percent (90%) of clean claims are paid within thirty (30) days from receipt at the Health Plan; b. Ninety-nine percent (99%) of clean claims are paid within ninety (90) days of receipt a the Health Plan; and c. All clean claims are paid within twelve (12) months of receipt by the Health Plan. H.  Encounter Data  The Agency is developing a Medicaid Encounter Data System (MEDS) to collect all encounter data from health plans reimbursed on a capitated basis. Encounter data collection will be required from all Florida capitated health plans for all health care services rendered to its members. The information required to support encounter reporting and submission will be defined by the Agency in the MEDS Companion Guide and MEDS Operations Manual. Other information contained within the MEDS Companion Guide and MEDS Operations Manual will be Managed Care Organization testing requirements for SFY 06-07 and thereafter. The Companion Guide and Operations Manual will be distributed to Health Plans in a manner that makes them easily accessible. Upon the request of the Agency, Health Plans shall be prepared to submit encounter data to the Agency or its designee. Health Plans shall have a comprehensive automated and integrated Encounter Data System that is capable of meeting the requirements listed below: 1.   All encounters shall be submitted in the standard HIPAA transaction formats, namely the ANSI X12N 837 Transaction formats (P - Professional, I - Institutional, and D - Dental), and the National Council for Prescription Drug Programs NCPDP format (for Pharmacy services). 2.   Health Plans shall collect and submit to the Agency or its designee, enrollee service level encounter data for all covered services. Health Plans will be held responsible for errors or noncompliance resulting from their own actions or the actions of an agent authorized to act on their behalf. 3.   Health Plans shall have the capability to convert all information that enters their claims systems via hard copy paper claims to encounter data to be submitted in the appropriate HIPAA compliant formats. 4.   Complete and accurate encounters shall be provided to the Agency. Health Plans will implement review procedures to validate encounter data submitted by providers. The historical encounter data submission shall be retained for a period not less than five years following generally accepted retention guidelines. 5.   Health Plans shall require each Provider to have a unique Florida Medicaid Provider number, in accordance with the requirement of Section X, C. jj. of this Contract. 6.   Health Plans will designate sufficient IT and staffing resources to perform these encounter functions as determined by generally accepted best industry practices. I. Fraud Prevention   1. The Health Plan shall establish functions and activities governing program integrity in order to reduce the incidence of Fraud and Abuse and shall comply with all State and federal program integrity requirements, including the applicable provisions of chapters 358, 414, 641 and 932 in Florida law and s. 409.912 (21) and (22). (See 42 CFR 438.608)   2. The Health Plan shall designate a compliance officer with sufficient experience in health care, who shall have the responsibility and authority for carrying out the provisions of the Fraud and Abuse policies and procedures. The Health Plan shall have adequate staffing and resources to investigate unusual incidents and develop and implement corrective action plans to assist the Health Plan in preventing and detecting potential Fraud and Abuse activities.   3. The Health Plan shall have internal controls and policies and procedures in place that are designed to prevent, detect and report known or suspected Fraud and Abuse activities.   4. The Health Plan shall submit its Fraud and Abuse policies and procedures to the Bureau of Managed Health Care for written approval before implementation. At a minimum, the policies and procedures shall: a. Ensure that all officers, directors, managers and employees know and understand the provision of the Health Plan's Fraud and Abuse policies and procedures; b. Include procedures designed to prevent and detect potential or suspected abuse and fraud in the administration and delivery of services under this Contract. The Health Plan is responsible for reporting suspected fraud and abuse by participating and non-participating providers, as well as enrollees, when detected. c. Incorporate a description of the specific controls in place for prevention and detection of potential or suspected Fraud and Abuse, including, but not limited to:   (1) Claims edits;   (2) Post-processing review of claims;   (3) Provider profiling and credentialing, including a review process for claims that shall include Providers and nonparticipating providers: i. Who consistently demonstrate a pattern of submitting falsified encounter or service reports; ii. Who consistently demonstrate a pattern of overstated reports or up-coded levels of service; iii. Who alter, falsify or destroy clinical record documentation; iv. Who make false statements relating to credentials; v. Who misrepresent medical information to justify Enrollee referrals; vi. Who fail to render Medically Necessary Covered Services that they are obligated to provide according to their Provider contracts; and vii. Who charge Enrollees for Covered Services.   (4) Prior Authorization;   (5) Utilization Management;   (6) Relevant Subcontract and Provider contract provisions; and   (7) Pertinent provisions from the Provider handbook and the Enrollee handbook. d. Contain provisions for the confidential reporting of Health Plan violations to the Health Plan's analyst with the Bureau of Managed Health Care, MPI and MFCU; e. Include provisions for the investigation and follow-up of any reports; f. Ensure that the identities of individuals reporting acts of Fraud and Abuse are protected; g. Require all instances of provider or Enrollee Fraud and Abuse under State and/or federal law be reported to the Health Plan's analyst with the Bureau of Managed Health Care and MPI. The Health Plan shall not cease an investigation or resolve the suspicion, knowledge or action without first informing the Agency and MPI. Additionally, any final resolution must include a written statement that provides notice to the provider or enrollee that the resolution in no way binds the State of Florida nor precludes the State of Florida from taking further action for the circumstances that brought rise to the matter; h. The Health Plan and all providers, upon request, and as required by State and/or federal law, shall:   (1) Make available to the Agency, MPI and/or MFCU any and all administrative, contractual, financial and Medical Records relating to the delivery of items or services for which Medicaid monies are expended; and   (2) Allow access to the Agency, MPI and/or MFCU to any place of business and all Medical Records, as required by State and/or federal law. The Agency, MPI and MFCU shall have access during normal business hours, except under special circumstances when the Agency, MPI and MFCU shall have after hour admission. The Agency, MPI and/or MFCU shall determine the need for special circumstances. i. The Health Plan shall cooperate fully in any investigation by the Agency, MPI, MFCU or any subsequent legal action that may result from such an investigation. j. The Health Plan shall ensure that the Health Plan does not retaliate against any individual who reports violations of the Health Plan's Fraud and Abuse policies and procedures or suspected Fraud and Abuse. k. The Health Plan shall provide for the use of the List of Excluded Individuals and Entities (LEIE), or its equivalent, to identify excluded parties during the process of an engaging the services of new Providers to ensure that the Providers are not in a nonpayment status or sanctioned from participation in federal health care programs. The Health Plan shall not engage the services of a provider if that provider is in nonpayment status or salute from participation in federal health care programs under sections 1128 and/or 1128A of the Social Security Act. The Health Plan shall not employ or contract the services of excluded Providers and must terminate the Provider contract immediately between the Health Plan and a Provider that becomes an excluded provider.   5. The Health Plan shall comply with all reporting requirements set forth in Section XII., Reporting Requirements.   6. The Health Plan shall meet with the Agency periodically, at the Agency’s request, to discuss fraud, abuse, neglect and overpayment issues. For purpose of this section, the Health Plan Compliance Officer shall be the point of contact for the Health Plan and the Agency’s Medicaid Fraud and Abuse Liaison shall be the point of contact for the Agency. REMAINDER OF PAGE INTENTIONALLY LEFT BLANK   -------------------------------------------------------------------------------- Section XI Information Management and Systems  A.  General Provisions 1.   Systems Functions. The Health Plan shall have Information management processes and Information Systems (hereafter referred to as Systems) that enable it to meet Agency and federal reporting requirements and other Contract requirements and that are in compliance with this Contract and all applicable State and federal laws, rules and regulations including HIPAA. 2.   Systems Capacity. The Health Plan’s Systems shall possess capacity sufficient to handle the workload projected for the begin date of operations and will be scaleable and flexible so they can be adapted as needed, within negotiated timeframes, in response to changes in Contract requirements, increases in enrollment estimates, etc. 3.   E-Mail System. The Health Plan shall provide a continuously available electronic mail communication link (E-mail system) with the Agency. This system shall be: available from the workstations of the designated Health Plan contacts; and capable of attaching and sending documents created using software products other than Health Plan’s systems, including the Agency’s currently installed version of Microsoft Office and any subsequent upgrades as adopted. 4.   Participation in Information Systems Work Groups/Committees. The Health Plan shall meet as requested by the Agency to coordinate activities and develop cohesive systems strategies across vendors and agencies that actively participate in the reform initiative. 5.   Connectivity to the Agency/State Network and Systems. The Health Plan shall be responsible for establishing connectivity to the Agency’s/the State’s wide area data communications network, and the relevant information systems attached to this network, in accordance to all applicable Agency and/or State policies, standards and guidelines. B.  Data and Document Management Requirements 1. Adherence to Data and Document Management Standards a.   Health Plan Systems shall conform to the standard transaction code sets specified in Section XI.I. b.   The Health Plan’s Systems shall conform to HIPAA standards for data and document management that are currently under development within one hundred twenty (120) Calendar Days of the standard’s effective date or, if earlier, the date stipulated by CMS or the Agency. c.   The Health Plan shall partner with the Agency in the management of standard transaction code sets specific to the Agency. Furthermore, the Health Plan shall partner with the Agency in the development and implementation planning of future standard code sets not specific to HIPAA or other federal efforts and shall conform to these standards as stipulated in the plan to implement the standards. 2.   Data Model and Accessibility. Health Plan Systems shall be Structured Query Language (SQL) and/or Open Database Connectivity (ODBC) compliant; alternatively, Health Plan Systems shall employ a relational data model in the architecture of its databases in addition to a relational database management system (RDBMS) to operate and maintain them. 3.   Data and Document Relationships. The Health Plan shall house indexed images of documents used by Enrollees and providers to transact with the Health Plan in the appropriate database(s) and document management systems so as to maintain the logical relationships between certain documents and certain data. 4.   Information Retention. Information in Health Plan systems shall be maintained in electronic form for three years in live Systems and, for audit and reporting purposes, for seven years in live and/or archival Systems. 5.   Information Ownership. All Information, whether data or documents, and reports that contain or make references to said Information, involving or arising out of this Contract is owned by the Agency. The Health Plan is expressly prohibited from sharing or publishing the Agency information and reports without the prior written consent of the Agency. In the event of a dispute regarding the sharing or publishing of information and reports, the Agency’s decision on this matter shall be final and not subject to change. C.  System and Data Integration Requirements   1. Adherence to Standards for Data Exchange a.   Health Plan Systems shall be able to transmit, receive and process data in HIPAA-compliant formats that are in use as of the Contract Execution Date; these formats are detailed in Section XI.J. b.   Health Plan Systems shall be able to transmit, receive and process data in the Agency-specific formats and/or methods that are in use on the Contract Execution Date, as specified in Section XI.J. c.   Health Plan Systems shall conform to future federal and/or Agency specific standards for data exchange within one hundred twenty (120) Calendar Days of the standard’s effective date or, if earlier, the date stipulated by CMS or the Agency. The Health Plan shall partner with the Agency in the management of current and future data exchange formats and methods and in the development and implementation planning of future data exchange methods not specific to HIPAA or other Federal effort. Furthermore, the Health Plan shall conform to these standards as stipulated in the plan to implement such standards. 2. HIPAA Compliance Checker. All HIPAA-conforming exchanges of data between the Agency and the Health Plan shall be subjected to the highest level of compliance as measured using an industry-standard HIPAA compliance checker application. 3. Data and Report Validity and Completeness. The Health Plan shall institute processes to ensure the validity and completeness of the data, including reports, it submits to the Agency. At its discretion, the Agency will conduct general data validity and completeness audits using industry-accepted statistical sampling methods. Data elements that will be audited include but are not limited to: Enrollee ID, date of service, assigned Medicaid Provider ID, category and sub category (if applicable) of service, diagnosis codes, procedure codes, revenue codes, date of claim processing, and (if and when applicable) date of claim payment. Control totals shall also be reviewed and verified. 4. State/Agency Website/Portal Integration. Where deemed that the Health Plan’s Web presence will be incorporated to any degree to the Agency’s or the State’s Web presence (also known as Portal), the Health Plan shall conform to any applicable Agency or State standard for Website structure, coding and presentation. 5. Connectivity to and Compatibility/Interoperability with Agency Systems and IT Infrastructure. The Health Plan shall be responsible for establishing connectivity to the Agency’s/State’s wide area data communications network, and the relevant information systems attached to this network, in accordance with all applicable Agency and/or State policies, standards and guidelines. 6. Functional Redundancy with FMMIS. The Health Plan’s Systems shall be able to transmit and receive transaction data to and from FMMIS as required for the appropriate processing of claims and any other transaction that could be performed by either System. 7. Data Exchange in Support of the Agency’s Program Integrity and Compliance Functions. The Health Plan’s System(s) shall be capable of generating files in the prescribed formats for upload into Agency Systems used specifically for program integrity and compliance purposes. 8. Address Standardization. The Health Plan’s System(s) shall possess mailing address standardization functionality in accordance with US Postal Service conventions. 9. Eligibility and Enrollment Data Exchange Requirements a.   The Health Plan shall receive, process and update enrollment files sent daily by the Agency or its Agent. b.   The Health Plan shall update its eligibility/Enrollment databases within twenty-four (24) hours of receipt of said files. c.   The Health Plan shall transmit to the Agency or its Agent, in a periodicity schedule, format and data exchange method to be determined by the Agency, specific data it may garner from an Enrollee including third party liability data. d.   The Health Plan shall be capable of uniquely identifying a distinct Medicaid Recipient across multiple Systems within its Span of Control. D.   Systems Availability, Performance and Problem Management Requirements   1.   Availability of Critical Systems Functions.  The Health Plan will ensure that critical systems functions available to Health Plan Enrollees and Providers - functions that if unavailable would have an immediate detrimental impact on enrollees and providers - are available twenty-four (24) hours a day, seven (7) days a week, except during periods of scheduled System Unavailability agreed upon by the Agency and the Health Plan. Unavailability caused by events outside of a Health Plan’s Span of Control is outside of the scope of this requirement. 2.   Availability of Data Exchange Functions.  The Health Plan shall ensure that the systems and processes within its Span of Control associated with its data exchanges with the Agency and/or its Agent(s) are available and operational according to specifications and the data exchange schedule. 3.   Availability of Other Systems Functions. The Health Plan shall ensure that at a minimum all other System functions and Information are available to the applicable System users between the hours of 7:00 a.m. and 7:00 p.m., EST or EDT as appropriate, Monday through Friday. 4.   Problem Notification. a.   Upon discovery of any problem within its Span of Control that may jeopardize or is jeopardizing the availability and performance of all Systems functions and the availability of information in said Systems, including any problems impacting scheduled exchanges of data between the Health Plan and the Agency and/or its Agent(s), the Health Plan shall notify the applicable Agency staff via phone, fax and/or electronic mail within fifteen (15) minutes of such discovery. In its notification the Health Plan shall explain in detail the impact to critical path processes such as enrollment management and claims submission processes. b.   The Health Plan shall provide to appropriate Agency staff information on System Unavailability events, as well as status updates on problem resolution. At a minimum these up-dates shall be provided on an hourly basis and made available via electronic mail and/or telephone. 5.   Recovery from Unscheduled System Unavailability. Unscheduled System unavailability caused by the failure of systems and telecommunications technologies within the Health Plan’s Span of Control will be resolved, and the restoration of services implemented, within forty-eight (48) hours of the official declaration of System Unavailability.   6.   Exceptions to System Availability Requirement. The Health Plan shall not be responsible for the availability and performance of systems and IT infrastructure technologies outside of the Health Plan’s span of control. 7.   Corrective Action Plan. Full written documentation that includes a Corrective Action Plan, that describes how problems with critical Systems functions will be prevented from occurring again, shall be delivered within five (5) Business Days of the problem’s occurrence. 8.   Business Continuity-Disaster Recovery (BC-DR) Plan a.   Regardless of the architecture of its Systems, the Health Plan shall develop and be continually ready to invoke a business continuity and disaster recovery (BC-DR) plan that is reviewed and prior-approved by the Agency. b.   At a minimum the Health Plan’s BC-DR plan shall address the following scenarios: (1) the central computer installation and resident software are destroyed or damaged, (2) System interruption or failure resulting from network, operating hardware, software, or operational errors that compromises the integrity of transactions that are active in a live system at the time of the outage, (3) System interruption or failure resulting from network, operating hardware, software or operational errors that compromises the integrity of data maintained in a live or archival system, (4) System interruption or failure resulting from network, operating hardware, software or operational errors that does not compromise the integrity of transactions or data maintained in a live or archival system but does prevent access to the System, i.e. causes unscheduled System Unavailability. c.   The Health Plan shall periodically, but no less than annually, perform comprehensive tests of its BC-DR plan through simulated disasters and lower level failures in order to demonstrate to the Agency that it can restore System functions per the standards outlined elsewhere in this Section of the Contract. d.   In the event that the Health Plan fails to demonstrate in the tests of its BC-DR plan that it can restore system functions per the standards outlined in this Contract, the Health Plan shall be required to submit to the Agency a corrective action plan in accordance with Section XIV (Sanctions) of this Contract that describes how the failure will be resolved. The corrective action plan shall be delivered within ten (10) Business Days of the conclusion of the test.   E.   System Testing and Change Management Requirements  1.   Notification and Discussion of Potential System Changes. The Health Plan shall notify the applicable Agency staff person of the following changes to Systems within its Span of Control within at least ninety (90) Calendar Days of the projected date of the change; if so directed by the Agency, the Health Plan shall discuss the proposed change with the applicable Agency staff: (1) software release updates of core transaction Systems: claims processing, eligibility and Enrollment processing, service authorization management, Provider enrollment and data management; (2) conversions of core transaction management Systems. 2.   Response to Agency Reports of Systems Problems not Resulting in System Unavailability. The Health Plan shall respond to Agency reports of System problems not resulting in System Unavailability according to the following timeframes: a.   Within seven (7) Calendar Days of receipt the Health Plan shall respond in writing to notices of system problems. b.   Within twenty (20) Calendar Days, the correction will be made or a Requirements Analysis and Specifications document will be due. c.   The Health Plan will correct the deficiency by an effective date to be determined by the Agency. 3.   Valid Window for Certain System Changes. Unless otherwise agreed to in advance by the Agency as part of the activities described in this Contract Section, scheduled System Unavailability to perform System maintenance, repair and/or upgrade activities shall not take place during hours that could compromise or prevent critical business operations. 4.   Testing a.   The Health Plan shall work with the Agency pertaining to any testing initiative as required by the Agency. b.   The Health Plan shall provide sufficient system access to allow the Agency and/or independent testing of the Health Plan’s systems during and subsequent to readiness review. REMAINDER OF PAGE INTENTIONALLY LEFT BLANK   F.  Information Systems Documentation Requirements  1.   Types of Documentation. The Health Plan shall develop, prepare, print, maintain, produce, and distribute distinct System Process and Procedure Manuals, User Manuals and Quick/Reference Guides, and any updates thereafter, for the Agency and other applicable Agency staff. 2.   Content of System Process and Procedure Manuals. The Health Plan shall ensure that written System Process and Procedure Manuals document and describe all manual and automated system procedures for its information management processes and information systems. 3.   Content of System User Manuals. The System User Manuals shall contain information about, and instructions for, using applicable System functions and accessing applicable system data. 4.   Changes to Manuals. a.   When a System change is subject to Agency sign off, the Health Plan shall draft revisions to the appropriate manuals prior to Agency sign off of the change. b.   Updates to the electronic version of these manuals shall occur in real time; updates to the printed version of these manuals shall occur within ten (10) Business Days of the update taking effect. 5.   Availability of/Access to Documentation. All of the aforementioned manuals and reference guides shall be available in printed form and/or on-line. If so prescribed, the manuals will be published in accordance to the appropriate Agency and/or State standard. G.   Reporting Requirements - Specific to Information Management and Systems Functions and Capabilities - and Technological Capabilities  1.   Reporting Requirements. The Health Plan shall submit a monthly Systems Availability and Performance Report to the Agency as described in Section XII (Reporting) of this Contract. 2.   Reporting Capabilities. The Health Plan shall provide systems-based capabilities to access to authorized Agency personnel, on a secure and read-only basis, to data that can be used in ad hoc reports. H.  Other Requirements Community Health Record/Electronic Medical Record and Related Efforts  a.   At such time that the Agency requires, the Health Plan shall participate and cooperate with the Agency to implement, within a reasonable timeframe, a secure, Web-accessible Community Health Records for Enrollees. b.   The design of the vehicle(s) for accessing the Community Health Record, the health record format and design shall comply with all HIPAA and related regulations. c.   The Health Plan shall also cooperate with the Agency in the continuing development of the state’s health care data site (FloridaHealthStat). I.  Compliance with Standard Coding Schemes 1.   Compliance with HIPAA-Based Code Sets.  A Health Plan System that is required to or otherwise contains the applicable data type shall conform to the following HIPAA-based standard code sets; the processes through which the data are generated should conform to the same standards as needed: a.   Logical Observation Identifier Names and Codes (LOINC) b.   Health Care Financing Administration Common Procedural Coding System (HCPCS) c.   Home Infusion EDI Coalition (HEIC) Product Codes d.   National Drug Code (NDC) e.   National Council for Prescription Drug Programs (NCPDP) f.   International Classification of Diseases (ICD-9) g.   Diagnosis Related Group (DRG) h.   Claim Adjustment Reason Codes i.   Remittance Remarks Codes 2.   Compliance with Other Code Sets.  A Health Plan System that is required to or otherwise contains the applicable data type shall conform to the following non-HIPAA-based standard code sets:   a. As described in all AHCA Medicaid Reimbursement Handbooks, for all "Covered Entities", as defined under the HIPAA, and which submit transactions in paper format (non-electronic format).   b. As described in all AHCA Medicaid Reimbursement Handbooks for all "Non-covered Entities", as defined under the HIPAA. REMAINDER OF PAGE INTENTIONALLY LEFT BLANK     J.  Data Exchange and Formats and Methods Applicable to Health Plans  1.   HIPAA-Based Formatting Standards.  Health Plan Systems shall conform to the following HIPAA-compliant standards for information exchange effective the first day of operations in the applicable service region: Batch transaction types - ASC X12N 834 Enrollment and Audit Transaction - ASC X12N 835 Claims Payment Remittance Advice Transaction - ASC X12N 837I Institutional Claim/Encounter Transaction - ASC X12N 837P Professional Claim/Encounter Transaction - ASC X12N 837D Dental Claim/Encounter Transaction - NCPDP 1.1 Pharmacy Claim/Encounter Transaction   Online transaction types - ASC X12N 270/271 Eligibility/Benefit Inquiry/Response - ASC X12N 276 Claims Status Inquiry - ASC X12N 277 Claims Status Response - ASC X12N 278/279 Utilization Review Inquiry/Response - NCPDP 5.1 Pharmacy Claim/Encounter Transaction 2.   Methods for Data Exchange. The Health Plans and the Agency and/or its Agent(s) shall made predominant use of Secure File Transfer Protocol (SFTP) and Electronic Data Interchange (EDI) in their exchanges of data. 3.   Agency-Based Formatting Standards and Methods.  Health Plan Systems shall exchange the following data with the Agency and/or its Agent(s) in a format to be jointly agreed upon by the Health Plan and the Agency:  a.   Provider network data b.   Case management fees c.   Administrative payments REMAINDER OF PAGE INTENTIALLY LEFT BLANK     Section XII Reporting Requirements A.  Health Plan Reporting Requirements   1. The Health Plan shall comply with all Reporting Requirements set forth by the Agency in this Contract.   a. The Health Plan is responsible for assuring the accuracy, completeness, and timely submission of each report.     b. The Health Plan’s chief executive officer (CEO), chief financial officer (CFO), or an individual who reports to the CEO or CFO and who has delegated authority to certify the Health Plan’s reports, must attest, based on his/her best knowledge, information, and belief, that all data submitted in conjunction with the reports and all documents requested by the Agency are accurate, truthful, and complete. (42 C.F.R. 438.606(a) and (b))     c. The Health Plan must submit its certification at the same time it submits the certified data reports. (42 C.F.R. 438.606(c))   d. Before October 1 of each year, the Health Plan shall deliver to the Agency a certification by an Agency-approved independent auditor that the Performance Measure data reported for the previous calendar year have been fairly and accurately presented.   e. Deadlines for report submission referred to in this Contract specify the actual time of receipt at the Agency, not the date the file was postmarked or transmitted.   f. If a reporting due date falls on a weekend, the report shall be due to the Agency on the following Monday.   g. All reports to be filed on a quarterly basis shall be filed on a calendar year quarter.   2. The Agency shall furnish the Health Plan with the appropriate reporting formats, instructions, submission timetables, and technical assistance, as required.   3. The Agency reserves the right to modify the Reporting Requirements, with a ninety (90) Calendar Day notice to allow the Health Plan to complete implementation, unless otherwise required by law.   4. The Agency shall provide the Health Plan with written notification of any modifications to the Reporting Requirements. 5. The Reporting Requirements specifications are outlined in detail below.   6. If the Health Plan fails to submit the required reports accurately and within the timeframes specified below, the Agency shall fine or otherwise sanction the Health Plan in accordance with Section XIV, Sanctions. 7.   The Health Plan must use the following naming convention for all submitted reports. Unless otherwise noted, each report will have an 8-digit file name, constructed as follows: Digit 1 Report Identifier Indicates the report type. Use G for grievance report; Digits 2, 3, and 4   Plan Identifier   Indicates the specific Health Plan submitting the data by the use of three (3) unique alpha digits. Comports to the Health Plan identifier used in exchanging data with the enrollment broker. Digits 5 and 6 Year Indicates the year. For example, reports submitted in 2006 should indicate 06. Digits 7 and 8 Time Period   For reports submitted on a quarterly basis, use Q1, Q2, Q3 or Q4. For reports submitted monthly, use the appropriate month, such as 01, 02, 03, etc. 8. These files can be: a. Mailed to the following address: Agency for Health Care Administration Bureau of Managed Health Care 2727 Mahan Drive, MS #26 Tallahassee, FL 32308 or b. Transmitted electronically to the Agency at the following address: MMCDATA@ahca.myflorida.com   9. For financial reporting, the Health Plan shall complete the spreadsheets and mail the diskette or compact disk to the address indicated above or transmit it electronically to the Agency at the email address noted above. Additionally, the Health Plan must also send financial reports to the following e-mail address: MMCDATA@ahca.myflorida.com REMAINDER OF PAGE INTENTIONALLY LEFT BLANK   -------------------------------------------------------------------------------- Table 1 Summary of Reporting Requirements Health Plan Reports Required by AHCA Report Name Level of Analysis Frequency Submission Media 834 Transaction Enrollment/Disenrollment Location Level Monthly File Transfer Protocol (FTP) to the Agency or its Agent via a secure Internet site Grievance System Reporting Table 2 Individual Level Quarterly, within 45 Calendar Days of end of reporting quarter Electronic mail or diskette Provider Network Report Table 3 Location Level At least monthly FTP to Choice Counselor vendor Marketing Representative Report Table 4 Health Plan Level Monthly Electronic mail Enhanced Benefit Report Table 5 Enrollee Level Monthly Electronic Mail Catastrophic Costs Report Table 6 Enrollee Level Monthly, as needed Electronic Mail Critical Incidents Enrollee Level Daily , as needed Electronic Mail Results of the HSA Survey Health Plan Level Biannually, on February 1 and August 1 Electronic mail or diskette Performance Measures Health Plan Level Annually, for previous calendar year, due October 1 Electronic mail, CD ROM or diskette submission Financial Reporting Health Plan Level Quarterly, within 45 Calendar Days of end of reporting quarter Diskette Audited Financial Report Health Plan Level Annually, within 90 Calendar Days of end of Health Plan Fiscal Year Electronic mail or diskette Suspected Fraud Reporting Individual Level As described in Section X, H. Electronic Mail Denials of Authorization Tables 7 and 7A Enrollee Level Monthly within 14 Calendar Days of the end of the month being reported Electronic mail or diskette Systems Availability and Performance Report Table 8 Health Plan Level Monthly, within fifteen (15) Calendar Days of the end of the reporting month Electronic Mail Claims Inventory Summary Reports Tables 9, 9a, 9b and 9c Health Plan Level Quarterly, within forty five (45) Calendar Days of the end of the reporting quarter Electronic Mail Child Health Check Up Reports Tables 10 and 10a Health Plan Level Annually for previous federal fiscal year (Oct.-Sept.) due by January 15. Audited report due by Oct. 1 Electronic Mail Pharmacy Encounter Data Health Plan Level Quarterly, within 30 days of the end of the quarter Electronic Mail Health Plan Benefit Package Table 11 Health Plan Level Annual re-certification by June 30 Electronic Mail Transportation Services Health Plan Level     Behavioral Health Specific Reporting Enrollee Satisfaction Survey Summary Table 12 Health Plan Level Semi-annually, due sixty (60) days after the end of the six months being reported. Hard Copy Stakeholders Satisfaction Survey Summary Table 13 Health Plan Level Semi-annually, due sixty (60) days after the end of the six months being reported. Hard Copy Grievance System Report Table 2 Individual Level Quarterly, within 45 days of end of reporting quarter Via AHCA secure RTP site Critical Incident Summary Table 14 Health Plan Level Monthly — Due on the 15th of the month- Contains previous calendar month’s data Via AHCA secure FTP site Critical Incidents Table 14a Individual Immediately upon occurrence Via AHCA secure FTP site Required Staff/Providers Table 15 Health Plan Level Quarterly — Due forty-five (45) after the end of the quarter being reported - Contains data for the entire quarter Via AHCA secure FTP site. FARS/CFARS Table 16   Biannually, due no later than forty-five (45) days after the reporting period. Via AHCA secure FTP site Encounter Data Table 17 Individual Level Quarterly - Due forty five (45) days after the end of the quarter being reported. Via AHCA secure FTP site Minority Reporting Health Plan Level Monthly - Due 15 days after the end of the month being reported Electronic Mail REMAINDER OF PAGE INTENTIONALLY LEFT BLANK   --------------------------------------------------------------------------------   B.  Enrollment/Disenrollment Reports:   1. The Agency or its Agent will report Enrollment/Disenrollment information to the PSN.   2. The Health Plan shall review the Enrollment/Disenrollment reports for accuracy and will notify the Agency within three (3) Business Days of any discrepancies. Failure to notify the Agency of any discrepancies within three (3) Business Days shall lead to fines and other sanctions as detailed in Section XIV, Sanctions.   3. The Enrollment/Disenrollment Reports will use HIPAA-compliant standard transactions. The Agency or its Agent will use the X12N 834 transaction for all Enrollee maintenance and reporting. The PSN must be capable of receiving and processing X12N 834 transactions. During the transition period from proprietary to standard formats, the PSN shall cooperatively participate with the Agency in the transition process, including formal testing when asked to do so by the Agency. C.  Grievance System     1. The Health Plan shall submit the Grievance System report to the Agency for Health Care Administration via the Agency’s secure FTP server or on a diskette or CD.   2. The report is due forty-five (45) Calendar Days following the end of the reported quarter. 3.   The Health Plan must submit the Grievance System report each quarter. If no new Grievances or Appeals have been filed with the Health Plan, or if the status of an unresolved Appeal has not changed to 'Resolved,' please submit one (1) record only. This record must contain the PLAN_ID field only, with the first 7-digits of the 9-digit Medicaid provider number.   4. The report shall contain information about Grievances and Appeals concerning both medical and behavioral health issues.   REMAINDER OF PAGE INTENTIONALLY LEFT BLANK   -------------------------------------------------------------------------------- Table 2 Structure for Grievance/Appeal Reporting File Field Name   Length   Start Column   End Column   Description PLAN_ID   9 1 9   The nine digit Medicaid provider number.   RECIP_ID     9     10     18     The recipient’s 9 digit Medicaid ID number     LAST_NAME     20     19     38     The recipient’s last name     FIRST_NAME     10     39     48     The recipient’s first name     MID_INIT     1     49     49     The recipient’s middle initial     GRV_DATE     10     50     59     The date of the grievance (MM/DD/CCYY)     GRV_TYPE     2     60     61   1. Quality of Care 2. Access to Care 3. Emergency Services 4. Not Medically Necessary 5. Pre-Existing Condition 6. Excluded Benefit 7. Billing Dispute 8. Contract Interpretation   1. Enrollment/Disenrollment 2. Termination of Contract 3. Services after termination 4. Unauthorized out of plan svcs 5. Unauthorized in-plan svcs 6. Benefits available in plan 7. Experimental/ Investigational 8. Other     APP_DATE     10     62     71     The date of the appeal (MM/DD/CCYY)     APP_ACTION     1     72     72     The type of action (42 CFR 438.400):           1. The denial or limited authorization of a requested service, including the type or level of service. 2. The reduction, suspension, or termination of a previously authorized service. 3. The denial, in whole or in part, of payment for a service. 4. The failure to provide services in a timely manner, as defined by the state. 5. The failure of the plan to act within the time frames provided in Sec. 438.408(b). 6. For a resident of a rural area with only one managed care entity, the denial of a Medicaid enrollee’s request to exercise his or her right, under Sec. 438.52(b)(2)(ii), to obtain services outside the network.     DISP_DATE     10     73     82     The date of the Disposition (MM/DD/CCYY)     DISP_TYPE     2     83     84     The Disposition of the Appeal / Grievance:           1. Referral made to specialist 2. PCP Appointment made 3. Bill Paid 4. Procedure scheduled 5. Reassigned PCP 6. Reassigned Center 7. Disenrolled Self 8. Disenrolled by plan   1. In HMO QA Review 2. In HMO Grievance System 3. Referred to Area Office 4. Member sent OLC form 5. Lost contact with member 6. Hospitalized / Institutionalized 7. Confirmed original decision 8. Reinstated in HMO 9. Other   DISP_STAT     1     85     85     R = Resolved     U = Unresolved           Note: Any grievance or appeal first reported as unresolved must be reported again when resolved. Grievances and appeals that are resolved in the quarter prior to reporting should be reported for the first time as resolved.   EXPED_REQ     1     86     86   Indicate whether the appeal was an expedited request Y =Yes N = No Note: This field is required for all reported appeals.   FILE_TYPE     2     87     88   Indicate whether the report is related to Grievance or Appeal and a behavioral health service respectively G = Grievance Report GB = Grievance Behavioral Report A = Appeal Report AB = Appeal Behavioral Report   ORIGINATOR     1     89     89   1 = An enrollee 2 = A provider, acting on behalf of the enrollee and with the enrollee’s written consent REMAINDER OF PAGE INTENTIONALLY LEFT BLANK   -------------------------------------------------------------------------------- D.  Provider Reporting   1. The Health Plan shall submit its provider directory as described in Section IV, A.5, Provider Directory, of this Contract, to the Agency or its Choice Counselor/Enrollment Broker at least on a monthly basis via FTP.   2. The Health Plan shall ensure that the Provider Network Report as described in Table 3 of this Section is an electronic representation of the Health Plan’s complete network of Providers, not a listing of entities for whom the Health Plan has paid claims.   3. The Provider Network Report shall be in an ASCII flat file and must be a complete refresh of the Health Plan’s Provider information. Plans will receive final instructions regarding file naming, Plan Code (see layout below), file transfers, file submission frequency and schedule and other issues prior to implementation.   4. The Health Plan shall submit the Provider Network Report on the Monday preceding the second to the last Saturday of each month. If the Monday deadline falls on a holiday, the PSN shall submit the file on the Friday before the holiday. The Health Plan may choose to submit the Provider Network Report a second time each month, on the third Business Day before the end of the month. This reporting schedule is subject to change upon notice from the Agency. NOTE: The following reporting material is proprietary information of ACS Inc. and may not be used, duplicated, or altered without the written permission of Corporate Management. Remainder of Page Intentionally Left Blank   --------------------------------------------------------------------------------   Field Name Field Length Required Field Field Format Justification Comments Plan Code 9 X alpha Left with leading zeros This is the 9 digit Medicaid Provider ID number specific to the county of HMO/ operation. Provider Type 1 X alpha Left Identifies the provider’s general area of service with an alpha character, as follows: P = Primary Care Provider (PCP) I = Individual Practitioner other than a PCP B = Birthing Center T = Therapy G = Group Practice (includes FQHCs and RHCs) H = Hospital C = Crisis Stabilization Unit D = Dentist R = Pharmacy A = Ancillary Provider (DME providers, Home Health Care Agencies, etc.) Plan Provider Number 15 X alpha Left with leading zeros Unique number assigned to the provider by the plan. Group Affiliation 15 Required for all groups and providers who are members of a group alpha Left with leading zeros The unique provider number assigned by the HMO/ to the group practice. This field is required for all providers who are members of a group, such as PCPs and specialists. The group affiliation number must be the same for all providers who are members of that group. A record is also required for each group practice being reported. For groups, this identification number must be the same as the plan provider number. SSN or FEIN 9 X alpha Left with leading zeros Social Security Number of Federal Identification Number for the individual provider or the group practice. Provider last name 30 X alpha Left The last name of the provider, or the first 30 characters of the name of the group. (Please do not include courtesy titles such as Dr., Mr., Ms., since this titles can interfere with electronic searches of the data.) This field should also be used to note hospital name. UPPER CASE ONLY PLEASE. Provider first name 30 X alpha Left The first name of the provider, or the continuation of the name of the group. Please do not include provider middle name in this field. Middle name field has been added at the end of the file for this purpose. UPPER CASE ONLY PLEASE. Address line 1 30 X alpha Left Physical location of the provider or practice. Do not use P.O. Box or mailing address is different from practice location. UPPER CASE ONLY PLEASE. Address line 2 30   alpha Left   City 30 X alpha Left Left Physical city location of the provider or practice. UPPER CASE ONLY PLEASE Zip Code 9 X numeric Left with trailing zeros Physical zip code location of the provider or practice. Accuracy is important, since address information is one of the standard items used to search for providers that are located in close proximity to the member. Phone area code 3   numeric Left   Phone number 7   numeric Left Please note that the format does not allow for use of a hyphen. Phone extension 4   numeric Left   Sex 1   alpha Left The gender of the provider. Valid values: M = male; F = Female; U = Unknown PCP Indicator 1 X alpha Left Used to indicate if an individual provider is a primary care physician, or for the , a medical home. Valid values: P = Yes, the provider is a PCP/medical home; N = No, the provider is not a PCP/medical home. This field should not be used to note group providers as PCPs, since members must be assigned to specific providers, not group practices. Provider Limitation 1 Required if PCP Indicator = P alpha Left X = Accepting new patients N = Not accepting new patients but remaining a contracted network provider L = Not accepting new patients; leaving the network (Please note the “L” designation at the earliest opportunity) P = Only accepting current patients C = Accepting children only A = Accepting adults only R = Refer member to HMO/ member services F = Only accepting female patients S = Only serving children through CMS (MediPass/PSN only) HMO//MediPass Indicator 1 X alpha Left H = HMO/ This field must be completed with this designation for each record submitted by the HMO/. Evening hours 1   alpha Left Y = Yes; N = No Saturday hours 1   alpha Left Y = Yes; N = No Age restrictions 20   alpha Left Populate this field with free-form text, to identify any age restriction the provider may have on their practice. Primary Specialty 3 Required if Provider Type = P or I numeric Left with leading zeros                                                                                                                                             Insert the 3 digit code that most closely describes 001 Adolescent Medicine 002 Allergy 003 Anesthesiology 004 Cardiovascular Medicine 005 Dermatology 006 Diabetes 007 Emergency Medicine 008 Endocrinology 009 Family Practice 010 Gastroenterology 011 General Practice 012 Preventative Medicine 013 Geriatrics 014 Gynecology 015 Hematology 016 Immunology 017 Infectious Diseases 018 Internal Medicine 019 Neonatal/Perinatal 020 Neoplastic Diseases 021 Nephrology 022 Neurology 023 Neurology/Children 024 Neuropathology 025 Nutrition 026 Obstetrics 027 OB-GYN 028 Occupational Medicine 029 Oncology 030 Ophthalmology 031 Otolaryngology 032 Pathology 033 Pathology, Clinical 034 Pathology, Forensic 035 Pediatrics 036 Pediatric Allergy 037 Pediatric Cardiology 038 Pediatric Oncology &Hematology 039 Pediatric Nephrology 040 Pharmacology 041 Physical Medicine and Rehab 042 Psychiatry  043 Psychiatry, Child 044 Psychoanalysis 045 Public Health 046 Pulmonary Diseases 047 Radiology 048 Radiology, Diagnostic 049 Radiology, Pediatric 050 Radiology, Therapeutic 051 Rheumatology 052 Surgery, Abdominal 053 Surgery, Cardiovascular 054 Surgery, Colon / Rectal 055 Surgery, General 056 Surgery, Hand 057 Surgery, Neurological 058 Surgery, Orthopedic 059 Surgery, Pediatric 060 Surgery, Plastic 061 Surgery, Thoracic 062 Surgery, Traumatic 063 Surgery, Urological 064 Other Physician Specialty 065 Maternal/Fetal 066 Assessment Practitioner 067 Therapeutic Practitioner 068 Consumer Directed Care 069 Medical Oxygen Retailer  070 Adult Dentures Only 071 General Dentistry 072 Oral Surgeon (Dentist) 073 Pedodontist 074 Other Dentist 075 Adult Primary Care Nurse Practitioner 076 Clinical Nurse Spec 077 College Health Nurse Practitioner 078 Diabetic Nurse Practitioner 079 Brain & Spinal Injury Medicine  080 Family/Emergency Nurse Practitioner 081 Family Planning Nurse Practitioner 082 Geriatric Nurse Practitioner 083 Maternal/Child Family Planning Nurse Practitioner 084 Reg. Nurse Anesthetist 085 Certified Registered Nurse Midwife 086 OB/GYN Nurse Practitioner 087 Pediatric Neonatal 088 Orthodontist 089 Assisted Living for the Elderly 090 Occupational Therapist 091 Physical Therapist 092 Speech Therapist 093 Respiratory Therapist     100 Chiropractor 101 Optometrist 102 Podiatrist 103 Urologist 104 Hospitalist BH1 Psychology, Adult BH2 Psychology, Child BH3 Mental Health Counselor BH4 Community Mental Health Center BH5 Clubhouse (TBD) Specialty 2 3   numeric Left with leading Use codes listed above. Specialty 3 3   numeric Left with leading Use codes listed above. Language 1 2   numeric Left with leading 01 = English 02 = Spanish 03 = Haitian Creole 04 = Vietnamese 05 = Cambodian 06 = Russian 07 = Laotian 08 = Polish 09 = French 10 = Other Language 2 2   numeric   Use codes listed above. Language 3 2   numeric   Use codes listed above. Hospital Affiliation 1 9   numeric Left with leading zeros Hospital with which the provider is affiliated. Use the AHCA ID for accurate identification, Hospital Affiliation 2 9   numeric Left with leading zeros as above Hospital Affiliation 3 9   numeric Left with leading zeros as above Hospital Affiliation 4 9   numeric Left with leading zeros as above Hospital Affiliation 5 9   numeric Left with leading zeros as above Wheel Chair Access 1   alpha   Indicates if the provider’s office is wheelchair accessible. Use Y = Yes or N = No. # of HMO/ Members 4 X numeric Left with leading zeros Information must be provided for PCPs only. Indicates the total number of patients who are enrolled in submitting plan. For providers who practice at multiple locations, the number of HMO/ members specific to each physical location must be specified. Active Patient Load 4 X numeric Left with leading zeros Total Active Patient Load, as defined in contract Professional License Number 10 X alpha/ numeric   Must be included for all health care professionals. License number is formatted with up to 3 alpha characters followed by up to 7 numeric digits. AHCA Hospital ID1  AHCA provided the list of AHCA IDs for hospitals to plans on 8-26-05. 8 Required if Provider Type = “H” numeric Left with leading zeros The number assigned by the Agency to uniquely identify each specific hospital by physical location. Any out of state hospital for which an AHCA ID is not included should be designated with the pseudo-number 99999999. County Health Department (CHD) Indicator 1 X alpha   Used to designate whether the individual or group provider is associated only with a county health department. Y = Yes; N = No. This field must be completed for all PCP and specialty providers. Filler 47 X       -------------------------------------------------------------------------------- 1  AHCA provided the list of AHCA IDs for hospitals to plans on 8-26-05.     -------------------------------------------------------------------------------- E. Marketing Representative Report The Health Plan shall register each marketing representative with the Agency as outlined in Section IV, Enrollee Services and Marketing. The file will be submitted within five days of the reporting month to the Agency at the following e-mail address: petrieg@ahca.myflorida.com. The Agency-supplied spreadsheet template must be used. This template contains the following data elements:   Table 4 Required Information for Marketing Representative Report Template Plan Information Marketing Representative Information Plan Name Last Name Address First Name Contact Person DOI License Number Phone Address Fax City     F.   Enhanced Benefits Report     Table 5 Placeholder REMAINDER OF PAGE INTENTIONALLY LEFT BLANK -------------------------------------------------------------------------------- G.   Catastrophic Component Threshold and Benefit Maximum Report   Health Plans that choose to cover the comprehensive component shall submit this report for each Enrollee, whose costs for Covered Services reach $25,000 in a Contract Year. The report shall be in the format shown in Table 6 below. The report shall be submitted monthly from the time the Enrollee’s costs reach $25,000 through the end of the Contract Year. Health Plans that choose to cover the comprehensive and catastrophic component shall submit this report for each Enrollee, whose costs for Covered Services reach $450,000 in a Contract Year. The report shall be in the format shown in Table 6 below. The report shall be submitted monthly from the time the Enrollee’s costs reach $450,000 through the end of the Contract Year. Table 6 $25,000 or $450,000 Thresholds Reached/Report to AHCA   RECIP DOS DOP UNIT/DAY AMOUNT APPCD TRPROV TRTYPE DIAG1 DIAG2 DIAG3 DIAG4 DIAG5 PROCD MOD1 MOD 2 NDC DRUGQTY P2PROV P2TYPE                                                                                                                                                                                                         REMAINDER OF PAGE INTENTIONALLY LEFT BLANK -------------------------------------------------------------------------------- H.   Critical Incidents The Health Plan shall report all serious Enrollee injuries occurring through health care services within 15 days of the Health Plan receiving information about the injury. The Health Plan will use the Florida Agency for Health Care Administration, Division of Health Quality Assurance’s Code 15 Report for Florida Ambulatory Surgical Centers, Hospitals and HMOs to document the incident. The Code 15 Report shall be sent to the Health Plan’s analyst in the Bureau of Managed Health Care. The Code 15 Report can be found at www.ahca.myflorida/MCHQ/Health_Facility_Regulation/Risk/reporting. I.  Hernandez Settlement Agreement (HAS) Report If the Health Plan has authorization requirements for prescribed drug services, the Health Plan shall file reports biannually to the Bureau of Managed Health Care, to include the following: 1. The results of the HSA survey with: (a) The total number of pharmacy locations surveyed; (b) The HSA areas surveyed;   (c) Those HSA areas in which the pharmacy locations were delinquent; and   (d) The process by which the Health Plan selected the pharmacy locations. 2. A copy of the Hernandez Ombudsman Log. J.   Performance Measure Report   1. The Health Plan shall report the performance measures described in Section VIII, A.3.c.   2. The Health Plan shall calculate the performance measures based on the calendar year (January 1 through December 31), unless otherwise specified.   3. The performance measure report is due by October 1 after the measurement year. K.  Financial Reporting   1. The Health Plan shall complete the spreadsheet supplied by the Agency.   2. Audited financial reports — The Health Plan shall submit to the Agency annual audited financial statements and four (4) quarterly unaudited financial statements.   a. The audited financial statements are due no later than three (3) calendar months after the end of the Health Plan’s fiscal year.   b. The Health Plan shall submit the quarterly unaudited financial statements no later than forty-five (45) days after each calendar quarter and shall use generally accepted accounting principles in preparing the unaudited quarterly financial statements, which shall include, but not be limited to, the following: (1) A Balance Sheet; (2) A Statement of Revenues and Expenses; (2)   A Statement of Cash Flows; and (4) Footnotes.   c. The Health Plan shall submit the annual and quarterly financial statements using, an Agency-supplied template, by electronic transmission to the following e-mail address: MMCFIN@AHCA.MYFLORIDA.COM   d. The Health Plan shall submit annual and quarterly financial statements that are specific to the operations of the Health Plan rather than to a parent or umbrella organization. L.  Suspected Fraud Reporting   1. Provider Fraud and Abuse Upon detection of a potential or suspected fraudulent claim submitted by a provider, the Health Plan shall file a report with the Agency, MPI and MFCU.. The report shall contain at a minimum:   a. The name of the provider;   b. The assigned Medicaid provider number and the tax identification number;   c A description of the suspected fraudulent act; and   d. The narrative report must be sent to the Health Plan’s analyst at the Bureau of Managed Health Care, MPI and MFCU. 2. Enrollee Fraud   a. Upon detection of all instances of fraudulent claims or acts by an Enrollee, the Health Plan shall file a report with the Agency and MPI.   b. The report shall contain, at a minimum: (1) The name of the Enrollee, (2) The Enrollee’s Health Plan identification number, (3) The Enrollee’s Medicaid identification number, (4) A description of the suspected fraudulent act, and   (5) The narrative report must be sent to the Health Plan’s analyst at the Bureau of Managed Health Care and MPI.   3. Failure to report instances of suspected Fraud and Abuse is a violation of law and subject to the penalties provided by law. M.   Denials of Authorization Reporting Requirements    1. The Health Plan shall report, on a monthly basis, denials of authorization for services in the following categories: a. Inpatient care (pre-certification and concurrent denials); b. Specialty care; and c. Ancillary Services. 3.   The Health Plan shall report all Denials of Authorization in accordance with the format set forth in Table 7 and 7-A, below.   Table 7 Denials of Authorization Report   Inpatient Pre-Certification Inpatient Concurrent Specialty Care Ancillary Services           Enrollee ID #         Service Requested         Date of Request         Date of Denial         Denial Reason         Denial Appealed Yes/No         REMAINDER OF PAGE INTENTIONALLY LEFT BLANK   -------------------------------------------------------------------------------- Table 7-A Summary of Authorization Denials   Inpatient Pre-Certification Inpatient Con-Current Specialty Care Ancillary Services   Total Authorizations Requested           Total Authorizations Denied           Average Number of Calendar Days Between Request and Denial           Longest Number of Calendar Days Between Request and Denial           Total Number of Denials Appealed         REMAINDER OF PAGE INTENTIONALLY LEFT BLANK   -------------------------------------------------------------------------------- N.   Systems Availability and Performance Report The Systems Availability and Performance Report should be formatted as shown in Table 8, below. The Health Plan shall provide average uptime, downtime and unscheduled downtime, i.e. outage and data by system (application/operating environment cohort) in tabular form. Table 8 Systems Availability and Performance Report System Availability and Performance Report System   Total Up Time Total Down Time Total UNSCHEDULED Down Time ("Outage Time")   Measurement Period Up Time During Period Up Time During Period During Period Notes/Comments  system 1             system2             system3             system4             system5             system6             system7             system8             system9             system10             REMAINDER OF PAGE INTENTIONALLY LEFT BLANK -------------------------------------------------------------------------------- O.   Claims Inventory Summary Report The Health Plan shall file an Aging Claims Summary Report quarterly, noting paid, denied and unpaid claims by provider type. The Health Plan will submit this report using the CLAIMS AGING TEMPLATE.xls file supplied by the Agency and presented in Tables 10, 10a, 10b and 10c. This file is an Excel spreadsheet and may be submitted to the following email address: mmcclms@ahca.myflorida.com. Table 9 Total Claims Aging By Provider Type   NOTE: List ALL claims including those contained in the beginning inventory on this page. 00/00/00                                   days   days   days   days   days   TOTAL PROVIDER 1-30 % 31-60 % 61-90 % 91-120 % 120+ % CLAIMS PRIMARY CARE   0%   0%   0%   0%   0% 0 SPECIALTY   0%   0%   0%   0%   0% 0 OTHER   0%   0%   0%   0%   0% 0                         HOSPITALS:                           0%   0%   0%   0%   0% 0     0%   0%   0%   0%   0% 0     0%   0%   0%   0%   0% 0     0%   0%   0%   0%   0% 0 REMAINDER OF PAGE INTENTIONALLY LEFT BLANK   Table 9a Paid Claims Aging by Provider Type Report 00/00/00                                                 days   days   days   days   days   TOTAL PROVIDER 1-30 % 31-60 % 61-90 % 91-120 % 120+ % CLAIMS PRIMARY CARE   0%   0%   0%   0%   0% 0 SPECIALTY   0%   0%   0%   0%   0% 0 OTHER   0%   0%   0%   0%   0% 0                         HOSPITALS:                           0%   0%   0%   0%   0% 0     0%   0%   0%   0%   0% 0     0%   0%   0%   0%   0% 0 REMAINDER OF PAGE INTENTIONALLY LEFT BLANK   -------------------------------------------------------------------------------- Table 9b Denied Claims Aging By Provider Type 00/00/00                       days   days   days   days   days   TOTAL PROVIDER 1-30 % 31-60 % 61-90 % 91-120 % 120+ % CLAIMS PRIMARY CARE   0%   0%   0%   0%   0% 0 SPECIALTY   0%   0%   0%   0%   0% 0 OTHER   0%   0%   0%   0%   0% 0                         HOSPITALS:                           0%   0%   0%   0%   0% 0     0%   0%   0%   0%   0% 0     0%   0%   0%   0%   0% 0 REMAINDER OF PAGE INTENTIONALLY LEFT BLANK -------------------------------------------------------------------------------- Table 9c Unpaid Claims Aging by Provider Type Report   00/00/00                                               days   days   days   days   days   TOTAL PROVIDER 1-30 % 31-60 % 61-90 % 91-120 % 120+ % CLAIMS PRIMARY CARE 0 0% 0 0% 0 0% 0 0% 0 0% 0 SPECIALTY 0 0% 0 0% 0 0% 0 0% 0 0% 0 OTHER 0 0% 0 0% 0 0% 0 0% 0 0% 0                         HOSPITALS:                         0 0% 0 0% 0 0% 0 0% 0 0% 0   0 0% 0 0% 0 0% 0 0% 0 0% 0   0 0% 0 0% 0 0% 0 0% 0 0% 0 REMAINDER OF PAGE INTENTIONALLY LEFT BLANK -------------------------------------------------------------------------------- Table 9d Claims Inventory by Provider Type 00/00/00   Inventory         (Ending Inventory from Previous quarter)           Beginning Claims     Ending PROVIDER Inventory Received Claims Paid Claims Denied Inventory PRIMARY CARE   0 0 0 0 SPECIALTY   0 0 0 0 OTHER   0 0 0 0             HOSPITALS:               0 0 0 0     0 0 0 0     0 0 0 0 REMAINDER OF PAGE INTENTIONALLY LEFT BLANK -------------------------------------------------------------------------------- P.   Child Health Check-Up Reports The Agency will supply the Excel spreadsheets necessary to create these reports. CMS 416 Report   1. The Child Health Check Up, CMS 416 Report shall be submitted annually and in the formats as presented in Tables 10. The reporting period is the federal fiscal year. The report is due on January 1, following the reporting period. Before October 1 following each reporting period, the Health Plan shall deliver to the Agency a certification by an Agency approved independent auditor that the Child Health Check-Up data has been fairly and accurately presented. This filing requires a copy of the audited reports and a copy of the auditors' letter of opinion.   2. For each of the following line items, report total counts by the age groups indicated. In cases where calculations are necessary, perform separate calculations for the total column and each age group. Report age based upon the child's age as of September 30 of the federal fiscal year. Medicaid Provider ID Number: Enter the plan's seven digit Medicaid Provider ID number, i.e., 015---- Plan Name: Enter the name of the Health Plan. Fiscal Year: Entered is the federal fiscal year being reported. Given Line 1 - Total Individuals Eligible for Child Health Check-Up (CHCUP):  Enter the total unduplicated number of all Enrollees under the age of 21, distributed by age and by basis of Medicaid Eligibility category. Unduplicated means that an Enrollee is reported only once, although he or she may have had more than one period of Eligibility during the year. All Enrollees under age 21 (except MediKids Enrollees) are considered eligible for CHCUP services, regardless of whether they have been informed about the availability of CHCUP services or whether they accept CHCUP services at the time of informing. Do not count Enrollees in the MediKids populations. Line 2a - State Periodicity Schedules - Given. Line 2b - Number of Years in Age Group - Given. Line 2c - Annualized State Periodicity Schedule - Given. Line 3a - Total Months Eligibility - Enter the total months of Eligibility for the Enrollees in each age group in Line 1 during the reporting year. Line 3b - Average Period of Eligibility - Pre-calculated by dividing the total months of Eligibility by Line 1, then by dividing that number by 12. This number represents the portion of the year that Enrollees remain Medicaid Eligible during the reporting year, regardless of whether Eligibility was maintained continuously. Line 4 - Expected Number of Screenings per Eligible Multiply - Pre-calculated by multiplying Line 2c by Line 3b. This number reflects the expected number of initial or periodic screenings per Child/Adolescent per year based on the number required by the State-specific periodicity schedule and the average period of Eligibility. Line 5 - Expected Number of Screenings - Pre-calculated by multiplying Line 4 by Line 1. This reflects the total number of initial or periodic screenings expected to be provided to the Enrollees in Line 1. Line 6 - Total Screenings Received - Enter the total number of initial or periodic screens furnished to Enrollees. Use the CPT codes listed below or any Health Plan-specific CHCUP codes developed for these screens. Use of these proxy codes is for reporting purposes only.   3. Health Plans must continue to ensure that all five age-appropriate elements of an CHCUP screen, as defined by law, are provided to CHCUP eligible Enrollees   4. This number should not reflect sick visits or episodic visits provided to children unless an initial or periodic screen was also performed during the visit. However, it may reflect a screen outside of the normal state periodicity schedule that is used as a "catch-up" CHCUP screening. (A catch-up CHCUP screening is defined as a complete screening that is provided to bring a child up-to-date with the State's screening periodicity schedule.) Use data reflecting date of service within the fiscal year for such screening services or other documentation of such services. Do not count MediKids Enrollees, who have had a check-up. The CPT-4 codes to be used to document the receipt of an initial or periodic screen are as follows: Codes for Preventive Medicine Services 99381 New Patient Under One Year 99382 New Patient Ages 1 - 4 Years 99383 New Patient Ages 5 - 11 Years 99384 New Patient Ages 12 - 17 Years 99385EP New Patient Ages 18 - 39 Years 99391 Established Patient Under One Year 99392 Established Patient Ages 1 - 4 Years 99393 Established Patient Ages 5 - 11 Years 99394 Established Patient Ages 12 - 17 Years 99395EP Established Patient Ages 18 - 39 Years 99431 Newborn Care - History and Examination 99432 Normal Newborn Care 99435 Newborn Care (history and examination) Codes For Evaluation and Management Services (must be used in conjunction withV codes V20-V20.2 and/or V70.0 and/or V70.3-V70.9) 99201-99205 New Patient 99211-99215 Established Patient Line 7 - Screening Ratio - Pre-calculated by dividing the actual number of initial and periodic screening services received (Line 6) by the expected number of initial and periodic screening services (Line 5). This ratio indicates the extent to which CHCUP eligible Enrollees receive the number of initial and periodic screening services required by the State's periodicity schedule, adjusted by the proportion of the year for which they are Medicaid Eligible. This ratio should not be over 100%. Any data submitted which exceeds 100% will be reflected as 100% on the final report. Line 8 - Total Eligibles Who Should Receive at Least One Initial or Periodic Screen - The number of Enrollees who should receive at least one initial or periodic screen is dependent on the State's periodicity schedule. The following calculations were used:     a. If the number entered in Line 4 is greater than 1, the number 1 is used. If the number in Line 4 is less than or equal to 1, the number in Line 4 is used. This eliminates situations where more than one visit is expected in any age group in a year.     b. The number from calculation 1 is multiplied by the number in Line 1 and entered on Line 8. Line 9 - Total Eligibles Receiving at Least One Initial or Periodic Screen - Enter the unduplicated count of Enrollees who received at least one documented initial or periodic screen during the year. Refer to codes in Line 6 and count Enrollees where you have received a claim. Do not count MediKids Enrollees who have had a check-up. Line 10 - Participant Ratio - Pre-Calculated by dividing Line 9 by Line 8. This ratio indicates the extent to which Enrollees are receiving any initial and periodic screening services during the year. NOTE: The Health Plan shall adopt annual participation goals to achieve at least a eighty percent (80%) CHCUP participation rate pursuant to Section 5360, Annual Participation Goals, of the State Medicaid Manual. Line 11 - Total Eligibles Referred for Corrective Treatment - Enter the unduplicated number of Enrollees who, as a result of at least one health problem identified during an initial or periodic screening service, including vision and hearing screenings, were scheduled for another appointment with the screening provider or referred to another provider for further needed diagnostic or treatment services. This element does not include correction of health problems during the course of a screening examination. This element is required. The new federally required referral codes should be provided in Line 11. REMAINDER OF PAGE INTENTIONALLY LEFT BLANK For reporting on the CMS-416 only count the referral codes "T" and "V".  U Complete Normal Indicator is used when there are no referrals made. 2 Abnormal, Treatment Initiated   Indicator is used when a child is currently under treatment for referred diagnostic or corrective health problem. T Abnormal, Recipient Referred Indicator is used for referrals to another provider for diagnostic or corrective treatments or scheduled for another appointment with check-up provider for diagnostic or corrective treatment for at least one health problem identified during an initial or V Patient Refused Referral Indicator is used when the patient refused a referral.   5. For purposes of reporting information on dental services, unduplicated means that each child is counted once for each line of data requested. Example: a child would be counted once on Line 12a for receiving any dental service and would be counted again for Line 12b and/or 12c if the child received a preventive and/or treatment dental service. These numbers should reflect services received in managed care. Lines 12b and 12c do not equal total services reflected on Line 12a. Line 12a - Total Eligibles Receiving Any Dental Services - Enter the unduplicated number of Children/Adolescents receiving any dental services as defined by CDT Codes D0100 - D9999. Line 12b - Total Eligibles Receiving Preventive Dental Services - Enter the unduplicated number of Children/Adolescents receiving a preventive dental service as defined by CDT Codes D1000 - D1999. Line 12c - Total Eligibles Receiving Dental Treatment Services - Enter the unduplicated number of Children/Adolescents receiving treatment services as defined by CDT Codes D2000 - D9999. Line 13 - Total Eligibles Enrolled in Managed Care - This number is reported for informational purposes only. This number represents all Enrollees eligible for CHCUP services, who were Enrolled at any time during the reporting year. These Enrollees should be included in the total number of unduplicated eligibles on Line 1 and the number of initial or periodic screenings provided to these Enrollees should be included in Lines 6 and 8 for purposes of determining the State's screening and participation rates. The number of Enrollees referred for corrective treatment and receiving dental services should be reflected in Lines 11 and 12, respectively. Do not count MediKids Enrollees.   6. To report the number of screening blood lead tests do the following: Count the number of times CPT code 83655 ("lead") or any State-specific (local) codes used for a blood lead test reported with any ICD-9-CM except with diagnosis codes 984 (.0 - .9) ("Toxic Effects of Lead and Its Compounds"), E861.5 ("Accidental Poisoning by Petroleum Products, Other Solvents and Their Vapors NEC: Lead Paints"), and E866.0 (Accidental Poisoning by Other Unspecified Solid and Liquid Substances: Lead and Its Compounds and Fumes"). These specific ICD-9-CM diagnosis codes are used to identify people who are lead poisoned. Blood lead tests done in these individuals should not be counted as a screening blood lead test. This is a federally mandated test for ages 12 months, 24 months and between the ages of 36 - 72 months who have not been previously screened for lead poisoning. Line 14 - Total Number of Screening Blood Lead Tests - Enter the total number of screening blood lead tests furnished to eligible Enrollees. Blood lead tests done on Enrollees who have been diagnosed or treated for lead poisoning should not be counted. Do not make entries in the shaded columns. REMAINDER OF PAGE INTENTIONALLY LEFT BLANK   -------------------------------------------------------------------------------- Table 10 Child Health Check Up Report   Enter Data in Blue Colored Out-Lined Cells Only CHILD HEALTH CHECK-UP REPORT (CHCUP) [CMS-416]   Seven Digit Medicaid Provider Number :   This report is due to the Agency no later than January 15.   Plan Name :         Federal Fiscal Year : October 1, 2004 - September 30, 2005     The Audited Report is due October 1.   Age Groups               Less than 1 Year 1-2 Years * 3-5 Years 6-9 Years 10-14 Years 15-18 Years 19-20 Years Total All Years 1. Total Individuals Eligible for CHCUP (Unduplicated)                 2a. State Periodicity Schedule 6 4 3 2 5 4 2 26 2b. Number of Years in Age Group 1 2 3 4 5 4 2 21 2c. Annualized State Periodicity Schedule 6.00 2.00 1.00 0.50 1.00 1.00 1.00 1.24 3a. Total Months of Eligibility                 3b. Average Period of Eligibility                 4. Expected Number of screenings per Eligible                 5. Expected Number of screenings                 6. Total Screens Received                   7. Screening Ratio                 8. Total Eligible who should receive at least one Initial or periodic screening               #VALUE! 9. Total Eligibles receiving at least one Initial or periodic screen (Unduplicated)                 10. Participation Ratio                 11. Total eligibles referred for corrective treatment (Unduplicated)                 12a. Total Eligibles receiving any dental services (Unduplicated)               0 12b. Total Eligibles receiving preventative dental services (Unduplicated)               0 12c. Total Eligibles receiving dental treatment services (Unduplicated)               0 13. Total Eligibles Enrolled in Plan                 14. Total number of Screening Blood Lead Tests                   * Includes 12-month visit                                     REMAINDER OF PAGE INTENTIONALLY LEFT BLANK   -------------------------------------------------------------------------------- Florida Sixty Percent Ratio   1. The Child Health Check Up, CMS 416 Report shall be submitted annually and in the formats as presented in Tables 10 and 10a. The reporting period is the federal fiscal year. The report is due on January 1, following the reporting period. Before October 1 following each reporting period, the Health Plan shall deliver to the Agency a certification by an Agency approved independent auditor that the Child Health Check-Up data has been fairly and accurately presented. This filing requires a copy of the audited reports and a copy of the auditors' letter of opinion.   2. For each of the following line items, report total counts by the age groups indicated. In cases where calculations are necessary, formulas have been inserted to pre-calculate the field. Report age based upon the child's age as of September 30 of the Federal fiscal year. Medicaid Provider ID Number: Enter the Health Plan's basic seven digit Medicaid Provider ID number, i.e., 015---- Plan Name: Enter the name of the Health Plan. Fiscal Year: Entered is the federal fiscal year being reported. Line 1 - Total Individuals Eligible for Child Health Check-Up (CHCUP): Enter the total unduplicated number of all Enrollees under the age of 21 Enrolled continuously for 8 months, distributed by age and by basis of Medicaid Eligibility. Unduplicated means that an Enrollee is reported only once although he or she may have had more than one period of Eligibility during the year. All Enrollees under age 21 (except MediKids Enrollees) are considered eligible for CHCUP services, regardless of whether they have been informed about the availability of CHCUP services or whether they accept CHCUP services at the time of informing. Do not count MediKids Enrollees. Line 2a - State Periodicity Schedules - Given. Line 2b - Number of Years in Age Group - Given. Line 2c - Annualized State Periodicity Schedule - Given. Line 3a - Total Months Eligibility - Enter the total months of eligibility for the Enrollees in each age group in Line 1 during the reporting year. Line 3b - Average Period Eligibility - Calculated by dividing the total months of eligibility by Line 1, then by dividing that number by 12. This number represents the portion of the year that Enrollees remain Medicaid Eligible during the reporting year, regardless of whether Eligibility was maintained continuously. Line 4 - Expected Number of Screenings per Eligible Multiply - Calculated by multiplying Line 2c by Line 3b. This number reflects the expected number of initial or periodic screenings per Child/Adolescent per year based on the number required by the State-specific periodicity schedule and the average period of Eligibility. Line 5 - Expected Number of Screenings - Calculated by multiplying Line 4 by Line 1. This reflects the total number of initial or periodic screenings expected to be provided to the Enrollees in Line 1. Line 6 - Total Screenings Received - Enter the total number of initial or periodic screens furnished to Enrollees. Use the CPT codes listed below or any Health Plan-specific CHCUP codes developed for these screens. Use of these proxy codes is for reporting purposes only.   3. Health Plans must continue to ensure that all five age-appropriate elements of an CHCUP screen, as defined by law, are provided to CHCUP eligible Enrollees.   4. This number should not reflect sick visits or episodic visits provided to Children/Adolescents unless an initial or periodic screen was also performed during the visit. However, it may reflect a screen outside of the normal State periodicity schedule that is used as a "catch-up" CHCUP screening. (A catch-up CHCUP screening is defined as a complete screening that is provided to bring a Child/Adolescent up-to-date with the State's screening periodicity schedule.) Use data reflecting date of service within the fiscal year for such screening services or other documentation of such services. Do not count MediKids Enrollees, who have had a check-up. The CPT-4 codes to be used to document the receipt of an initial or periodic screen are as follows: Codes for Preventive Medicine Services 99381 New Patient Under One Year 99382 New Patient Ages 1 - 4 Years 99383 New Patient Ages 5 - 11 Years 99384 New Patient Ages 12 - 17 Years 99385EP New Patient Ages 18 - 39 Years 99391 Established Patient Under One Year 99392 Established Patient Ages 1 - 4 Years 99393 Established Patient Ages 5 - 11 Years 99394 Established Patient Ages 12 - 17 Years 99395EP Established Patient Ages 18 - 39 Years 99431 Newborn Care - History and Examination 99432 Normal Newborn Care 99435 Newborn Care (history and examination) Codes for Evaluation and Management (must be used in conjunction with V codes V20-V20.2 and/or V70.0 and/or V70.3-V70.9) 99201-99205 New Patient 99211-99215 Established Patient Line 7 - Screening Ratio - Calculated by dividing the actual number of initial and periodic screening services received (Line 6) by the expected number of initial and periodic screening services (Line 5). This ratio indicates the extent to which CHCUP eligible Enrollees receive the number of initial and periodic screening services required by the State's periodicity schedule, adjusted by the proportion of the year for which they are Medicaid eligible. This ratio should not be over 100%. Any data submitted which exceeds 100% will be reflected as 100% on the final report. The goal ratio is 60% or higher under State requirements. -------------------------------------------------------------------------------- Table 10a Child Health Check Up Report   COMPLETE THIS 60% TEMPLATE TO MEET THE 60% SCREENING RATIO PURSUANT TO SECTION 409.912, FLORIDA STATUTES AND SECTIONS 10.8.1 AND 60.0, 2004-2006 MEDICAID HMO CONTRACT      Enter Data in Blue Colored Out-Lined Cells ONLY - This report reflects only those eligibles that have at least 8 months of continuous enrollment - State Required  FL 60% SCREENING RATIO - CHILD HEALTH CHECK-UP REPORT (CHCUP) - 8 MONTHS CONTINUOUS ENROLLMENT         Seven Digit Medicaid Provider ID Number :   The unaudited report is due to the Agency no later than January 15. The audited report is due October 1.   Plan Name :   F.S. 409.912 & Section 10.8.1, Medicaid HMO Contract   Federal Fiscal Year : October 1, 2004 - September 30, 2005 REQUIRED FILING   Age Groups                   Less than 1 Year 1-2 Years * 3-5 Years 6-9 Years 10-14 Years 15-18 Years 19-20 Years Total All Years 1. Total Individuals Eligible for CHCUP with 8 months continuous enrollment (Unduplicated)                 2a. State Periodicity Schedule 6 4 3 2 5 4 2 26 2b. Number of Years in Age Group 1 2 3 4 5 4 2 21 2c. Annualized State Periodicity Schedule 6.00 2.00 1.00 0.50 1.00 1.00 1.00 1.24 3a. Total Months of Eligibility                 3b. Average Period of Eligibility                 4. Expected Number of screenings per Eligible                   5.   Expected Number of screenings                   6.   Total Screens Received                   7.   Screening Ratio - F.S. 409.912 & Section 10.8.1, Medicaid HMO Contract                   -------------------------------------------------------------------------------- Q.  Pharmacy Encounter Data   Health Plans shall submit pharmacy encounter data on an ongoing quarterly payment schedule. For example, all claims paid during 04/01/06 and 06/30/06 is due to the Agency by 07/31/06. The following should be used when submitting the data: 1.   Any claims paid during the payment period should be submitted within 30 days after the end of the quarter. 2.   Only the final adjudication of claims should be submitted. 3.   The File Naming Convention is: [health plan abbreviation]_[current date]_[file type]_[Production]_[file#]_[total # of files].format. For example: ABC_07312006_Rx_Production_1_7.txt 4.   The files must be accompanied by a field layout and the records must have carriage-returns and line-feeds for record/file separation. 5.   All Medicaid pharmacy data should be submitted via CD to Bureau of Health Systems Development and shall be timely, accurate, complete, and certified. Each submission requires a concurrent certification letter. 6.   The minimal data requirements include the Plan ID, Transaction Reference number (claim identifier), NDC code, Date of Service (CCYYMMDD), Medicaid ID as assigned by the state, and Process/payment date (CCYYMMDD). 7.   The format is expected to change to NCPDP as the Agency is developing the companion guide and the Plans shall conform to this change upon notification.   R. Health Plan Benefit Package The Benefit Grid (Grid) below describes the Health Plan’s Customized Benefit Package (CBP). The Health Plan’s CBP must meet actuarial equivalency and sufficiency standards for the population or populations which will be covered by the CBP. The Health Plan shall submit its CBP for recertification of actuarial equivalency and sufficiency standards on an annual basis. The Grid displays the services to be covered and the areas that are customized by the Prepaid Health Plan, whether that is co-pays, or the amount, duration or scope of the services. The shaded areas indicate that no changes to the services in that part of the Grid can be changed from the Medicaid fee-for-service coverage limits. If the Health Plan submits a Benefit Grid with any input cells left blank, that indicates the coverage level of the respective benefit is at the fee-for-service coverage limits. If the CBP includes expanded services, beginning with #10 of the Grid, the Prepaid Health Plan must submit additional information with the Grid including projected PMPM costs for the target population, as well as the actuarial rationale for them. This rationale shall include utilization and unit cost expectations for services provided in the benefit. The Health Plan shall submit its CBP for recertification of actuarial equivalency and sufficiency standards no later than June 30th of each year.   --------------------------------------------------------------------------------   Health Plan:________________________________ Target Population:___________________________     All Listed Services must be covered for Children and Pregnant Adults if medically necessary with no co-pay   Covered Service Category AHCA Standard for Adult Coverage Day/Visit Limit Limit Period (Annual/Monthly) Dollar Limit Limit Period (Annual/Monthly) Copay Amount Copay Application 1 Hospital Inpatient   45 days               Behavioral Health             day or admit   Physical Health             day or admit                     2 Transplant Services   all medically nec                                 3 Outpatient Services                   Emergency Room all medically nec               Medical/Drug Therapies (Chemo, Dialysis) all medically nec               Ambulatory Surgery - ASC all mecially nec.               Hospital Outpatient Surgery all medically nec           visit   Independent Lab / Portable X-ray all medically nec           day   Hospital Outpatient Services NOS sufficiency tested           visit   Outpatient Therapy (PT/RT) coverage           visit   Outpatient Therapy (OT/ST) not applicable                                 4 Maternity and Family Planning Services all medically nec               Inpatient Hospital all medically nec               Birthing Centers all medically nec               Physician Care all medically nec               Family Planning all medically nec               Pharmacy all medically nec                                 5 Physician and Phys Extender Services (non maternity)                 EPSDT not applicable               Primary Care Physician all medically nec           visit   Specialty Physician all medically nec           visit   ARNP / Physician Assistant  all medically nec           visit   Clinic (FQHC, RHC) all medically nec           visit   Clinic (CHD) all medically nec               Other  all medically nec           visit                     6 Other Outpatient Professional Services                 Home Health Services sufficiency tested           visit   Chiropractor coverage           visit   Podiatrist coverage           visit   Dental Services coverage           visit   Vision Services coverage           visit   Hearing Services coverage           visit                     7 Outpatient Mental Health all medically nec           visit                     8 Outpatient Pharmacy sufficiency tested               Generic Pharmacy                 Brand Pharmacy                                   9 Other Services                 Ambulance all medically nec               Non-emergent Transportation all medically nec           trip   Durable Medical Equipment  sufficiency tested                                                       Additional Services (if applicable)* Projected PMPM             10                   11                   12                   13                   14                     * Attach benefit description and supporting documentation.                REMAINDER OF PAGE INTENTIONALLY LEFT BLANK   -------------------------------------------------------------------------------- S.  Transportation Services 1. The Health Plan shall report the following encounter data on a quarterly basis: a.   A call log broken down by month that includes the following information: i.   Number of calls received; ii.   Average time required to answer a call; iii.   Number of abandoned calls; iv.   Percentage of calls that are abandoned; v.   Average abandonment time; and vi.   Average call time. b.   A listing of the total number of reservations of Transportation Services by month, level of service and percentage of level of service utilized, to include, but not be limited to, the following: i.   Ambulatory transportation; ii.   Long haul ambulatory transportation; iii.   Wheelchair transportation; iv.   Stretcher transportation; v.   Ambulatory multiload transportation; vi.   Wheelchair multiload transportation; vii.   Mass transit pending transportation; viii.   Mass transit transportation; ix.   Mass transit transportation (Enrollee has pass); and x.   Mass transit transportation (sent pass to Enrollee). c.   A listing of the total number of authorized uses of Transportation Services, by month, level of service and percentage of level of service utilized, to include, but not be limited to, the following: i.   Ambulatory transportation; ii.   Long haul ambulatory transportation; iii.   Wheelchair transportation; iv.   Stretcher transportation; v.   Ambulatory multiload transportation; vi.   Wheelchair multiload transportation; vii.   Mass transit pending transportation; viii.   Mass transit transportation; ix.   Mass transit transportation (Enrollee has pass); and x.   Mass transit transportation (sent pass to Enrollee). d.   A listing of the total number of canceled trips, by month, level of service and percentage of level of service utilized, to include, but not be limited to, the following: i.   Ambulatory transportation; ii.   Long haul ambulatory transportation; iii.   Wheelchair transportation; iv.   Stretcher transportation; v.   Ambulatory multiload transportation; vi.   Wheelchair multiload transportation; vii.   Mass transit pending transportation; viii.   Mass transit transportation; ix.   Mass transit transportation (Enrollee has pass); and x.   Mass transit transportation (sent pass to Enrollee). e.   A listing of the total number of denied Transportation Services, by month, and a detailed description of why the Plan denied the Transportation Service request. f.   A listing of the total number of authorized trips, by facility type, for each month and level of service. g.   A listing of the total number of Transportation Service claims and payments, by facility type, for each month and level of service. 2.   Establish a performance measure to evaluate the safety of the Transportation Services provided by Participating Transportation Providers. The Plan shall report the results of the evaluation to the Agency on August 15th of each year; 3.   Establish a performance measure to evaluate the reliability of the vehicles utilized by Participating Transportation Providers. The Plan shall report the results of the evaluation to the Agency on August 15th of each year; and 4.   Establish a performance measure to evaluate the quality of service provided by a Participating Transportation Provider. The Plan shall report the results of the evaluation to the Agency on August 15th of each year. 5.   Certification - Each Health Plan/Participating Transportation Provider shall submit an annual safety and security certification in accordance with 14-90.10, F.A.C., 2004 and shall submit to any and all Safety and Security Inspections and Reviews in accordance with 14-90.12, F.A.C., 2004. 6.   The Plan shall report the following by August 15th of each year: a.   The estimated number of one-way passenger trips to be provided in the following categories: i.   Ambulatory transportation; ii.   Long haul ambulatory transportation; iii.   Wheelchair transportation; iv.   Stretcher transportation; v.   Ambulatory multiload transportation; vi.   Wheelchair multiload transportation; vii.   Mass transit pending transportation; viii.   Mass transit transportation; ix.   Mass transit transportation (Enrollee has pass); and x.   Mass transit transportation (sent pass to Enrollee). b.   The actual amount of funds expended and the total number of trips provided during the previous fiscal year; and   c.   The operating financial statistics for the previous fiscal year. REMAINDER OF PAGE INTENTIONALLY LEFT BLANK -------------------------------------------------------------------------------- T. Enrollee Satisfaction Survey Summary   a. In all areas in which the Health Plan provides Behavioral Health Services, the Health Plan shall conduct a Behavioral Health Services Enrollee Satisfaction Survey in both English and Spanish.   b. The Health Plan shall report the Enrollee Satisfaction Survey Summary to the Agency in accordance with the requirements set forth in Table 9, Enrollee Satisfaction Survey Summary, below. Table 12 Enrollee Satisfaction Survey Summary Number of surveys distributed   Number of surveys completed   Method used   Number of Responses for each item on the survey   Item Numbers Agree Disagree No Response 1       2       3       4       5       6       7       8       9       10                 Significant findings or results that will be addressed:              -------------------------------------------------------------------------------- U.  Stakeholders’ Satisfaction Survey Summary     a. The Health Plan shall submit to the Agency the results of a Stakeholders’ Satisfaction Survey Summary.   b. The Health Plan shall report the results from the survey in accordance with Table 10, Stakeholders’ Satisfaction Survey Summary, below. Table 13 Stakeholders Satisfaction Survey Summary Types of Stakeholders Surveyed DCF Counselors Community Based Care Providers Foster Parents Consumer Advocacy Groups Parents of SED Children Out-of-Plan Providers (specify) Others   Number of Surveys Distributed                   Number of surveys completed in each type                   Method used for distribution                 Summary of Responses:     Significant findings or results that will be addressed:       REMAINDER OF PAGE INTENTIONALLY LEFT BLANK   -------------------------------------------------------------------------------- V. Behavioral Health Services Grievance and Appeals Reporting Requirements See C. Grievance System of this section, Section XII. W.  Critical Incident Reporting     a. For Providers and providers under contract with DCF, the State’s operating procedures for incident reporting and client risk protection establishes departmental procedures and guidelines for reporting information related to the incidents specified in this Section. See CF Operating Procedure No. 215-6, November 1, 1998.   b. The critical incident reporting requirements set forth in this section do not replace the abuse, neglect and exploitation reporting system established by the State. Additionally, the Health Plan must report to the Agency in accordance with the format in Table 14, Critical Incidents Summary, and Table 14-A, Critical Incident Individual, below.   c. The definitions of reportable critical incidents apply to the Health Plan, Providers (participating and non-participating) and any subcontractees/delgatees providing services to Enrollees.   d. The Health Plan shall report the following events immediately to the Agency, in accordance with the format set forth in Table 10-A, Critical Incident Individual, below: (1) Death of an Enrollee due to one (1) of the following: (a) Suicide; (b) Homicide; (c) Abuse; (d) Neglect; or   (e) An accident or other incident that occurs while the Enrollee is in a facility operated or contracted by the Health Plan or in an acute care facility.   (2) Enrollee Injury or Illness - A medical condition that requires medical treatment by a licensed health care professional and which is sustained, or allegedly is sustained, due to an accident, act of abuse, neglect or other incident occurring while an Enrollee is in a Facility operated or contracted by the Health Plan or while the Enrollee is in an acute care facility.   (3) Sexual Battery - An allegation of sexual battery, as determined by medical evidence or law enforcement involvement, by: (a) An Enrollee on another Enrollee;   (b) An employee of the Health Plan, a provider or a subcontractee, an Enrollee; and/or   (c) An Enrollee on an employee of the Health Plan, a provider or a subcontractee.   e. The Health Plan shall immediately report to the Agency, in accordance with the format in Table 14-A, Critical Incident Individual, below, if one (1) or more of the following events occur: (1) Medication errors in an acute care setting; and/or   (2) Medication errors involving Children/Adolescents in the care or custody of DCF.   f. The Health Plan shall report monthly to the Agency, in accordance with the format in Table 14 Critical Incidents Summary, below, a summary of all critical incidents.   g. In addition to supplying a quarterly Critical Incidents Summary, the Health Plan shall also report Critical Incidents in the manner prescribed by the appropriate district’s DCF Alcohol, Drug Abuse Mental Health office, using the appropriate DCF reporting forms and procedures.   REMAINDER OF PAGE INTENTIONALLY LEFT BLANK --------------------------------------------------------------------------------   Table 14 Critical Incidents Summary Incident Type # of Events Enrollee Death - Suicide   Enrollee Death - Homicide   Enrollee Death - Abuse/Neglect   Enrollee Death - other   Enrollee Injury or Illness   Sexual Battery   Medication Errors - acute care   Medication Errors - children   Enrollee Suicide Attempt   Altercations requiring Medical Interventions   Enrollee Escape   Enrollee Elopement   Other reportable incidents   Total   REMAINDER OF PAGE INTENTIONALLY LEFT BLANK -------------------------------------------------------------------------------- Table 14-A Critical Incident Individual   Enrollee Medicaid ID#:     Date of Incident:     Location of Incident:     Critical Incident Type:     Details of Incident: (Include enrollee’s age, gender, diagnosis, current medication, source of information, all reported details about the event, action taken by Health Plan or provider, and any other pertinent information)     Follow up planned or required: (Include information related to any Health Plan or provider protocol that applies to event.)     Assigned provider:     Report submitted by:     Date of submission:   REMAINDER OF PAGE INTENTIONALLY LEFT BLANK     X.  Required Staff/Providers The Health Plan shall submit contracted and subcontracted staffing information by position, name and FTE for all direct service positions on a quarterly basis in accordance with the format of Table 15 below. REMAINDER OF PAGE INTENTIONALLY LEFT BLANK   -------------------------------------------------------------------------------- Table 15 Required Staff/Providers     Non-Clinical Specialties Therapeutic Specialty Areas With 2 Years Clinical Experience Positions Total Bi-Lingual Expert Witness Court Ordered Evals Adoption/ Attachment Issues Post Traumatic Stress Syndrome Dual Diagnosis (Mental Disorder/ Substance Abuse) Gender/ Sexual Issues Geriatrics/ Aging Issues Separation, Grief & Loss Easting Disorders Adolescent/ Children’s Issues Sexual / Physical Abuse —Child Sexual Physical Abuse — Adult Domestic Violence — Child Domestic Violence — Adult Adult Psychiatrists                                 Child Psychiatrists                                 Other Physicians                                 Psychiatric ARNPs                                 Psychologists                                 Master Level Clinicians (LCSW, LMFT, LMHC, MFCC)_                                 Bachelor Level                                 RN                                 Unduplicated Totals                                   -------------------------------------------------------------------------------- Y.  FARS/CFARS   The reports shall be submitted in accordance with the format of Table 16 and 16-A below. Table 16 FARS/CFARS Reporting   O***YY06.txt (January through June, due August 15) OR     O***YY12.txt (July through December, due February 15)   Data Element Name   Length   Start Column End Column   Description   Recipient ID   9   1   9   9-Digit Medicaid ID Number of plan member   Recipient DOB   10   10   19   Plan member’s date of birth (MM/DD/CCYY)   Provider ID   9   20   28   9-Digit Medicaid HMO ID Number   Assessment Type   1   29   29   Designate the type of functional assessment that was done using “F: for FARS or “C” for CFARS   Initial Date   10   30   39   Date of initial assessment (MM/DD/CCYY)   Initial Score   2   40   41   Initial overall assessment score   6 Month Date   10   42   51   Date of 6 month assessment, if applicable** (MM/DD/CCYY)   6 Month Score   2   52   53   6 month overall assessment score, if applicable**   Discharge Date   10   54   63   Date of Discharge (MM/DD/CCYY)   Discharge Score   2   64   65   Overall assessment score at discharge             ** Note: Discharge date may occur prior to the 6 month assessment.   Placeholder for Table 16-A, Summary FARS/CFARS Outcomes and Trending Report   -------------------------------------------------------------------------------- Z. Behavioral Health Encounter Report The Behavioral Health encounter data shall be reported in the format given in Table 17, below. The following should be used when completing the report. 1. Diagnostic Criteria All provider claims are restricted to claims for beneficiaries with an ICD-9CM diagnosis code of 290 through 290.43; 293 through 298.9; 300 through 301.9; 302.7, 306.51 through 312.4; 312.81 through 314.9; 315.3, 315.31, 315.5, 315.8, and 315.9. 2. Provider and Coding Criteria a. General Hospital Services - Provider Type 01, Claim Input Indicator “I” Use Revenue Codes 0114, 0124, 0134, 0144, 0154, or 0204 on the UB-92 or 837-I   b. Hospital Outpatient Services - Provider Type 01, Claim Input Indicator “O” Use Revenue Center Codes 0450, 0513, 0901, 0914, or 0918 on the UB-92 or 837-I 3. Community Mental Health Services Provider Type - 05, Community Alcohol, Drug and Mental Health, or Provider Type - 07, Mental Health Practitioner Both are Claim Input Indicator “J” Use Procedure code H0001; H000lHN; H0001H0; H0001TS; H0031; H0031 HO; H003lHN; H0031TS; H0032; H0032TS; H0046; H0047; H2000; H2000HO; H2000HP; H2010HO; H2010HE; H2010HF; H2010HQ; H2012; H2012HF; H2017; H2019; H2019HM; M2019HN; H2019HO; H2019HQ; H2019HR; H2030; T1007; T1007TS; T1015; T1015HE; T1015HF; Tl023HE; or T1023HF   4. Physician Services - Provider Type 25 (MD) or 26 (DO) with a specialty code of "42"Psychiatrist, "43”Child Psychiatrist, or "44" Psychoanalysis All claims submitted by these specialists apply   5. Advanced Nurse Practitioner Provider Type 30 (ARNP) with a specialty Code of “76” - Clinical Nurse Specialist. All claims submitted by these specialists apply 6. Case Management Agency - Provider Type 91 Procedure code T1017 (Targeted Case Management for Adults); T1017HA (Targeted Case Management for Children (birth through 17); and T1017HK (Intensive Team Targeted Case Management, Adults 18 an over). REMAINDER OF PAGE INTENTIONALLY LEFT BLANK -------------------------------------------------------------------------------- Table 17 Behavioral Health Encounter Data Field Name Field Length Comments Medicaid ID 9 First 9 digits of the Enrollee ID number Plan ID 9 9 digit Medicaid ID of the Health Plan in which Enrollee was Enrolled on the first date of service Service Type 1 I Hospital Inpatient C CSU O Hospital Outpatient P Physician (MD or DO) A Advanced Nurse Practitioner, ARNP H Comm. Mental Health, Mental Health Practitioner T Targeted Case Management L Locally Defined or Optional Service First Date of Service 8 For Inpatient and CSU encounters, this equals the admit date. Use YYYYMMDD format. Revenue Code 4 Use only for Hospital Inpatient and Hospital Outpatient Encounters Procedure Code 5 5 digit CPT or HCPCS Procedure Code (For Inpatient Claims only, use the ICD9-CM Procedure Code.) Procedure Modifier 1 2   Procedure Modifier 2 2   Units of Service 3 For Inpatient and CSU encounters, report the number of covered days. For all other encounters, use the units of service referenced in the appropriate Medicaid Coverage and Limitations Handbook. Diagnosis 6 Primary Diagnosis Code Provider Type 1 1 M.D. 2 D.O. 3 A.R.N.P. 4 P.A. 5 Community Mental Health Center 6 Licensed Psychologist, LCSW, LMFT, LMHC 7 Other Provider ID Type 1 Type of unique identifier for the direct service provider: A = AHCA ID M = Medicaid Provider ID L = Professional License Number Provider ID 9 Unique identifier for the direct service provider Amount Paid 10 Costs associated with the claim. Format with an explicit decimal point and 2 decimal places but no explicit commas. Optional. Run Date 8 The date the file was prepared. Use YYYYMMDD format Claim Reference Number 25 The Health Plan’s internal unique claim record identifier -------------------------------------------------------------------------------- AA. Minority Participation Report The Agency for Health Care Administration encourages the Vendor to use Minority and Certified Minority businesses as subcontractors when procuring commodities or services to meet the requirement of this Contract. The Agency requires information regarding the Vendor’s use of minority owned businesses as subcontractors under this contract. This information will be used for assessment and evaluation of the Agency’s Minority Business Utilization Plan. During the term of the contract, it will be necessary to provide this information monthly by the 15th of each subsequent month. A minority owned business is defined as any business enterprise owned and operated by the following ethnic groups: African American (Certified Minority Code H or Non-Certified Minority Code N), Hispanic American (Certified Minority Code I or Non-Certified Minority O), Asian American (Certified Minority Code J or Non-Certified Minority Code P), Native American (Certified Minority Code K or Non-Certified Minority Code Q), or American Woman (Certified Minority Code M or Non-Certified Minority Code R). This requirement can be waived by the agency if the plan demonstrates that it is either at least 51 percent minority owned, at least 51 percent of its board of directors are a minority, at least 51 percent of its officers are a minority, or if the plan is not for profit corporation and at least 51 percent of the population it serves belong to a minority. The Vendor is required to provide the following information on company letterhead: 1) Minority subvendor's company name and Minority Code (see above);    2) Services subcontracted related to this Contract;   3) Dates of services (beginning and ending);   4) Total dollar amount paid to subvendor for services related to this Contract; or   5) A statement that no minority subvendors were used during this period. REMAINDER OF PAGE INTENTIALLY LEFT BLANK -------------------------------------------------------------------------------- Section XIII Method of Payment A. Payment Overview. This is a fixed price (unit cost) Contract. The Agency will manage this fixed price Contract for the delivery of Covered Services to Enrollees. The Agency or its Fiscal Agent shall make payment to the Health Plan on a monthly basis for the Health Plan’s satisfactory performance of its duties and responsibilities as set forth in this Contract. To accommodate payments, the Health Plan is enrolled as a Medicaid provider with the Fiscal Agent. Payments made to the Health Plan resulting from this Contract include monthly Capitation Rate payments for either a Comprehensive Component or a Comprehensive Component and Catastrophic Component, both of which contain risk adjustments, and were developed for particular Medicaid populations, and may contain an adjustment to collect amounts for the Enhanced Benefit Accounts fund. The Agency may also pay Health Plans for obstetrical delivery and transplant services through Kick Payments; for Covered Services that are over the Catastrophic Component Threshold, if the Health Plan has contracted for the Comprehensive Component only; and for Child Health Check-Up (CHCUP) incentive payments, if any, as specified below. B. Capitation Rate Payments   1.   The Agency’s Capitation Rate payments shall meet the following requirements:   a.   Medicaid Reform Capitation Rates will begin with the September 1, 2006 Capitation Rate payments. (1) For the first (1st) two (2) years of Medicaid Reform, the Health Plan’s Risk-Adjusted Capitation Rates (for the Children and Families and Aged and Disabled Enrollee population) will consist of two (2) components for the eligibility categories listed in Tables 2 and 3 in Attachment I. The two components are: a current Capitation Rate methodology component and a Risk-Adjusted Capitation Rate methodology component.   (2) For SSI Medicare Part B Only Enrollees and SSI Medicare Parts A and B Enrollees, the Capitation Rates are based on the current Capitation Rate methodology for the age groups listed in Table 4 in Attachment I.   (3) For Enrollees diagnosed with HIV/AIDS and for Children with Chronic Conditions, the Capitation Rates are fully Risk-Adjusted.     (a) The Agency will pay the Health Plan the HIV/AIDS Capitation Rate only for those Enrollees who have been identified and verified as having an HIV/AIDS diagnosis. The HIV/AIDS Capitation Rate is provided in the Capitation Rate Table 5 in Attachment I.   (i) The Agency will pay the HIV/AIDS Capitation Rate for those Enrollees who have been identified as having an HIV/AIDS diagnosis, regardless of whether or not the Health Plan is a Specialty Plan.   (ii) Enrollees with an HIV/AIDS diagnosis may be identified by either the Agency or the Health Plan. For the Health Plan to identify that an Enrollee has an HIV/AIDS diagnosis, the Health Plan must have completed lab testing as interpreted by a licensed physician prior to reporting the Enrollee to the Agency as an identified Enrollee with an HIV/AIDS diagnosis. The Health Plan must provide the Agency with such Enrollee’s test results upon request.   (iii) The Health Plan may submit Enrollees identified with an HIV/AIDS diagnosis to the Agency in a format and transmittal method approved by the Agency.   (iv) The Agency shall not pay the HIV/AIDS Capitation Rate for any Enrollee who was not identified as HIV/AIDS prior to Enrollment processing for the month for which the capitation payment is made, nor shall the Agency make a retroactive capitation payment at the HIV/AIDS Capitation Rate if the Enrollee was identified as HIV/AIDS after Enrollment processing.     (b) The Agency will pay the Health Plan the Capitation Rate for Children with Chronic Conditions only if the Enrollee meets the requirements for the Children with Chronic Conditions and is enrolled in a Specialty Plan for for Children with Chronic Conditions based on the rates specified in Table 6.     b.   For each eligibility category indicated, and for each age group indicated, the Agency will make a capitation payment for Enrollees as provided for in the Capitation Rate tables in Attachment I and as described below.   (1) For Enrollees who are in the Children and Families and the Aged and Disabled eligibility categories, not identified as diagnosed with HIV/AIDS and not enrolled in a Specialty Plan as identified Children with Chronic Conditions, their Capitation Rates are provided in Capitation Rate Tables 2 and 3 of Attachment I. The columns in Capitation Rate Tables 2 and 3 of Attachment I are defined below:     (a) Age ranges for the eligibility categories for which the Capitation Rates are calculated.     (b) Contract Year 2006-2007 Medicaid Reform rates under current Capitation Rate methodology.     (c) Percentage of current methodology used for determining rates.     (d) Current methodology capitation amount (component) based on the percentage of current methodology Capitation Rates used.     (e) Preliminary base rate for Contract Year Risk-Adjusted methodology with Enhanced Benefit adjustment. The Enhanced Benefit adjustment is a per Health Plan percentage amount that is deposited into the Enhanced Benefit Accounts fund (see also subsection F.2. of this Attachment).     (f) Budget neutrality factor: an actuarially-derived factor to ensure that aggregate costs do not increase or decrease.     (g) Base rates for Risk-Adjusted Methodology after Budget Neutrality: Capitation amount based on the percentage of Risk-Adjusted methodology Capitation Rates used multiplied by the budget neutrality factor (f).     (h) Percentage of Risk-Adjusted methodology used for determining rates (the Agency’s Risk-Adjusted Capitation Rate methodology is based on eligibility, claims and encounter data).     (i) 25% of Risk Adjusted Methodology: The capitation amount based on the percentage of Risk-Adjusted methodology (h) multiplied by the Base Rates column for Risk-Adjusted methodology after budget neutrality factor (g).   i.   The Agency assigns the Health Plan a Risk-Adjusted Plan Factor which designates the aggregated risk of the Health Plan’s enrolled population.   ii.   During the first (1st) two (2) Contract years, the Health Plan’s Risk-Adjusted Plan Factor will not vary more than ten percent (10%) from the aggregate weighted mean of all Medicaid Reform Health Plans within the same Service Area for the respective eligibility categories.     (j) Final Rate (with Enhanced Benefit Adjustment): The current methodology capitation amount (d) added to the 25% of Risk-Adjusted methodology amount (i). The final rate provided in Attachment I is an estimate based on a Plan Factor of 1.0. Note: The actual final monthly Capitation Rate(s) paid to the Health Plan will be based on the Health Plan’s actual Plan Factor and reduced by the actual percentage deducted to fund the Enhanced Benefit Accounts.   (2) For Enrollees who in the SSI Medicare Part B Only and the SSI Medicare Parts A and B eligibility categories, and who are not identified as diagnosed with HIV/AIDS or enrolled in a Specialty Plan as identified Children with Chronic Conditions Enrollees, their Capitation Rates are provided in Table 4 of Attachment I.   (3) For Enrollees who are identified as diagnosed with HIV/AIDS, their Capitation Rates are provided in Table 5 of Attachment I.     (i) HIV/AIDS Specialty Plan Enrollees who are family members of Enrollees identified as diagnosed with HIV/AIDS, and who are not identified as diagnosed with HIV/AIDS, will receive a Capitation Rate based on their respective eligibility categories in Capitation Rate Tables 2 or 3 in Attachment I. In developing the capitation rates for these family members, a Plan Factor of 1.0 will be assigned until the Agency determines that the Health Plan has enough of population of such Enrollees as to warrant its own Plan Factor.   (4) For Enrollees who are in the Children with Chronic Conditions Speciality Plan, their Capitation Rates are provided in Table 6 of Attachment I. Sibling Enrollees who are enrolled in the Children with Chronic Conditions Speciality Plan, and are not identified as Children with Chronic Conditions, will receive a Capitation Rate based on their respective eligibility categories in Capitation Rate Tables 2 or 3 in Attachment I. In developing the capitation rates for these family members, a Plan Factor of 1.0 will be assigned until the Agency determines that the Health Plan has enough of population of such Enrollees as to warrant its own Plan Factor.     c. The Risk-Adjusted Capitation Rates paid by the Agency are either for the Comprehensive Component or Comprehensive Component and Catastrophic Component as specified below.   (1)   Health Plans are required to provide the Comprehensive Component and the Catastrophic Component to Enrollees in the following manner:     (a) For Contracts serving Broward County and/or Duval County, Health Plans that are not Capitated PSNs are required to provide both the Comprehensive Component and Catastrophic Components. This means that the Health Plan is responsible for the cost of providing Covered Services up to the Benefit Maximum determined by the Agency for the Contract Year.     (b) For Contracts serving Broward County and/or Duval County, Health Plans that are Capitated PSNs must provide the Comprehensive Component and may choose to provide the Catastrophic Component. The Capitated PSN’s choice will be documented in Attachment I.   i. If the Capitated PSN has chosen to provide both the Comprehensive Component and the Catastrophic Component, the Health Plan is responsible for the cost of providing Covered Services up to the Benefit Maximum determined by the Agency for the Contract Year.   ii. If the Capitated PSN has chosen to provide the Comprehensive Component only, the Health Plan is responsible for the cost of providing Covered Services up to the Catastrophic Component Threshold by the Agency for the Contract Year. Such a Health Plan will receive reimbursement from the Agency for its costs beyond the Catastrophic Threshold up to the Benefit Maximum in accordance with Subsection D.     (c) For Contracts serving Baker County, Clay County and/or Nassau County, the Health Plan is required to provide the Comprehensive Component and may choose to provide the Catastrophic Component to its Enrollees in those counties.   i. If by this Contract, as specified in Attachment I, the Health Plan has agreed to provide both the Comprehensive Component and the Catastrophic Component, then the Health Plan is responsible for the cost of providing the Enrollee with Covered Services up to the Benefit Maximum determined by the Agency for the Contract Year.   ii. If by this Contract, as specified in Attachment I, the Health Plan has agreed to provide the Comprehensive Component only, then the Health Plan is financially responsible for the provision of Covered Services up to the Catastrophic Component Threshold determined by the Agency for the Contract Year.   (2) For purposes of calculating whether an Enrollee has met the Catastrophic Component Threshold and the Benefit Maximum, a Health Plan’s costs will be converted to the Medicaid Fee-for-Service payment levels as indicated in subsection D. below. For services covered by the Health Plan for which there is no Medicaid fee, the Agency will use the amount the Health Plan paid for the service. Upon the Agency’s request, the plan shall provide documentation to validate payment and services rendered. In addition, if the Health Plan receives payment from the Agency for Kick Payment services, the Kick Payment made by the Agency will be included toward the Catastrophic Component Threshold and toward the Benefit Maximum.   (3) Health Plans will be paid Capitation Rates for the Comprehensive Component and the Catastrophic Component or for the Comprehensive Component only, in accordance with whether the Health Plan agreed, by this Contract, to provide both the Comprehensive Component and Catastrophic Component or to provide only the Comprehensive Component.   2. The Agency’s Capitation Rates are included as Attachment I, titled “ESTIMATED HEALTH PLAN RATES; NOT FOR USE UNLESS APPROVED BY CMS.” The Agency may use, or may amend and use these rates, only after certification by its actuary and approval by the Centers for Medicare and Medicaid Services. Inclusion of these rates is not intended to convey or imply any rights, duties or obligations of either party, nor is it intended to restrict, restrain or control the rights of either party that may have existed independently of this Section of the Contract.     a. By signature on this Contract, the parties explicitly agree that this Section shall not independently convey any inherent rights, responsibilities or obligations of either party, relative to these rates, and shall not itself be the basis for any cause of administrative, legal or equitable action brought by either party. In the event that the rates certified by the actuary and approved by CMS are different from the rates included in this Contract, the Health Plan agrees to accept a reconciliation performed by the Agency to bring payments to the Health Plan in line with the approved rates. The Agency may amend and use the CMS-approved rates by notice in a Contract amendment to the Health Plan.   b. Upon receipt of CMS approval of the September 1, 2006 - August 31, 2007 Capitation Rates (remainder of the 2006-2007 Contract year), the Agency shall amend this Contract to reflect CMS-approved and actuarially certified Capitation Rates effective September 1, 2006. The Health Plan’s Capitation Rates for this Contract period (September 1, 2006 - August 31, 2007) will be weighted so that seventy-five percent (75%) is based on current Capitation Rate methodology and twenty-five percent (25%) is based on the Risk-Adjusted Capitation Rate methodology.   c. Upon CMS approval of the September 1, 2007 - August 31, 2008 Capitation Rates, the Agency shall amend this Contract to reflect CMS-approved and actuarially certified Capitation Rates effective September 1, 2007. The Health Plan’s Capitation Rates for the September 1, 2007 - August 31, 2008 Contract Year will be weighted so that fifty percent (50%) is based on current Capitation Rate methodology and fifty percent (50%) is based on the Risk-Adjusted Capitation Rate methodology.   d. Upon CMS approval of the September 1, 2008 - August 31, 2009 Capitation Rates, the Agency shall amend this Contract to reflect CMS-approved and actuarially certified Capitation Rates effective September 1, 2008. The Health Plan’s Capitation Rates shall be fully Risk-Adjusted for the September 1, 2008 - August 31, 2009 Contract Year. 3. The Agency shall pay the applicable Capitation Rate for each Enrollee whose name appears on the ONGOING REPORT (FLMR 8200-R004) and the REINSTATEMENT REPORT (FLMR 8200-R009) for each month, except that the Agency shall not pay for, and, in accordance with subsections F. and G. of this Attachment, shall recoup payment for, any part of the total Enrollment that exceeds the maximum authorized Enrollment level(s) expressed in this Contract in Attachment I. The total payment amount to the Health Plan shall depend on the number of Enrollees in each eligibility category and each rate group, and whether the Health Plan is providing the Comprehensive Component only or the Comprehensive Component and the Catastrophic Component, and at a rate that has been Risk-Adjusted pursuant to this Contract, or as adjusted pursuant to the Contract, where necessary in accordance with subsection F. of this Attachment.   a. The Health Plan is obligated to provide services pursuant to the terms of this Contract for all Enrollees for whom the Health Plan has received capitation payment or for whom the Agency has assured the Health Plan that the capitation payment is forthcoming.   b. To ensure a seamless health care delivery system for the Enrollee, if the Health Plan contracts for the Comprehensive Component only, the Health Plan continues to be responsible for coordinating, managing, and delivering all Enrollee care up to the Benefit Maximum regardless of whether the cost of the Enrollee’s Covered Services is above and beyond the Catastrophic Component Threshold.   c. Regardless of whether the Health Plan is at risk for the Comprehensive Component only or for both the Comprehensive Component and the Catastrophic Component, the Health Plan continues to be responsible for the coordinating and managing all Enrollee care even if the cost of the Enrollee’s Covered Services is above and beyond the Benefit Maximum. 4. The Capitation Rates to be paid specific to the Health Plan shall be as indicated in the Payment Tables in Attachment I, and adjusted monthly based on the Health Plan’s Plan Factor in accordance with subsection B.1.b.(1)(g)(i) through (ii) of this Section. 5. Unless otherwise specified in this Contract, the Health Plan shall accept the capitation payment received each month as payment in full by the Agency for all services provided to Enrollees covered under this Contract and the administrative costs incurred by the Health Plan in providing or arranging for such services. Any and all costs incurred by the Health Plan in excess of the capitation payment shall be borne in total by the Health Plan. 6. The Agency shall pay a retroactive Capitation Rate for each Newborn enrolled in the Health Plan for up to the first (1st) three (3) months of life provided the Newborn was enrolled through the Unborn Activation Process.   a. The Health Plan shall use the Unborn Activation Process to enroll all babies born to pregnant Enrollees as specified in Section III, Eligibility and Enrollment, B.3.   b. The Health Plan is responsible for payment of all Covered Services provided to Newborns enrolled through the Unborn Activation Process. C. Kick Payments Beginning September 1, 2006, the Agency shall pay Health Plans one (1) Kick Payment for each covered transplant for the Health Plan’s Enrollees who are not dually eligible for Medicare, and for each obstetrical delivery performed for each obstetrical delivery performed for the Health Plan’s Enrollees. Kick Payments are not made for Enrollees dually eligible for Medicare. 1. The Agency shall pay Kick Payments in the amounts indicated for children and adults in Attachment I, Tables 7 and 8.   a. For Health Plans under Contract to provide the Comprehensive Component only, Agency reimbursements to the Health Plan for Kick Payment services will be counted toward the Health Plan’s Catastrophic Component Threshold. Once the Catastrophic Component Threshold has been met, the Agency will continue to reimburse the Health Plan any Kick Payment services delivered by the Health Plan at the Kick Payment amounts.   b. For purposes of Kick Payments, an obstetrical delivery includes all births resulting from the delivery; therefore, if an obstetrical delivery results in multiple births, the Agency will reimburse the Health Plan through one Kick Payment only. Obstetrical deliveries also include still births as specified in the Medicaid Physicians Services Handbook.   c. For Health Plans under Contract as a Specialty Plan, Agency reimbursements to the Health Plans for Kick Payment services will be counted toward the Enrollee’s Benefit Maximum. 2. To receive a Kick Payment, the Health Plan must adhere to specific requirements listed in subsections 3. and 4. below and adhere to the following requirements:   a. The Health Plan must have provided the covered Kick Payment service to the recipient while he or she was enrolled in the Health Plan; and   b. The Health Plan must submit any required documentation to the Agency upon its request in order to receive the Kick Payment applicable to the Covered Service provided. 3. In addition to subsection 2. above, to receive a Kick Payment for covered transplants provided to an Enrollee without Medicare, the Health Plan must also comply with the following requirements:   a. For each transplant provided, the Health Plan must submit an accurate and complete CMS-1500 Claim Form and (“CMS-1500”) Operative Report to the Fiscal Agent within the required Medicaid Fee-for-Service claims submittal timeframes   b. The Health Plan must list itself as both the Pay-to and the Treating Provider on the CMS-1500 Claim Form; and   c. The Health Plan must use the following list of transplant procedure codes relative to the type of transplant performed when completing Field 24 D on the CMS-1500: CPT Code Transplant CPT Code Description 32851 lung single, without bypass 32852 lung single, with bypass 32853 lung double, without bypass 32854 lung double, with bypass 33945 heart transplant with or without recipient cardiectomy 47135 liver, allotransplation, orthotopic, partial or whole from cadaver or living donor 47136 liver, heterotopic, partial or whole from cadaver or living donor any age 4. In addition to subsection 2. above, to receive a Kick Payment for the covered obstetrical delivery provided to an Enrollee, the Health Plan must also comply with the following requirements:   a. The Health Plan must submit an accurate and complete CMS-1500 Claim Form in sufficient time to be received by the Fiscal Agent within six (6) months following the date of service (delivery);   b. The Health Plan must list itself as both the Pay-to and the Treating Provider on the CMS-1500 Claim Form; and   c. The Health Plan must use the following list of delivery procedure codes relative to the type of delivery performed when completing Field 24 D on the CMS-1500: REMAINDER OF PAGE INTENTIONALLY LEFT BLANK   CPT Code Obstetrical Delivery CPT Code Description 59409 Vaginal delivery only 59410 Vaginal delivery including postpartum care 59515 Cesarean delivery including postpartum care 59612 Vaginal delivery only, after previous cesarean delivery 59614 Vaginal delivery only, after previous cesarean delivery including postpartum care 59622   Cesarean delivery only, following attempted vaginal delivery after previous cesarean delivery including postpartum care D. Claims Payment for Health Plans Accepting Financial Risk for the Comprehensive Component Only 1. In order for Health Plans accepting financial risk for only the Comprehensive Component to receive reimbursement from the Agency for incurred expenditures for Covered Services for an Enrollee who has reached the annual Catastrophic Component Threshold, the Health Plan shall adhere to the following requirements: a.The Health Plan must notify the Agency in writing, in an Agency-specified format, when expenditures it has paid for an Enrollee’s Covered Services exceed $25,000 prior to the end of a Contract Year. b.For Enrollee’s whose Health Plan expenditures for Covered Services costs exceed $25,000, the Health Plan must update the Agency in writing, as specified in Section XII, and on a monthly basis, of the Health Plan’s additional expenditures for Covered Services for the Enrollee until the Enrollee has exceeded the Catastrophic Component Threshold or for the remainder of the Contract Year, whichever occurs first; c.Once the Agency has reviewed the Covered Services expenditure information provided by the Health Plan and has determined that a Health Plan’s expenditures for an Enrollee have exceeded the Catastrophic Component Threshold for the Medicaid Covered Services received based on Florida Medicaid’s fee schedules and as indicated in subsection B.1.c.(2) of this Attachment, and the Health Plan has received Agency notification that the Enrollee has met the Catastrophic Component Threshold, the Health Plan must submit the following in order to receive reimbursement for Covered Services provided: (1)An accurate and fully-completed claim form in the Agency’s designated format and within the Medicaid FFS time frames for claims submission. The Health Plan must list itself as both the Pay to and Treating Provider. (2)Any specified data requested by the Agency regarding treating providers unknown to FMMIS. (3)Health Plan claims data, for an Agency-specified data set in an Agency-specified format and transmittal method, that documents that the Health Plan’s expenditures, after conversion to the appropriate Medicaid fee (as applicable) are an amount equal to the Catastrophic Component Threshold. 2.For Health Plans providing the Comprehensive Component only, the Agency will be responsible for payment to the Health Plan for Medicaid Covered Services provided in excess of the Catastrophic Component Threshold up to the Enrollee’s Benefit Maximum. a.With the exception of Kick Payment services, such payment will be made at ninety-five percent (95%) of the Medicaid FFS payment rate, less co-payment or coinsurance required under the Medicaid fee schedule, for the respective Medicaid Covered Service provided and paid for by the Health Plan. b.For Kick Payment services provided by the Health Plan, the Agency’s payment to the Health Plan will be the Kick Payment amount specified in Attachment I, Tables 7 and 8. c.For Covered Services provided by the Health Plan for which there is not a Medicaid payment rate, the Agency will pay the actual amount the Health Plan paid to the Provider less five percent (5%). d.If the Health Plan submits claims to the Agency for Covered Services that are not in excess of the Catastrophic Component Threshold, or claims for Covered Services beyond the benefit maximum, and the Agency reimburses the plan for those claims, the Agency will recoup such reimbursement or the Health Plan will be responsible for repayment in accordance with the Payment Assessments and Errors subsections below. E. Child Health Check-UP (CHCUP) Incentive Payments Health Plans will be eligible to participate in the Child Health Check-Up (CHCUP) incentive program when the Health Plan has exceeded both the sixty percent (60%) State screening rate and the federal eighty percent (80%) participation and screening ratio goals as outlined in Section V, Covered Services, E.2. The Agency will determine which Health Plans will participate based upon the audited CHCUP reports submitted. 1.   The amount of the incentive payment shall be calculated as follows: the ratio of a qualified Health Plan’s screenings to the total of all Health Plans’ screenings will be multiplied by the total amount in the fund for the incentive payment. The ratios will be based on the Health Plans’ audited CHCUP reports. The total amount in the fund will be determined at the discretion of the Agency. In no event shall the total monies allotted to the incentive program be in excess of the incentive payment fund. 2. Pursuant to 42 CFR 438.6, I(1)(iv) and (5)(iii), the payment to any one (1) Health Plan shall not be in excess of five percent (5%) of the capitation amount paid to all Health Plans for CHCUP services provided pursuant to this Contract   F. Payment Assessments 1. Choice Counseling/Enrollment and Disenrollment In accordance with s 409.912 (29), F.S., at such time as the Agency receives legislative direction to assess Health Plans for Enrollment and Disenrollment services costs, the Agency shall apply assessments, in quarterly installments each year, against the Health Plan’s next capitation payment to pay for the Enrollment and Disenrollment services costs of the Choice Counselor/Enrollment Broker as follows:   a. July 1, for costs estimated for the Enrollment and Disenrollment services rendered by the Choice Counselor/Enrollment Broker for July and the following two (2) months;   b. October 1, for costs related to the Enrollment and Disenrollment services rendered by the Choice Counselor/Enrollment Broker for October and the following two (2) months;   c. January 1, for costs related to the Enrollment and Disenrollment services rendered by the Choice Counselor/Enrollment Broker for January and the following two (2) months; and   d. April 1, for costs related to maintaining the third party Enrollment and Disenrollment services contract for April and the following two (2) months. 2. Rate Adjustments The Health Plan and the Agency acknowledge that the Capitation Rates paid under this Contract, as specified in Payment and Maximum Authorized Enrollment Levels of this Contract, are subject to approval by the federal government.   a. Adjustments to funds previously paid and to be paid may be required. Funds previously paid shall be adjusted when Capitation Rate calculations are determined to have been in error, or when capitation payments have been made for Medicaid Recipients who are determined to be ineligible for Health Plan Enrollment during the period for which the capitation payments were made. In such events, the Health Plan agrees to refund any overpayment and the Agency agrees to pay any underpayment.   b. If the Agency receives legislative direction as specified in Section XIII, subsection F.1., Payment Assessments, Choice Counseling, respectively, the Agency shall annually, or more frequently, determine the actual expenditures for Enrollment and Disenrollment services rendered by the Choice Counselor/Enrollment Broker. The Agency will compare Capitation Rate assessments to the actual expenditures for such Enrollment and Disenrollment services. The following factors will enter into the cost settlement process:   (1) If the amount of Capitation Rate assessments are less than the actual cost of providing Enrollment and Disenrollment services rendered by the Choice Counselor/Enrollment Broker, the Health Plan shall pay the difference to the Agency within thirty (30) Calendar Days of settlement.   (2) If the amount of capitation assessments exceeds the actual cost of providing Enrollment, and Disenrollment services, the Agency will pay the difference to the Health Plan within thirty (30) Calendar Days of the settlement.   c. As the Agency adjusts the Plan Factor based on updated historical data, the Health Plan’s Capitation Rates will be adjusted according to the methodology indicated in the Capitation Rate tables.   d. The Agency may adjust the Health Plan’s Capitation Rates if the percentage deducted for the Enhanced Benefit Accounts fund is modified due to program needs. G. Errors Health Plans are expected to carefully prepare all reports and monthly payment requests for submission to the Agency. If after preparation and electronic submission, either the Health Plan or the Agency discover an error, including but not limited to errors resulting in incorrect Kick Payments, errors resulting in incorrect identification of Enrollees (including but not limited to specific identification of Enrollees with HIV/AIDS diagnoses), errors resulting in incorrect claims payments, and errors resulting in Capitation Rate payments above the Health Plan’s authorized Enrollment levels, the Health Plan has thirty (30) Calendar Days after its discovery of the error, or from its receipt of Agency notice of the error, to correct the error and re-submit accurate reports and/or invoices. Failure to respond within the thirty (30) Calendar Day period shall result in a loss of any money due the Health Plan for such errors and/or a sanction against the Health Plan pursuant to Section XIV of this Contract. H. Enrollment Levels The Health Plan is assigned an authorized maximum Enrollment level for each operational county. The authorized maximum Enrollment level is in effect on September 1, 2006, or upon Contract execution, whichever is later. 1. The Agency must approve in writing any increase in the Health Plan’s maximum Enrollment level for each operational county and subpopulation to be served, as applicable. Such approval shall not be unreasonably withheld, and shall be based on the Health Plan’s satisfactory performance of terms of the Contract and approval of the Health Plan’s administrative and service resources, as specified in this Contract, in support of each Enrollment level 2. Authorized Enrollment Levels in Attachment I indicate the Health Plan’s maximum authorized Enrollment levels for each Medicaid Reform county and each applicable authorized eligibility category. REMAINDER OF PAGE INTENTIONALLY LEFT BLANK   -------------------------------------------------------------------------------- Section XIV Sanctions A. General Provisions   1. The Health Plan shall comply with all requirements and performance standards set forth in this Contract. In the event the Agency identifies a violation of this Contract, or other non-compliance with this Contract, the Health Plan shall submit a corrective action plan (CAP) within three (3) Calendar Days of the date of receiving notification of the violation or non-compliance from the Agency.   2. Within five (5) Business Days of receiving the CAP the Agency will either approve or disapprove the CAP. If disapproved, the Health Plan shall resubmit, within ten (10) Business Days, a new CAP that addresses the concerns identified by the Agency.   3. Upon approval of the CAP, whether the initial CAP or the revised CAP, the Health Plan shall implement the CAP within the time frames specified by the Agency.   4. Except where specified below, the Agency shall impose a monetary sanction of $100 per day on the Health Plan for each Calendar Day that the approved CAP is not implemented to the satisfaction of the Agency B. Specific Sanctions   As described in 42 CFR 438.700, the Agency may impose any of the following sanctions against a Health Plan if it determines that a Health Plan has violated any provision of this Contract, or any applicable statutes.   1. Suspension of the Health Plan’s Voluntary Enrollments and participation in the Mandatory Assignment process for Enrollment.   2. Suspension or revocation of payments to the Health Plan for Enrollees during the sanction period.   3. For any nonwillful violation of the Contract, the Agency shall impose a fine, not to exceed $2,500 per Violation. In no event shall such fine exceed an aggregate amount of $10,000 for all nonwillful Violations arising out of the same action.   4. With respect to any knowing and willful violation of the Contract the Agency shall impose a fine upon the Health Plan in an amount not to exceed $20,000 for each such violation. In no event shall such fine exceed an aggregate amount of $100,000 for all knowing and willful violations arising out of the same action.   5. If the Health Plan fails to carry out substantive terms of the Contract or fails to meet applicable requirements in 42 CFR 438.700, the Agency shall terminate the Contract. After the Agency notifies the Health Plan that it intends to terminate the Contract, the Agency shall give the Health Plan's Enrollees written notice of the State's intent to terminate the Contract and allow the Enrollees to disenroll immediately without Cause.   6. The Agency may impose intermediate sanctions in accordance with 42 CFR 438.702, including, but not limited to:   a. Civil monetary penalties in the amounts specified in this contract.   b. Appointment of temporary management for the Health Plan. Rules for temporary management pursuant to 42 CFR 438.706 are as follows:   (1) The State may impose temporary management only if it finds (through on-site survey, Enrollee Grievances, financial audits, or any other means) that:   i. There is continued egregious behavior by the Health Plan, including but not limited to behavior that is described in 42 CFR 438.700;   ii. There is substantial risk to Enrollees' health;   iii. The sanction is necessary to ensure the health of the Health Plan’s Enrollees;   iv. While improvements are made to remedy the Health Plan’s violation(s) under 42 CFR 438.700; or   v. Until there is an orderly termination or reorganization of the Health Plan.   (2) The State must impose temporary management (regardless of any other sanction that may be imposed) if it finds that the Health Plan has repeatedly failed to meet substantive requirements in 42 CFR 438.706. The State must also grant Enrollees the right to terminate Enrollment without Cause, as described in 42 CFR 438.702(a)(3), and must notify the affected Enrollees of their right to terminate Enrollment.   (3) The State shall not delay imposition of temporary management to provide a hearing before imposing this sanction.   (4) The State shall not terminate temporary management until it determines that the Health Plan can ensure that the sanctioned behavior will not recur.   c. Granting Enrollees the right to terminate Enrollment without Cause and notifying affected Enrollees of their right to disenroll.   d. Suspension or limitation of all new Enrollment, including Mandatory Enrollment, after the effective date of the sanction.   e. Suspension of payment for Enrollees after the effective date of the sanction and until CMS or the Agency is satisfied that the reason for imposition of the sanction no longer exists and is not likely to recur.   f. Before imposing any intermediate sanctions, the State must give the Health Plan timely notice according to 42 CFR 438.710.   7. If the Health Plan’s CHCUP Screening compliance rate is below sixty percent (60%), it must submit to the Agency, and implement, an Agency accepted CAP. If the Health Plan does not meet the standard established in the CAP during the time period indicated in the plan, the Agency has the authority to impose sanctions in accordance with this section.   8. Unless the duration of a sanction is specified, a sanction shall remain in effect until the Agency is satisfied that the basis for imposing the sanction has been corrected and is not likely to recur.   9. The Agency reserves the right to withhold all or a portion of the Health Plans monthly administrative allocation for any amount owed pursuant to this section. REMAINDER OF PAGE INTENTIALLY LEFT BLANK -------------------------------------------------------------------------------- Section XV Financial Requirements A.   Insolvency Protection    The Health Plan shall establish a restricted Insolvency protection account with a federally guaranteed financial institution licensed to do business in Florida in accordance with section 1903(m)(1) of the Social Security Act (amended by section 4706 of the Balanced Budget Act of 1997), and section 409.912, F.S. The Health Plan shall deposit into that account five percent of the capitation payments made by the Agency each month until a maximum total of two percent of the annualized total current contract amount is reached. No interest may be withdrawn from this account until the maximum contract amount is reached. This provision shall remain in effect as long as the Health Plan continues to contract with the Agency. The restricted Insolvency protection account may be drawn upon with the authorized signatures of two persons designated by the Health Plan and two representatives of the Agency. The signature card shall be resubmitted when a change in authorized personnel occurs. If the authorized persons remain the same, the Health Plan shall submit an attestation to this effect annually. A sample form (Multiple Signature Verification Agreement) is available from the Agency upon request.  All such agreements or other signature cards must be approved in advance by the Agency. 1. In the event that a determination is made by the Agency that the Health Plan is Insolvent, as defined in Section I Definitions, of this Contract, the Agency may draw upon the amount solely with the two authorized signatures of representatives of the Agency and funds may be disbursed to meet financial obligations incurred by the Health Plan under this Contract. A statement of account balance shall be provided by the Health Plan within fifteen (15) Calendar Days of request of the Agency.   2. If the Contract is terminated, expired, or not continued, the account balance shall be released by the Agency to the Health Plan upon receipt of proof of satisfaction of all outstanding obligations incurred under this Contract. 3. In the event the Contract is terminated or not renewed and the Health Plan is Insolvent, the Agency may draw upon the Insolvency protection account to pay any outstanding debts the Health Plan owes the Agency including, but not limited to, overpayments made to the Health Plan, and fines imposed under the Contract or section 641.52, F.S., for which a final order has been issued. In addition, if the Contract is terminated or not renewed and the Health Plan is unable to pay all of its outstanding debts to health care providers, the Agency and the Health Plan agree to the court appointment of an impartial receiver for the purpose of administering and distributing the funds contained in the Insolvency protection account. Should a receiver be appointed, he shall give outstanding debts owed to the Agency priority over other claims. B.   Insolvency Protection for a Capitated Provider Service Network (PSN)    1. A capitated PSN is required to assume responsibility for comprehensive coverage and meet the following financial reserve requirements: a.   The capitated PSN shall maintain a minimum surplus in an amount that is the greater of $1 million or 1.5 percent of projected annual premiums. b.   In lieu of the requirements above, the Agency consider the following: i.   If the organization is a public entity, the Agency may take under advisement a statement from the public entity that a county supports the managed care plan with the county’s full faith and credit. In order to qualify for the Agency’s consideration, the county must own, operate, manage, administer, or oversee the managed care plan, either partly or wholly, through a county department or agency; ii.   The state guarantees the solvency of the organization; iii.   The organization is a federally qualified health center or is controlled by one or more federally qualified health centers and meets the solvency standards established by the state for such organization pursuant to s. 409.912(4)(c), Florida Statutes; or iv.   The entity meets the financial standards for federally approved provider-sponsored organizations as defined in 42CFR ss. 422.380 - 422.390. 2. Capitated PSNs have the option to assume responsibility for catastrophic coverage, but will be required to meet more stringent financial standards consistent with licensed HMOs in Chapter 641, F.S. and s. 409.912, F.S. At a minimum, the Capitated PSN shall at all times maintain a minimum surplus in an amount that is the greater $1,500,000, or 10 percent of total liabilities, or 2 percent of total contract amount. C.   Surplus Start Up Account    All new Health Plans, after initial Contract execution but prior to initial Enrollee enrollment, shall submit to the Agency, if a private entity, proof of working capital in the form of cash or liquid assets excluding revenues from Medicaid premium payments equal to at least the first three (3) months of operating expenses or $200,000, whichever is greater. This provision shall not apply to Health Plans that have been providing services to Enrollees for a period exceeding three (3) continuous months.   D.   Surplus Requirement    In accordance with section 409.912, F.S., the Health Plan shall maintain at all times in the form of cash, investments that mature in less than 180 Calendar Days allowable as admitted assets by the Department of Financial Services, and restricted funds of deposits controlled by the Agency (including the Health Plan’s Insolvency protection account) or the Department of Financial Services, a Surplus amount equal to one and one half (1 ½) times the Health Plan’s monthly Medicaid prepaid revenues. In the event that the plan’s Surplus (as defined in Section I Definitions, of this Contract) falls below an amount equal to one and one half (1 ½) times the Health Plan’s monthly Medicaid prepaid revenues, the Agency shall prohibit the Health Plan from engaging in Marketing and Request for Benefit Information activities, shall cease to process new Enrollments until the required balance is achieved, or may terminate the Health Plan’s Contract. E.   Interest   Interest generated through investments made by the Health Plan under this Contract shall be the property of the Health Plan and shall be used at the Health Plan’s discretion. F.   Inspection and Audit of Financial Records   The state and DHHS may inspect and audit any financial records of the plan or its subcontractors. Pursuant to section 1903(m)(4)(A) of the Social Security Act and State Medicaid Manual 2087.6(A-B), non-federally qualified plans must report to the state, upon request, and to the Secretary and the Inspector General of DHHS, a description of certain transactions with parties of interest as defined in section 1318(b) of the Social Security Act. G.   Physician Incentive Plans     1. Physician incentive plans shall comply with 42 CFR 417.479, 42 CFR 438.6(h), 42 CFR 422.208 and 42 CFR 422.210. Health Plans shall make no specific payment directly or indirectly under a physician incentive plan to a physician or physician group as an inducement to reduce or limit medically necessary services furnished to an individual Enrollee. Incentive plans must not contain provisions which provide incentives, monetary or otherwise, for the withholding of medically necessary care.   2. The Health Plan shall disclose information on physician incentive plans listed in 42 CFR 417.479(h)(1) and 417.479(i) at the times indicated in 42 CFR 417.479(d)-(g). All such arrangements must be submitted to the Agency for approval, in writing, prior to use. If any other type of withhold arrangement currently exists, it must be omitted from all subcontracts.   H.     Third Party Resources    1. The Health Plan must specify whether it will assume full responsibility for third party collections in accordance with this section. 2. The Health Plan shall be responsible for making every reasonable effort to determine the legal liability of third parties to pay for services rendered to members under this contract. The plan has the same rights to recovery of the full value of services as the Agency (See section 409.910, F.S. The following standards govern recovery.   a. If the Health Plan has determined that third party liability exists for part or all of the services provided directly by the Health Plan to an Enrollee, the Health Plan shall make reasonable efforts to recover from third party liable sources the value of services rendered.   b. If the Health Plan has determined that third party liability exists for part or all of the services provided to an Enrollee by a Subcontractor or referral Provider, and the third party is reasonably expected to make payment within 120 Calendar Days, the Health Plan may pay the Subcontractor or referral Provider only the amount, if any, by which the Subcontractor's allowable claim exceeds the amount of the anticipated third party payment; or, the Health Plan may assume full responsibility for third party collections for service provided through the Subcontractor or referral Provider.   c. The Health Plan may not withhold payment for services provided to an Enrollee if third party liability or the amount of liability cannot be determined, or if payment shall not be available within a reasonable time, beyond 120 calendar days from the date of receipt.   d. When both the Agency and the Health Plan have liens against the proceeds of a third party resource, the Agency shall prorate the amount due to Medicaid to satisfy such liens under section 409.910, F.S., between the Agency and the Health Plan. This prorated amount shall satisfy both liens in full.   e. The Agency may, at its sole discretion, offer to provide third party recovery services to the Health Plan. If the Health Plan elects to authorize the Agency to recover on its behalf, the Health Plan shall be required to provide the necessary data for recovery in the format prescribed by the Agency. All recoveries, less the Agency’s cost to recover shall be income to the plan. The cost to recover shall be expressed as a percentage of recoveries and shall be fixed at the time the plan elects to authorize the Agency to recover on its behalf.   f. All funds recovered from third parties shall be treated as income for the Health Plan. I.   Fidelity Bonds   The Health Plan shall secure and maintain during the life of this Contract a blanket fidelity bond from a company doing business in the State of Florida on all personnel in its employment. The bond shall be issued in the amount of at least $250,000 per occurrence. Said bond shall protect the Agency from any losses sustained through any fraudulent or dishonest act or acts committed by any employees of the Health Plan and Subcontractors, if any. Proof of coverage must be submitted to the Agency’s contract manager within sixty (60) Calendar Days after execution of the Contract and prior to the delivery of health care. To be acceptable to the Agency for fidelity bonds, a surety company shall comply with the provisions of chapter 624, F.S. REMAINDER OF PAGE INTENTIALLY LEFT BLANK -------------------------------------------------------------------------------- Section XVI Terms and Conditions A.   Agency Contract Management   1. The Division of Medicaid within the Agency shall be responsible for management of the Contract. The Division of Medicaid shall make all statewide policy decision-making or contract interpretation. In addition, the Division of Medicaid shall be responsible for the interpretation of all federal and State laws, rules and regulations governing or in any way affecting this Contract. Management shall be conducted in good faith with the best interest of the State and the Medicaid Recipients it serves being the prime consideration. The Agency shall provide final interpretation of general Medicaid policy. When interpretations are required, the Health Plan shall submit written requests to the Agency’s contract manager.   2. The terms of this Contract do not limit or waive the ability, authority or obligation of the Office of Inspector General, Bureau of Medicaid Program Integrity, its contractors, or other duly constituted government units (State or federal) to audit or investigate matters related to, or arising out of this Contract.   3. The Contract shall only be amended as follows: a. The parties cannot amend or alter the terms of this Contract without a written amendment. b. The Agency and the Health Plan understand that any such written amendment to amend or alter the terms of this Contract shall be executed by an officer of both parties, who is duly authorized to bind the Agency and the Health Plan. c. Only a person authorized by the Agency and a person authorized by the Health Plan may amend or alter the terms of this Contract.   B.   Applicable Laws and Regulations The Health Plan agrees to comply with all applicable federal and State laws, rules and regulations including but not limited to: Title 42 Code of Federal Regulations (CFR) chapter IV, subchapter C; Title 45 CFR, Part 74, General Grants Administration Requirements; chapters 409 and 641, Florida Statutes; all applicable standards, orders, or regulations issued pursuant to the Clean Air Act of 1970 as amended (42 USC 1857, et seq.); Title VI of the Civil Rights Act of 1964 (42 USC 2000d) in regard to persons served; Title IX of the education amendments of 1972 (regarding education programs and activities); 42 CFR 431, subpart F, section 409.907(3)(d), F.S., and Rule 59G-8.100 (24)(b), F.A.C. in regard to the contractor safeguarding information about beneficiaries; Title VII of the Civil Rights Act of 1964 (42 USC 2000e) in regard to employees or applicants for employment; Rule 59G-8.100, F.A.C.; section 504 of the Rehabilitation Act of 1973, as amended, 29 USC. 794, which prohibits discrimination on the basis of handicap in programs and activities receiving or benefiting from federal financial assistance; the Age Discrimination Act of 1975, as amended, 42 USC. 6101 et. seq., which prohibits discrimination on the basis of age in programs or activities receiving or benefiting from federal financial assistance; the Omnibus Budget Reconciliation Act of 1981, P.L. 97-35, which prohibits discrimination on the basis of sex and religion in programs and activities receiving or benefiting from federal financial assistance; Medicare - Medicaid Fraud and Abuse Act of 1978; the federal Omnibus Budget Reconciliation Acts; Americans with Disabilities Act (42 USC 12101, et seq.); the Newborns’ and Mothers’ Health Protection Act of 1996; and the Balanced Budget Act of 1997 and the Health Insurance Portability and Accountability Act of 1996. The Health Plan is subject to any changes in federal and state law, rules, or regulations. C.   Assignment   1. Except as provided below or with the prior written approval of the Agency, which approval shall not be unreasonably withheld, this Contract and the monies which may become due are not to be assigned, transferred, pledged or hypothecated in any way by the Health Plan, including by way of an asset or stock purchase of the Health Plan and shall not be subject to execution, attachment or similar process by the Health Plan. . a. As provided by section 409.912, F.S., when a merger or acquisition of a Health Plan has been approved by the Department of Financial Services pursuant to section 628.4615, F.S., the Agency shall approve the assignment or transfer of the appropriate Contract upon the request of the surviving entity of the merger or acquisition if the Health Plan and the surviving entity have been in good standing with the Agency for the most recent 12 month period, unless the Agency determines that the assignment or transfer would be detrimental to the Medicaid Recipients or the Medicaid program. The entity requesting the assignment or transfer shall notify the Agency of the request ninety (90) days prior to the anticipated effective date. b. To be in good standing, a Health Plan or Plan must not have failed accreditation or committed any material violation of the requirements of section 641.52, F.S., and must meet the Contract requirements. c. For the purposes of this section, a merger or acquisition means a change in controlling interest of an Entity, including an asset or stock purchase. D.   Attorney's Fees In the event of a dispute, each party to the Contract shall be responsible for its own attorneys’ fees except as otherwise provided by law. E.   Conflict of Interest   The Contract is subject to the provisions of chapter 112, Florida Statutes. The Health Plan shall disclose the name of any officer, director, or agent who is an employee of the State of Florida, or any of its agencies. Further, the Health Plan shall disclose the name of any State employee who owns, directly or indirectly, an interest of five percent (5%) or more in the offerer's firm or any of its branches. The Health Plan covenants that it presently has no interest and shall not acquire any interest, direct or indirect, which would conflict in any manner or degree with the performance of the services hereunder. The Health Plan further covenants that in the performance of the Contract no person having any such known interest shall be employed. No official or employee of the Agency and no other public official of the State of Florida or the federal government who exercises any functions or responsibilities in the review or approval of the undertaking of carrying out the Contract shall, prior to completion of this Contract, voluntarily acquire any personal interest, direct or indirect, in this Contract or proposed Contract. REMAINDER OF PAGE INTENTIONALLY LEFT BLANK F.   Contract Variation     If any provision of the Contract (including items incorporated by reference) is declared or found to be illegal, unenforceable, or void, then both the Agency and the Health Plan shall be relieved of all obligations arising under such provisions. If the remainder of the Contract is capable of performance, it shall not be affected by such declaration or finding and shall be fully performed. In addition, if the laws or regulations governing this Contract should be amended or judicially interpreted as to render the fulfillment of the Contract impossible or economically infeasible, both the Agency and the Health Plan shall be discharged from further obligations created under the terms of the Contract. However, such declaration or finding shall not affect any rights or obligations of either party to the extent that such rights or obligations arise from acts performed or events occurring prior to the effective date of such declaration or finding. G.   Court of Jurisdiction or Venue   For purposes of any legal action occurring as a result of or under this Contract, between the Health Plan and the Agency, the place of proper venue shall be Leon County. H.   Damages for Failure to Meet Contract Requirements     In addition to any remedies available through this Contract, in law or equity, the Health Plan shall reimburse the Agency for any federal disallowances or sanctions imposed on the Agency as a result of the Health Plan's failure to abide by the terms of this contract. I.   Disputes    The Health Plan may request in writing an interpretation of the Contract from the Contract manager. In the event the Health Plan disputes this interpretation, the Health Plan may request that the dispute be decided by the Division of Medicaid. The ability to dispute an interpretation does not apply to issues that are a matter of law or fact. Any disputes shall be decided by the Agency’s Division of Medicaid which shall reduce the decision to writing and serve a copy on the Health Plan. The written decision of the Agency’s Division of Medicaid shall be final and conclusive. The division will render its final decision based upon the written submission of the Health Plan and the Agency, unless, at the sole discretion of the Division director, the division allows an oral presentation by the Health Plan and the Agency. If such a presentation is allowed, the information presented will be considered in rendering the division’s decision. Should the Health Plan challenge an Agency decision through arbitration as provided below, the Agency action shall not be stayed except by order of an arbitrator. Thereafter, a Health Plan shall resolve any controversy or claim arising out of or relating to the Contract, or the breach thereof, by arbitration. Said arbitration shall be held in the City of Tallahassee, Florida, and administered by the American Arbitration Association in accordance with its applicable rules and the Florida Arbitration Code (chapter 682, F.S.). Judgment upon any award rendered by the arbitrator may be entered by the Circuit Court in and for the Second Judicial Circuit, Leon County, Florida. The chosen arbitrator must be a member of the Florida Bar actively engaged in the practice of law with expertise in the process of deciding disputes and interpreting contracts in the health care field. Any arbitration award shall be in writing and shall specify the factual and legal bases for the award. Either party may appeal a judgment entered pursuant to an arbitration award to the First District Court of Appeal. The parties shall bear their own costs and expenses relating to the preparation and presentation of a case in arbitration. The arbitrator shall award to the prevailing party all administrative fees and expenses of the arbitration, including the arbitrator’s fee. This Contract with numbered attachments represents the entire agreement between the Health Plan and the Agency with respect to the subject matter in it and supersedes all other contracts between the parties when it is duly signed and authorized by the Health Plan and the Agency. Correspondence and memoranda of understanding do not constitute part of this Contract. In the event of a conflict of language between the Contract and the attachments, the provisions of the Contract shall govern. However, the Agency reserves the right to clarify any contractual relationship in writing with the concurrence of the Health Plan and such clarification shall govern. Pending final determination of any dispute over an Agency decision, the Health Plan shall proceed diligently with the performance of the contract and in accordance with the Agency’s Division of Medicaid direction. J.   Force Majeure   The Agency shall not be liable for any excess cost to the Health Plan if the Agency's failure to perform the Contract arises out of causes beyond the control and without the result of fault or negligence on the part of the Agency. In all cases, the failure to perform must be beyond the control without the fault or negligence of the Agency. The Health Plan shall not be liable for performance of the duties and responsibilities of the Contract when its ability to perform is prevented by causes beyond its control. These acts must occur without the fault or negligence of the Health Plan. These include destruction to the facilities due to hurricanes, fires, war, riots, and other similar acts. Annually by May 31, the Health Plan shall submit to the Agency for approval an emergency management plan specifying what actions the Health Plan shall conduct to ensure the ongoing provisions of health services in a disaster or man-made emergency. K.   Legal Action Notification   The Health Plan shall give the Agency by certified mail immediate written notification (no later than thirty (30) Calendar Days after service of process) of any action or suit filed or of any claim made against the Health Plan by any subcontractor, vendor, or other party which results in litigation related to this Contract for disputes or damages exceeding the amount of $50,000. In addition, the Health Plan shall immediately advise the Agency of the insolvency of a Subcontractor or of the filing of a petition in bankruptcy by or against a principal Subcontractor. L.   Licensing   For the purposes of this Contract, a Health Plan includes health maintenance organizations authorized under chapter 641 of the Florida Statutes, exclusive provider organizations as defined in chapter 627 of the Florida Statutes, health insurers authorized under chapter 624 of the Florida Statutes, and Provider Service Networks as defined in Section 409.912, Florida Statutes. For purposes of this Contract, a PSN shall operate in accordance with section 409.91211(3)(e), F.S., and is exempt from licensure under Chapter 641, F.S., however, shall be responsible for meeting certain standards in Chapter 641, F.S. as required in this Contract. A Health Plan must be licensed under Chapter 641, Florida Statutes in order to offer a Specialty Plan for the population with HIV/AIDS. M.   Misuse of Symbols, Emblems, or Names in Reference to Medicaid   No person or Health Plan may use, in connection with any item constituting an advertisement, solicitation, circular, book, pamphlet or other communication, or a broadcast, telecast, or other production, alone or with other words, letters, symbols or emblems the words “Medicaid,” or “Agency for Health Care Administration,” except as required in the Agency’s core contract, page two (2), unless prior written approval is obtained from the Agency. Specific written authorization from the Agency is required to reproduce, reprint, or distribute any Agency form, application, or publication for a fee. State and local governments are exempt from this prohibition. A disclaimer that accompanies the inappropriate use of program or Agency terms does not provide a defense. Each piece of mail or information constitutes a violation. N.   Offer of Gratuities   By signing this agreement, the Health Plan signifies that no member of or a delegate of Congress, nor any elected or appointed official or employee of the State of Florida, the General Accounting Office, Department of Health and Human Services, CMS, or any other federal Agency has or shall benefit financially or materially from this procurement. The Contract may be terminated by the Agency if it is determined that gratuities of any kind were offered to or received by any officials or employees from the offeror, his agent, or employees.   O.   Subcontracts     1. The Health Plan is responsible for all work performed under this Contract, but may, with the written prior approval of the Agency, enter into Subcontracts for the performance of work required under this Contract. All Subcontracts must comply with 42 CFR 438.230. All Subcontracts and amendments executed by the Health Plan shall meet the following requirements. All Subcontractors must be eligible for participation in the Medicaid program; however, the Subcontractor is not required to participate in the Medicaid program as a provider. The Agency encourages use of minority business enterprise Subcontractors. See Section X.C., Administration and Management, Provider Contracts, of this Contract, for provisions and requirements specific to Provider contracts.   2. No Subcontract which the Health Plan enters into with respect to performance under the Contract shall in any way relieve the Health Plan of any responsibility for the performance of duties under this Contract. The Health Plan shall assure that all tasks related to the Subcontract are performed in accordance with the terms of this Contract. The Health Plan shall identify in its Subcontracts any aspect of service that may be further subcontracted by the Subcontractor.   3. All model and executed Subcontracts and amendments used by the Health Plan under this Contract must be in writing, signed, and dated by the Health Plan and the Subcontractor and meet the following requirements: a. Identification of conditions and method of payment:   i. The Health Plan agrees to make payment to all subcontractors in a timely fashion.   ii. Provide for prompt submission of information needed to make payment.   iii. Make full disclosure of the method and amount of compensation or other consideration to be received from the Health Plan.   iv. Require an adequate record system be maintained for recording services, charges, dates and all other commonly accepted information elements for services rendered to the Health Plan.   v. Specify that the Health Plan shall assume responsibility for cost avoidance measures for third party collections in accordance with Section XV. F., Financial Requirements, Third Party Liability. b. Provisions for monitoring and inspections:   i. Provide that the Agency and DHHS may evaluate through inspection or other means the quality, appropriateness and timeliness of services performed.   ii. Provide for inspections of any records pertinent to the contract by the Agency and DHHS.   iii. Require that records be maintained for a period not less than five (5) years from the close of the Contract and retained further if the records are under review or audit until the review or audit is complete. (Prior approval for the disposition of records must be requested and approved by the Health Plan if the Subcontract is continuous.)   iv. Provide for monitoring and oversight by the Health Plan and the Subcontractor to provide assurance that all licensed medical professionals are Credentialed in accordance with the Health Plan’s and the Agency’s Credentialing requirements as found in Section VIII.A.3.h Credentialing and Recredentialing, of this Contract, if the Health Plan has delegated the Credentialing to a Subcontractor.   v. Provide for monitoring of services rendered to Enrollees sponsored by the Provider. c. Specification of functions of the Subcontractor:   i. Identify the population covered by the Subcontract.   ii. Provide for submission of all reports and clinical information required by the Health Plan, including Child Health Check-Up reporting (if applicable).   iii. Provide for the participation in any internal and external quality improvement, utilization review, peer review, and grievance procedures established by the Health Plan. d. Protective clauses:   i. Require safeguarding of information about Enrollees according to 42 CFR, Part 438.224.   ii. Require compliance with HIPAA privacy and security provisions.   iii. Require an exculpatory clause, which survives Subcontract termination including breach of Subcontract due to insolvency, that assures that Medicaid Recipients or the Agency may not be held liable for any debts of the Subcontractor.   iv. If there is a Health Plan physician incentive plan, include a statement that the Health Plan shall make no specific payment directly or indirectly under a physician incentive plan to a Subcontractor as an inducement to reduce or limit Medically Necessary services to an Enrollee, and that all incentive plans shall not contain provisions which provide incentives, monetary or otherwise, for the withholding of Medically Necessary care;   4. Contain a clause indemnifying, defending and holding the Agency and the Health Plan Enrollees harmless from and against all claims, damages, causes of action, costs or expense, including court costs and reasonable attorney fees to the extent proximately caused by any negligent act or other wrongful conduct arising from the Subcontract agreement. This clause must survive the termination of the Subcontract, including breach due to Insolvency. The Agency may waive this requirement for itself, but not Health Plan Enrollees, for damages in excess of the statutory cap on damages for public entities if the Subcontractor is a public health entity with statutory immunity. All such waivers must be approved in writing by the Agency.   5. Require that the Subcontractor secure and maintain during the life of the Subcontract worker's compensation insurance for all of its employees connected with the work under this Contract unless such employees are covered by the protection afforded by the Health Plan. Such insurance shall comply with the Florida's Worker's Compensation Law.   6. Specify that if the Subcontractor delegates or Subcontracts any functions of the Health Plan, that the Subcontract or delegation includes all the requirements of this Contract.   7. Make provisions for a waiver of those terms of the Subcontract, which, as they pertain to Medicaid Recipients, are in conflict with the specifications of this Contract.   8. Provide for revoking delegation or imposing other sanctions if the Subcontractor's performance is inadequate.   9. The Health Plan must provide that compensation to individuals or entities that conduct utilization management activities is not structured so as to provide incentives for the individual or entity to deny, limit, or discontinue medically necessary services to any Enrollee. P.   Hospital Subcontracts   All hospital Subcontracts must meet the requirements outlined in Section XV.I.Q., Terms and Conditions, Subcontracts, of this Contract. In addition such Subcontracts shall require that the hospitals notify the Health Plan of births where the mother is a Health Plan Enrollee. The Subcontract must also specify which entity (Health Plan or hospital) is responsible for completing form DCF-ES 2039 and submitting it to the local DCF Economic Self-Sufficiency Services office. The Subcontract must also indicate that the plan’s name must be indicated as the referring Agency when the form DCF-ES 2039 is completed. Q.   Termination Procedures     1. In conjunction with section III.B., Termination, on page eight (8) of the Agency's Standard Contract, termination procedures are required. The Health Plan agrees to extend the thirty (30) Calendar Days notice found in section III.B.1., Termination at Will, on page eight (8) of the Agency's Standard Contract to ninety (90) Calendar Days notice. The party initiating the termination shall render written notice of termination to the other party by certified mail, return receipt requested, or in person with proof of delivery, or by facsimile letter followed by certified mail, return receipt requested. The notice of termination shall specify the nature of termination, the extent to which performance of work under the Contract is terminated, and the date on which such termination shall become effective. In accordance with 1932(e)(4), Social Security Act, the Agency shall provide the plan with an opportunity for a hearing prior to termination for cause. This does not preclude the Agency from terminating without cause.   2. Upon receipt of final notice of termination, on the date and to the extent specified in the notice of termination, the Health Plan shall: a. Stop work under the Contract, but not before the termination date. b. Cease enrollment of new Enrollees under the Contract. c. Terminate all Marketing activities and Subcontracts relating to Marketing. d. Assign to the State those Subcontracts as directed by the Agency's contracting officer including all the rights, title and interest of the Health Plan for performance of those Subcontracts. e. In the event the Agency has terminated this Contract in one or more Agency areas of the State, complete the performance of this Contract in all other areas in which the Health Plan has not been terminated. f. Take such action as may be necessary, or as the Agency's contracting officer may direct, for the protection of property related to the contract which is in the possession of the Health Plan and in which the Agency has been granted or may acquire an interest. g. Not accept any payment after the Contract ends unless the payment is for the time period covered under the Contract. Any payments due under the terms of this Contract may be withheld until the Agency receives from the Health Plan all written and properly executed documents as required by the written instructions of the Agency. h. At least sixty (60) Calendar Days prior to the termination effective date, provide written notification to all Enrollees of the following information: the date on which the Health Plan will no longer participate in the State’s Medicaid program; and instructions on contacting the Agency’s Choice Counselor/Enrollment Broker help line to obtain information on Enrollee’ enrollment options and to request a change in Health Plans. R.   Waiver   No covenant, condition, duty, obligation, or undertaking contained in or made a part of the Contract shall be waived except by written agreement of the parties, and forbearance or indulgence in any other form or manner by either party in any regard whatsoever shall not constitute a waiver of the covenant, condition, duty, obligation, or undertaking to be kept, performed, or discharged by the party to which the same may apply. Until complete performance or satisfaction of all such covenants, conditions, duties, obligations, or undertakings, the other party shall have the right to invoke any remedy available under law or equity not withstanding any such forbearance or indulgence. S.   Withdrawing Services from a County   If the Health Plan intends to withdraw services from a county, it shall provide written notice to its members in that county at least sixty (60) Calendar Days prior to the last day of service. The notice shall contain the same information as required for a notice of termination according to Section XVI.S.2.h., Terms and Conditions, Termination Procedures, of this Contract. The Health Plan shall also provide written notice of the withdrawal to all Subcontractors in the county.   T.   MyFloridaMarketPlace Vendor Registration   This Vendor is exempt under Rule 60A-1.030(3)d(ii), Florida Administrative Code, from being required to register in MyFloridaMarketPlace for this Contract. U.   MyFloridaMarketplace Vendor Registration and Transaction Fee Exemption    The Vendor is exempted from paying the 1% transaction fee per 60A-1.032(1)(g) of the Florida Administrative Code for this Contract. V.   Ownership and Management Disclosure      1. Federal and State laws require full disclosure of ownership, management and control of Disclosing Entities.  a. Disclosure shall be made on forms prescribed by the Agency for the areas of ownership and control interest (42 CFR 455.104 Form CMS 1513), business transactions (42 CFR 455.105), public entity crimes (section 287.133(3)(a), F.S.), and disbarment and suspension (52 Fed. Reg., pages 20360-20369, and section 4707 of the Balanced Budget Act of 1997). The forms are available through the Agency and are to be submitted to the Agency with the initial application for a Medicaid HMO or Health Plan and then submitted on an annual basis. The Health Plan shall disclose any changes in management as soon as those occur. In addition, the Health Plan shall submit to the Agency full disclosure of ownership and control of Medicaid HMOs and Health Plans at least sixty (60) Calendar Days before any change in the Health Plan's ownership or control occurs. b. The following definitions apply to ownership disclosure:   (1) A person with an ownership interest or control interest means a person or corporation that: (a) Owns, indirectly or directly 5 percent (5%) or more of the Health Plan's capital or stock, or receives 5 percent (5%) or more of its profits; (b) Has an interest in any mortgage, deed of trust, note, or other obligation secured in whole or in part by the plan or by its property or assets and that interest is equal to or exceeds 5 percent (5%) of the total property or assets; or (c) Is an officer or director of the Health Plan if organized as a corporation, or is a partner in the plan if organized as a partnership.   (2) The percentage of direct ownership or control is calculated by multiplying the percent of interest which a person owns, by the percent of the Health Plan's assets used to secure the obligation. Thus, if a person owns ten percent (10%) of a note secured by sixty percent (60%) of the Health Plan's assets, the person owns six percent (6%) of the Health Plan.   (3) The percent of indirect ownership or control is calculated by multiplying the percentage of ownership in each organization. Thus, if a person owns ten percent (10%) of the stock in a corporation, which owns eighty percent (80%) of the Health Plan stock, the person owns 8 percent (8%) of the Health Plan. c. The following definitions apply to management disclosure:   (1) Changes in management are defined as any change in the management control of the Health Plan. Examples of such changes are those listed below or equivalent positions by another title. (a) Changes in the board of directors or officers of the Health Plan, medical director, chief executive officer, administrator, and chief financial officer. (b) Changes in the management of the Health Plan where the Health Plan has decided to contract out the operation of the Health Plan to a management corporation. The Health Plan shall disclose such changes in management control and provide a copy of the contract to the Agency for approval at least sixty (60) Calendar Days prior to the management contract start date. d. In accordance with section 409.912, F.S., the Health Plan shall annually conduct a background check with the Florida Department of Law Enforcement on all persons with five percent (5%) or more ownership interest in the Health Plan, or who have executive management responsibility for the Health Plan, or have the ability to exercise effective control of the Health Plan. The Health Plan shall submit information to the Agency for such persons who have a record of illegal conduct according to the background check. The Health Plan shall keep a record of all background checks to be available for Agency review upon request.   (1) In accordance with section 409.907, F.S., Health Plans with an initial contract beginning on or after July 1, 1997, shall submit, prior to execution of a contract, complete sets of fingerprints of principals of the plan to the Agency for the purpose of conducting a criminal history record check.   (2) Principals of the Health Plan shall be as defined in section 409.907, F.S. e. The Health Plan shall submit to the Agency, within five (5) Business Days, any information on any officer, director, agent, managing employee, or owner of stock or beneficial interest in excess of five percent (5%) of the Health Plan who has been found guilty of, regardless of adjudication, or who entered a plea of nolo contendere or guilty to, any of the offenses listed in section 435.03, F.S. f. In accordance with section 409.912, F.S., the Agency shall not contract with a Health Plan that has an officer, director, agent, managing employee, or owner of stock or beneficial interest in excess of five percent (5%) of the Health Plan, who has committed any of the above listed offenses. In order to avoid termination, the Health Plan must submit a corrective action plan, acceptable to the Agency, which ensures that such person is divested of all interest and/or control and has no role in the operation and management of the Health Plan. REMAINDER OF PAGE INTENTIONALLY LEFT BLANK W.   Minority Recruitment and Retention Plan   The Health Plan shall implement and maintain a minority recruitment and retention plan in accordance with section 641.217, F.S. The Health Plan shall have policies and procedures for the implementation and maintenance of such a plan. The minority recruitment and retention plan may be company-wide for all product lines. X.   Independent Provider   It is expressly agreed that the Health Plan and any Subcontractors and agents, officers, and employees of the Health Plan or any Subcontractors, in the performance of this Contract shall act in an independent capacity and not as officers and employees of the Agency or the State of Florida. It is further expressly agreed that this Contract shall not be construed as a partnership or joint venture between the Health Plan or any Subcontractor and the Agency and the State of Florida. Y.   General Insurance Requirements   The Health Plan shall obtain and maintain the same adequate insurance coverage including general liability insurance, professional liability and malpractice insurance, fire and property insurance, and directors’ omission and error insurance. All insurance coverage must comply with the provisions set forth for HMOs in Rule 69O-191.069, F.A.C.; excepting that the reporting, administrative, and approval requirements shall be to the Agency rather than to the Department of Financial Services. All insurance policies must be written by insurers licensed to do business in the State of Florida and in good standing with the Department of Financial Services. All policy declaration pages must be submitted to the Agency annually. Each certificate of insurance shall provide for notification to the Agency in the event of termination of the policy. Z.   Worker's Compensation Insurance   The Health Plan shall secure and maintain during the life of the Contract, worker's compensation insurance for all of its employees connected with the work under this Contract. Such insurance shall comply with the Florida Worker's Compensation Law, chapter 440, F.S. Policy declaration pages must be submitted to the Agency annually. AA.   State Ownership   The Agency shall have the right to use, disclose, or duplicate all information and data developed, derived, documented, or furnished by the plan resulting from this contract. Nothing herein shall entitle the Agency to disclose to third parties data or information which would otherwise be protected from disclosure by State or federal law. BB.   Disaster Plan   The Health Plan shall submit a plan describing procedures guaranteeing the continuation of services during an emergency, including but not limited to localized acts of nature, accidents, and technological and/or attack-related emergencies. -------------------------------------------------------------------------------- ATTACHMENT III BUSINESS ASSOCIATE AGREEMENT The parties to this Attachment agree that the following provisions constitute a business associate agreement for purposes of complying with the requirements of the Health Insurance Portability and Accountability Act of 1996 (HIPAA). This Attachment is applicable if the Vendor is a business associate within the meaning of the Privacy and Security Regulations, 45 C.F.R. 160 and 164. The Vendor certifies and agrees as to abide by the following: 1.   Definitions. Unless specifically stated in this Attachment, the definition of the terms contained herein shall have the same meaning and effect as defined in 45 C.F.R. 160 and 164. 1.a. Protected Health Information. For purposes of this Attachment, protected health information shall have the same meaning and effect as defined in 45 C.F.R. 160 and 164, limited to the information created, received, maintained or transmitted by the Vendor from, or on behalf of, the Agency. 1.b. Security Incident. For purposes of this Attachment, security incident shall mean any event resulting in computer systems, networks, or data being viewed, manipulated, damaged, destroyed or made inaccessible by an unauthorized activity. See National Institute of Standards and Technology (NIST) Special Publication 800-61, "Computer Security Incident Handling Guide,” for more information. 2.   Use and Disclosure of Protected Health Information. The Vendor shall not use or disclose protected health information other than as permitted by this Contract or by federal and state law. The Vendor will use appropriate safeguards to prevent the use or disclosure of protected health information for any purpose not in conformity with this Contract and federal and state law. The Vendor will implement administrative, physical, and technical safeguards that reasonably and appropriately protect the confidentiality, integrity, and availability of electronic protected health information the Vendor creates, receives, maintains, or transmits on behalf of the Agency. 3. Use and Disclosure of Information for Management, Administration, and Legal Responsibilities. The Vendor is permitted to use and disclose protected health information received from the Agency for the proper management and administration of the Vendor or to carry out the legal responsibilities of the Vendor, in accordance with 45 C.F.R. 164.504(e)(4). Such disclosure is only permissible where required by law, or where the Vendor obtains reasonable assurances from the person to whom the protected health information is disclosed that: (1) the protected health information will be held confidentially, (2) the protected health information will be used or further disclosed only as required by law or for the purposes for which it was disclosed to the person, and (3) the person notifies the Vendor of any instance of which it is aware in which the confidentiality of the protected health information has been breached. 4. Disclosure to Third Parties. The Vendor will not divulge, disclose, or communicate protected health information to any third party for any purpose not in conformity with this Contract without prior written approval from the Agency. The Vendor shall ensure that any agent, including a subcontractor, to whom it provides protected health information received from, or created or received by the Vendor on behalf of, the Agency agrees to the same terms, conditions, and restrictions that apply to the Vendor with respect to protected health information. 5. Access to Information. The Vendor shall make protected health information available in accordance with federal and state law, including providing a right of access to persons who are the subjects of the protected health information in accordance with 45 C.F.R. 164.524. 6. Amendment and Incorporation of Amendments. The Vendor shall make protected health information available for amendment and to incorporate any amendments to the protected health information in accordance with 45 C.F.R. § 164.526. 7. Accounting for Disclosures. The Vendor shall make protected health information available as required to provide an accounting of disclosures in accordance with 45 C.F.R. § 164.528. The Vendor shall document all disclosures of protected health information as needed for the Agency to respond to a request for an accounting of disclosures in accordance with 45 C.F.R. § 164.528. 8. Access to Books and Records. The Vendor shall make its internal practices, books, and records relating to the use and disclosure of protected health information received from, or created or received by the Vendor on behalf of the Agency, available to the Secretary of the Department of Health and Human Services or the Secretary’s designee for purposes of determining compliance with the Department of Health and Human Services Privacy Regulations. 9. Reporting. The Vendor shall make a good faith effort to identify any use or disclosure of protected health information not provided for in this Contract. The Vendor will report to the Agency, within ten (10) business days of discovery, any use or disclosure of protected health information not provided for in this Contract of which the Vendor is aware. The Vendor will report to the Agency, within twenty-four (24) hours of discovery, any security incident of which the Vendor is aware. A violation of this paragraph shall be a material violation of this Contract. 10. Termination. Upon the Agency’s discovery of a material breach of this Attachment, the Agency shall have the right to terminate this Contract. 10.a. Effect of Termination. At the termination of this Contract, the Vendor shall return all protected health information that the Vendor still maintains in any form, including any copies or hybrid or merged databases made by the Vendor; or with prior written approval of the Agency, the protected health information may be destroyed by the Vendor after its use. If the protected health information is destroyed pursuant to the Agency’s prior written approval, the Vendor must provide a written confirmation of such destruction to the Agency. If return or destruction of the protected health information is determined not feasible by the Agency, the Vendor agrees to protect the protected health information and treat it as strictly confidential. The Vendor has caused this Attachment to be signed and delivered by its duly authorized representative, as of the date set forth below. Vendor Name:     /s/  Todd S. Farha            Signature   6/26/06 Date    Todd S. Farha, President & CEO          Name and Title of Authorized Signer   --------------------------------------------------------------------------------   CERTIFICATION REGARDING DEBARMENT, SUSPENSION, INELIGIBILITY AND VOLUNTARY EXCLUSION CONTRACTS/SUBCONTRACTS This certification is required by the regulations implementing Executive Order 12549, Debarment and Suspension, signed February 18, 1986. The guidelines were published in the May 29, 1987, Federal Register (52 Fed. Reg., pages 20360-20369). INSTRUCTIONS 1. Each Vendor whose contract/subcontract equals or exceeds $25,000 in federal monies must sign this certification prior to execution of each contract/subcontract. Additionally, Vendors who audit federal programs must also sign, regardless of the contract amount. The Agency for Health Care Administration cannot contract with these types of Vendors if they are debarred or suspended by the federal government. 2. This certification is a material representation of fact upon which reliance is placed when this contract/subcontract is entered into. If it is later determined that the signer knowingly rendered an erroneous certification, the Federal Government may pursue available remedies, including suspension and/or debarment. 3. The Vendor shall provide immediate written notice to the contract manager at any time the Vendor learns that its certification was erroneous when submitted or has become erroneous by reason of changed circumstances. 4. The terms "debarred," "suspended," "ineligible," "person," "principal," and "voluntarily excluded," as used in this certification, have the meanings set out in the Definitions and Coverage sections of rules implementing Executive Order 12549. You may contact the contract manager for assistance in obtaining a copy of those regulations. 5. The Vendor agrees by submitting this certification that, it shall not knowingly enter into any subcontract with a person who is debarred, suspended, declared ineligible, or voluntarily excluded from participation in this contract/subcontract unless authorized by the Federal Government. 6. The Vendor further agrees by submitting this certification that it will require each subcontractor of this contract/subcontract, whose payment will equal or exceed $25,000 in federal monies, to submit a signed copy of this certification. 7. The Agency for Health Care Administration may rely upon a certification of a Vendor that it is not debarred, suspended, ineligible, or voluntarily excluded from contracting/subcontracting unless it knows that the certification is erroneous. 8. This signed certification must be kept in the contract manager's contract file. Subcontractor's certifications must be kept at the contractor's business location. CERTIFICATION (1)   The prospective Vendor certifies, by signing this certification, that neither he nor his principals is presently debarred, suspended, proposed for debarment, declared ineligible, or voluntarily excluded from participation in this contract/subcontract by any federal department or agency. (2) Where the prospective Vendor is unable to certify to any of the statements in this certification, such prospective Vendor shall attach an explanation to this certification.     /s/  Todd S. Farha            Signature   6/26/06 Date    Todd S. Farha, President & CEO          Name and Title of Authorized Signer -------------------------------------------------------------------------------- CERTIFICATION REGARDING LOBBYING CERTIFICATION FOR CONTRACTS, GRANTS, LOANS AND COOPERATIVE AGREEMENTS The undersigned certifies, to the best of his or her knowledge and belief, that: (1)   No federal appropriated funds have been paid or will be paid, by or on behalf of the undersigned, to any person for influencing or attempting to influence an officer or employee of any agency, a member of congress, an officer or employee of congress, or an employee of a member of congress in connection with the awarding of any federal contract, the making of any federal grant, the making of any federal loan, the entering into of any cooperative agreement, and the extension, continuation, renewal, amendment, or modification of any federal contract, grant, loan, or cooperative agreement.   (2)   If any funds other than federal appropriated funds have been paid or will be paid to any person for influencing or attempting to influence an officer or employee of any agency, a member of congress, an officer or employee of congress, or an employee of a member of congress in connection with this federal contract, grant, loan, or cooperative agreement, the undersigned shall complete and submit Standard Form-LLL, “Disclosure Form to Report Lobbying,” in accordance with its instructions.   (3)   The undersigned shall require that the language of this certification be included in the award documents for all sub-awards at all tiers (including subcontracts, sub-grants, and contracts under grants, loans, and cooperative agreements) and that all sub-recipients shall certify and disclose accordingly. This certification is a material representation of fact upon which reliance was placed when this transaction was made or entered into. Submission of this certification is a prerequisite for making or entering into this transaction imposed by section 1352, Title 31, U.S. Code. Any person who fails to file the required certification shall be subject to a civil penalty of not less than $10,000 and not more than $100,000 for each such failure.       /s/  Todd S. Farha            Signature   6/26/06 Date   Todd S. Farha                              Name of Authorized Individual    FAR 001 Application or Contract Number  HealthEase Health Plan of Florida, Inc.  P.O. Box 26011, Tampa, FL 33623 Name and Address of Organziation      

Exhibit 10.1 AMENDMENT NUMBER SIX TO LOAN AND SECURITY AGREEMENT This AMENDMENT NUMBER SIX, dated as of December 11, 2006, (this "Amendment") is an amendment to the Loan and Security Agreement, dated as of April 18, 2003, by and between Shoe Pavilion Corporation, a Washington corporation (the "Borrower") and Wells Fargo Retail Finance, LLC, as "Lender", as amended by that Amendment Number One to Loan and Security Agreement dated as of September 24, 2004 by and between the Borrower and the Lender, as amended by that Amendment Number Two to Loan and Security Agreement dated as of May 12, 2005 by and between the Borrower and the Lender, as amended by that Amendment Number Three to Loan and Security Agreement dated as of August 11, 2005, as amended by that Amendment Number Four to Loan and Security Agreement dated as of March 15, 2006 by and between the Borrower and the Lender, as amended by that Amendment Number Five to the Loan and Security Agreement dates as of October 30, 2006 (as further amended from time to time, the "Loan Agreement"). All capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Loan Agreement. The Borrower has requested that the Lender agree to certain modifications of the Loan Agreement as set forth herein. The Lender is prepared to agree to the Borrower's request on the terms and conditions contained herein. In consideration of the foregoing and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, each of the undersigned hereby agrees as follows: Modified Definitions. The following definition contained in Article 1 of the Loan Agreement shall be modified as set forth below: The definition of "Maximum Revolver Amount" in Section 1.1 of the Loan Agreement shall be deleted in its entirety and the following definition shall be substituted therefore: ""Maximum Revolver Amount' means Thirty Million Dollars ($30,000,000), provided however, that the Maximum Revolver Amount may be increased up to Fifty Million Dollars ($50,000,000) pursuant to the provisions of Section 2.2A." Increase of Maximum Revolver Amount . Section 2.2A of the Loan Agreement shall be amended by (i) deleting "Thirty Million Dollars ($30,000,000)" therefrom and substituting "Fifty Million Dollars ($50,000,000)" in lieu thereof and (ii) deleting "Two Million Dollars ($2,000,000)" therefrom and substituting "Five Million Dollars ($5,000,000)" in lieu thereof. Schedule 6.2. Schedule 6.2(c)(i) of the Loan Agreement shall be deleted in it entirety and the following shall be substituted therefor: "(i) Within fifteen (15) days of the end of each month for the immediately preceding month: (A) stock ledger or perpetual roll-forward (including sales, purchase, beginning-of-month Inventory, end-of-month Inventory); (B) copy of invoice reflecting current payable owing for services rendered to Borrower at Gilbert West Warehouse Facility and evidence of the payment of such invoice; and (C) Inventory certificate in Lender's format." The following Schedule 6.2(c)(v) is hereby added to the Loan Agreement: "(v) From time to time, upon Lender's request, Borrower shall promptly provide to Lender original counterparts of (each in such form as Lender from time to time may specify) (i) a receiving report; (ii) Inventory summary report by location and by department; and (iii) P.O. gross margin percentage report." Acknowledgement of Obligations by Borrower. The Borrower confirms and agrees that (a) all representations and warranties contained in the Loan Agreement and in the other Loan Documents are on the date hereof true and correct in all material respects, and (b) it is unconditionally liable for the punctual and full payment of all Obligations, including, without limitation, all reasonable charges, fees, expenses and costs (including attorneys' fees and expenses) under the Loan Documents, and that the Borrower has no defenses, counterclaims or setoffs with respect to full, complete and timely payment of all Obligations. Ratification of Financing. The Borrower confirms that the Loan Agreement and the Loan Documents remain in full force and effect without amendment or modification of any kind, except for the amendments explicitly set forth herein. This Amendment shall be deemed to be one of the Loan Documents and, together with the other Loan Documents, constitute the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior dealings, correspondence, conversations or communications between the parties with respect to the subject matter hereof. This Amendment shall be considered a Loan Document and, without in any way limiting the application of other provisions of the Loan Agreement, this Amendment shall be governed by the provisions of Articles 13, 15 and 16 of the Loan Agreement. No further amendment to the Loan Agreement shall be made except by a writing signed by all parties to the Loan Agreement. Representations, Warranties and Covenants. The Borrower and Guarantor, jointly and severally, represents, warrants and covenants with and to the Lender as follows, which representations, warranties and covenants are continuing and shall survive the execution and delivery hereof, the truth and accuracy of, or compliance with each, together with the representations, warranties and covenants in the other Loan Agreements, being a continuing condition of the making or providing any loans or Letters of Credit by the Lender to Borrower: This Amendment has been duly authorized, executed and delivered by all necessary action of the Borrower and Guarantor, and is in full force and effect, and the agreements and obligations of the Borrower and Guarantor contained here constitute legal, valid and binding obligations of the Borrower enforceable against the Borrower and Guarantor in accordance with its terms. After giving effect to this Amendment, there is no Event of Default under the Loan Agreement or any of the Loan Documents. Conditions Precedent.   This Amendment shall become effective upon satisfaction of each of the following conditions precedent or waiver of such conditions by the Lender: Receipt by Lender of this Amendment duly executed by the Borrower and Lender. Receipt by Lender of the Acknowledgment and Consent duly executed by Guarantor. All representations and warranties contained herein shall be true and correct in all material respects. After giving effect to this Amendment, no Default or Event of Default shall have occurred and be continuing. Miscellaneous. Section and paragraph headings herein are included for convenience of reference only and shall not constitute a part of this Amendment for any other purpose. This Amendment shall be governed by, and construed in accordance with, the laws of the State of California. Counterparts.   This Amendment may be executed in any number of counterparts, each of which shall be deemed to be an original hereof and submissible into evidence and all of which together shall be deemed to be a single instrument. In making proof of this Amendment, it shall not be necessary to produce or account for more than one counterpart thereof signed by each of the parties hereto. Delivery of an executed counterpart of this Amendment by facsimile or other electronic method of transmission shall have the same force and effect as delivery of an original executed counterpart of this Amendment.   [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their authorized officers as of the day and year first above written. WELLS FARGO RETAIL FINANCE, LLC (the "Lender") By: /s/ Robert C. Chakarian Name: Robert C. Chakarian Title:  Vice President BORROWER : SHOE PAVILION CORPORATION By: /s/ Bruce L. Ross Name: Bruce L. Ross Title: EVP and CFO                       Signature page to Amendment Number 6- # 1461560 v1 -------------------------------------------------------------------------------- ACKNOWLEDGEMENT AND CONSENT   The undersigned, as a party to one or more Loan Documents, as defined in the Loan and Security Agreement, dated as of April 18, 2003, as heretofore amended (the "Loan Agreement"), by and between Shoe Pavilion Corporation, a Washington corporation (the "Borrower") and Wells Fargo Retail Finance, LLC, a Delaware limited liability company, as lender (the "Lender"), hereby (i) acknowledges and consents to Amendment Number Six dated as of December 11, 2006, to Loan Agreement (the "Amendment", all terms defined therein being used herein as defined therein), to which this Acknowledgement and Consent is attached, together with all prior amendments to the Loan Agreement; (ii) confirms and agrees that the General Continuing Guaranty dated as of April 18, 2003 to which the undersigned is a party is, and shall continue to be, in full force and effect and is ratified and confirmed in all respects; (iii) confirms and agrees that the Loan Agreement together with each other Loan Document to which the undersigned is a party is, and shall continue to be, in full force and effect and is hereby ratified and confirmed in all respects; and (iv) confirms and agrees that to the extent that any such Loan Document purports to assign or pledge to the Lender, or to grant to the Lender a security interest in or lien on, any collateral as security for the obligations of the Borrower and Guarantor from time to time existing in respect of the Loan Documents, such pledge, assignment and/or grant of a security interest or lien is hereby ratified and confirmed in all respects as security for all obligations of the Borrower and the undersigned, whether now existing or hereafter arising. Dated: ______ __, 2006 SHOE PAVILION,INC. By: ________________________ Name: Title:   Signature Page to Acknowledgment and Consent to Amendment Number Six

EXHIBIT 10.1 Leissa McNabb Note   AMENDED AND RESTATED LOAN AGREEMENT AND CONVERTIBLE PROMISSORY NOTE THIS AMENDED AND RESTATED LOAN AGREEMENT AND CONVERTIBLE PROMISSORY NOTE, dated as of August 11, 2006 (the “Note”), between SMI PRODUCTS, INC., a Nevada Corporation (the "Maker"), having an address at 3503 Cedar Locus, Sugarland, Texas 77479 and Liessa McNabb (the "Payee"), having an address at 10684 East Fanfol Lane, Scottsdale, AZ 85258. Each of the Maker and the Payee are referred to herein as a “Party”, and collectively as the “Parties.” WHEREAS, on October 20, 2003, on November 5, 2004, on February 15, 2005 and on August 18, 2005, the Parties entered into certain Loan Agreements, as amended (the “Original Loan Agreements”), pursuant to which, the Payee agreed to provide funds to the Maker in the total amount of $17,300 (the “Loans”) for its corporate purposes, on the terms and conditions set forth therein; and WHEREAS, the Parties desire amend and restate the Original Loan Agreements and to evidence the amount due thereunder by this Amended and Restated Loan Agreement and Convertible Promissory Note (“Note”) which shall accrue interest at a rate of 2% per annum and shall be payable on demand. NOW THEREFORE, in consideration of the premises, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: 1. The Original Loan Agreements are hereby amended and restated in its entirety herein and now solely evidenced by this Note. Any attempt to present the Original Loan Agreements for payment, separate from this Note, shall be invalid and shall be of no effect. 2. The Maker, unconditionally promises to pay to the order of the Payee, the principal sum of the Loans together with accrued interest thereon from the date of issuance of the Loans, which, as of the date hereof, is $626.83. The Maker further agrees to pay all costs of collection, including reasonable attorneys' fees, incurred by the Payee or by any other holder of this Note in any action to collect this Note, whether or not suit is brought. 3. Principal and accrued interest shall be payable on August 11, 2007. Maker shall have the right at any time to prepay, in whole or in part, the principal and accrued interest without penalty upon fifteen (15) days prior written notice to the Payee. 4. The amounts due hereunder are payable without deduction or offset in lawful money of the United States of America in immediately available funds to the Payee at its address as set forth above, or at such other place as the holder of this Note shall from time to time designate. 5. It shall be an event of default (“Event of Default”), and the then unpaid portion of this Note shall become immediately due and payable, at the election of Payee, upon the occurrence of any of the following events:   (a) any failure on the part of Maker to make any payment hereunder when due, whether by acceleration or otherwise; (b) Maker shall commence (or take any action for the purpose of commencing) any proceeding under any bankruptcy, reorganization, arrangement, readjustment of debt, moratorium or similar law or statute; or (c) a proceeding shall be commenced against Maker under any bankruptcy, reorganization, arrangement, readjustment of debt, moratorium or similar law or statute and relief is ordered against Maker, or the proceeding is controverted but is not dismissed within sixty (60) days after the commencement thereof. 6. The principal balance of this Note and all accrued interest hereunder shall be convertible, in whole or in part, into shares of the Maker’s common stock in the manner described below at the option of the Payee or other holder hereof at any time prior to maturity, upon ten (10) days advance written notice to the Maker. The number of shares of the Maker’s common stock issuable upon such conversion shall be determined by the Board of Directors of the Company based on what it determines the fair market value of the Company is at the time of such conversion. Upon conversion, this Note shall be canceled and a replacement note on identical terms shall be promptly issued by the maker to the holder hereof to evidence the remaining outstanding principal amount hereof as of the date of the conversion, if applicable. In the event of a stock-split, combination, stock dividend, recapitalization of the Maker or similar event, the conversion price and number of shares issuable upon conversion shall be equitably adjusted to reflect the occurrence of such event. --------------------------------------------------------------------------------   7. No failure on the part of the Payee or any other holder of this Note to exercise and no delay in exercising any right, remedy or power hereunder or under any other document or agreement executed in connection herewith shall operate as a waiver thereof, nor shall any single or partial exercise by the Payee or any other holder of this Note of any right, remedy or power hereunder preclude any other or future exercise of any other right, remedy or power. 8. This Note shall be binding upon the Maker and the Maker’s successors and assigns. 9. This Note shall be governed by and construed in accordance with the laws of the State of New York, excluding the conflicts of laws principles thererof. 10. In the event that any one or more of the provisions of this Note shall for any reason be held to be invalid, illegal or unenforceable, in whole or in part, or in any respect, or in the event that any one or more of the provisions of this Note shall operate, or would prospectively operate, to invalidate this Note, then, and in any such event, such provision or provisions only shall be deemed null and void and of no force or effect and shall not affect any other provision of this Note, and the remaining provisions of this Note shall remain operative and in full force and effect, shall be valid, legal and enforceable, and shall in no way be affected, prejudiced or disturbed thereby. 11. All agreements between Maker and Payee are hereby expressly limited so that in no event whatsoever, whether by reason of deferment in accordance with this Note or under any agreement or by virtue of acceleration or maturity of the Note, or otherwise, shall the amount paid or agreed to be paid to the Payee hereunder or to compensate Payee for damages to be suffered by reason of a late payment hereof, exceed the maximum permissible under applicable law. If enforcement of any provision hereof at the time performance of such provision shall be due, shall exceed the limit of validity prescribed by law, the relevant obligations to be fulfilled shall be deemed reduced to the limit of such validity. This provision shall never be superseded or waived and shall control every other provision of all agreements among Maker and Payee. 12. Subject to applicable federal and state securities laws, the Payee may assign this Note without first obtaining the consent of the Maker. 13. Subject to the applicable cure periods contained herein, time is of the essence of this Note. 14. EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED HEREIN, THE MAKER, AND ALL OTHERS THAT MAY BECOME LIABLE FOR ALL OR ANY PART OF THE OBLIGATIONS EVIDENCED BY THIS NOTE, HEREBY WAIVES PRESENTMENT, DEMAND, NOTICE OF NONPAYMENT, PROTEST AND ALL OTHER DEMANDS AND NOTICES IN CONNECTION WITH THE DELIVERY, ACCEPTANCE, PERFORMANCE OR ENFORCEMENT OF THIS NOTE, AND DOES HEREBY CONSENT TO ANY NUMBER OF RENEWALS OR EXTENSIONS OF THE TIME OF PAYMENT HEREOF AND AGREE THAT ANY SUCH RENEWALS OR EXTENSIONS MAY BE MADE WITHOUT NOTICE TO ANY SUCH PERSONS AND WITHOUT AFFECTING THEIR LIABILITY HEREIN AND DO FURTHER CONSENT TO THE RELEASE OF ANY PERSON LIABLE WITH RESPECT TO FAILURE TO GIVE SUCH NOTICE, (ALL WITHOUT AFFECTING THE LIABILITY OF THE OTHER PERSONS, FIRMS, OR CORPORATIONS LIABLE FOR THE PAYMENT OF THIS NOTE). 15. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE MAKER HEREBY KNOWINGLY AND VOLUNTARILY WAIVES TRIAL BY JURY AND THE RIGHT THERETO IN ANY ACTION OR PROCEEDING OF ANY KIND ARISING UNDER OR OUT OF OR OTHERWISE RELATED TO OR CONNECTED WITH THIS NOTE OR ANY RELATED DOCUMENT. [Signature Page Follows]   2 -------------------------------------------------------------------------------- IN WITNESS WHEREOF, each of the undersigned has duly executed this Amended and Restated Loan Agreement and Convertible Promissory Note on the date first above written.         SMI PRODUCTS, INC.               By:   /s/ James Charuk   -------------------------------------------------------------------------------- James Charuk   President           PAYEE:                      /s/ Liessa McNabb   -------------------------------------------------------------------------------- Liessa McNabb       --------------------------------------------------------------------------------

  MANAGEMENT AGREEMENT   This management agreement dated for reference 19 April 2006 is between De Beira Goldfields Inc., a Nevada corporation (“De Beira”) with an office at 1530 Duthie Avenue, Burnaby, British Columbia, V5A 2R6, and Reginald Gillard, of 4 Mere View Way, Subiaco, Western Australia, 6008.   Whereas De Beira wishes to appoint Mr. Gillard as president and chief executive officer of De Beira , and whereas Mr. Gillard has consented to the appointment of president and chief executive officer, for valuable consideration, the receipt and sufficiency of which are acknowledged, and the following mutual promises, the parties agree that:     1.   Appointment. De Beira appoints Mr. Gillard as of 19 April 2006 to provide his services as the president and chief executive officer of De Beira and his business management expertise to De Beira in connection with its business activities.   2.   Compensation. De Beira will pay Mr. Gillard $5,000 Australian dollars per month for the term of this agreement.   3.   Expenses. De Beira will reimburse Mr. Gillard for any reasonable out-of-pocket expenses that he incurs in fulfilling the terms of this agreement.   4.   Term. The term of this agreement will be 12 months and this agreement will expire on April 18, 2007.   5.   Confidentiality.    a.   Mr. Gillard will hold in the strictest confidence any information about De Beira or any other affiliated entity that he acquires in the performance of his duties under this agreement or otherwise, unless De Beira or an affiliate has publicly disclosed the information or authorized Mr. Gillard to disclose it in writing, and will use his best efforts and precautions to prevent the unauthorized disclosure of confidential information. This confidentiality provision survives the termination of this agreement and Mr. Gillard’s office as president and chief executive officer.   b.   Mr. Gillard acknowledges the importance and value of confidential information, that the unauthorized disclosure of any confidential information could cause irreparable harm to De Beira or its affiliates, and that monetary damages are an inadequate compensation for Mr. Gillard’s breach of this agreement. Accordingly, De Beira and its affiliates may, in addition to and not in limitation of any other rights, remedies or damages available to it in law or equity, obtain a temporary restraining order, a preliminary injunction or a permanent injunction in order to prevent Mr. Gillard from breaching or threatening to breach this agreement.   6.   Representations and warranties. Mr. Gillard represents and warrants that he has the management skills and experience required to fulfil the duties of president and chief executive officer of De Beira and to advise De Beira on its business activities.   7.   Termination. Either party may terminate this agreement any time for any reason by delivering a written notice of termination to the other party 30 days before the termination date. De Beira will only be liable to pay Mr. Gillard for the 30 days.   8.   No waiver. No failure or delay of De Beira in exercising any right under this agreement operates as a waiver of the right. De Beira’s rights under this agreement are cumulative and do not preclude De Beira from relying on or enforcing any other legal or equitable right or remedy.   9.   Time. Time is of the essence.   10.   Jurisdiction. This agreement is governed by the laws of the State of Nevada.   11.   Severability. If any part of this agreement that is held to be void or otherwise unenforceable by a court or proper legal authority, then that part is deemed to be amended or deleted from this agreement, and the remainder of this agreement is valid or otherwise enforceable.   12.   Notice. Any notice required by or in connection with this agreement be in writing and must be delivered to the parties by hand or transmitted by fax to the address and fax number given for the parties in the recitals. Notice is deemed to have been delivered when it is delivered by hand or transmitted by fax.   13.   Counterparts. This agreement may be signed in counterparts and delivered to the parties by fax, and the counterparts together are deemed to be one original document.   The parties’ signatures below are evidence of their agreement.   De Beira Goldfields Inc. /s/ Michele Fronzo Authorized Signatory /s/ Reginald Gillard  Reginald Gillard

Exhibit 10.11 $750,000,000 DYNEGY HOLDINGS INC. 8.375% Senior Notes due 2016 PURCHASE AGREEMENT March 29, 2006 Credit Suisse Securities (USA) LLC Citigroup Global Markets Inc., Banc of America Securities LLC J.P. Morgan Securities Inc.,     c/o Credit Suisse Securities (USA) LLC,         Eleven Madison Avenue,             New York, N.Y. 10010-3629 Dear Sirs: 1. Introductory. Dynegy Holdings Inc., a Delaware corporation (the “Company”), proposes, subject to the terms and conditions stated herein, to issue and sell to the several initial purchasers named in Schedule A hereto (the “Purchasers”) U.S.$750,000,000 principal amount of its 8.375% Senior Notes due 2016 (“Offered Securities”) to be issued under a second supplemental indenture to be dated as of April 12, 2006 to the indenture dated September 26, 1996, as restated as of March 23, 1998, amended and restated as of March 14, 2001 and supplemented by a first supplemental indenture dated as of July 25, 2003 (collectively, the “Indenture”), between the Company and Wilmington Trust Company (as successor to JP Morgan Chase Bank, N.A.), as Trustee, on a private placement basis pursuant to an exemption under Section 4(2) of the United States Securities Act of 1933 (the “Securities Act”), and hereby agrees with the several Purchasers as follows. The holders of the Offered Securities will be entitled to the benefits of a Registration Rights Agreement of even date herewith among the Company and the Purchasers (the “Registration Rights Agreement”), pursuant to which the Company has agreed to file a registration statement with the Securities Exchange Commission (the “Commission”) to exchange the Offered Securities for a new class of securities issued under the Indenture and registered under the Securities Act subject to the terms and conditions therein specified. As used herein, the term “Operative Documents” refers to this Agreement, the Registration Rights Agreement, the Indenture and the Offered Securities. 2. Representations and Warranties of the Company. The Company represents and warrants to, and agrees with, the several Purchasers that: (a) A preliminary offering circular dated as of March 29, 2006 (the “Preliminary Offering Circular”) relating to the Offered Securities to be offered by the Purchasers and a final offering circular (the “Final Offering Circular”) disclosing the offering price and other final terms of the Offered Securities dated as of the date of this Agreement (even if finalized and issued subsequent to the date of this Agreement) have been or will be prepared by the Company. “General Disclosure Package” means the Preliminary Offering Circular, together with any Issuer Free Writing Communication (as hereinafter defined) existing at the Applicable Time (as hereinafter defined) as evidenced by its being specified in Schedule B to this Agreement (including the term sheet listing the final terms of the Offered Securities and their offering, included in Schedule B to this Agreement, which is referred to as the “Terms Communication”). Any reference herein to the Preliminary Offering Circular, the Offering Circular or the General Disclosure Package shall be deemed to refer to and include the filing of any Exchange Act Report (as defined). “Applicable Time” means 3:15 P.M. (EST time) on the date of this Agreement. As of the date of this Agreement and as of the Closing Date, the Final Offering Circular does not include any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the -------------------------------------------------------------------------------- circumstances under which they were made, not misleading. At the Applicable Time and as of the Closing Date neither (i) the General Disclosure Package, nor (ii) any individual Supplemental Marketing Material (as hereinafter defined), when considered together with the General Disclosure Package, included any untrue statement of a material fact or omitted to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The preceding two sentences do not apply to statements in or omissions from the Preliminary or Final Offering Circular, the General Disclosure Package or any Supplemental Marketing Material based upon written information furnished to the Company by any Purchaser through Credit Suisse Securities (USA) LLC (“Credit Suisse”) specifically for use therein, it being understood and agreed that the only such information is that described as such in Section 8(b) hereof. On the date of this Agreement, the Company’s annual report on Form 10-K most recently filed with the Commission and all subsequent reports (collectively, the “Exchange Act Reports”) which have been or subsequently are deemed to be incorporated by reference in the Preliminary Offering Circular, the General Disclosure Package or the Final Offering Circular do not include any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. Such documents, when they were filed with the Commission, conformed in all material respects to the requirements of the Exchange Act and the rules and regulations of the Commission thereunder. “Free Writing Communication” means a written communication (as such term is defined in Rule 405 under the Securities Act) that constitutes an offer to sell or a solicitation of an offer to buy the Offered Securities and is made by means other than the Preliminary Offering Circular or the Final Offering Circular. “Issuer Free Writing Communication” means a Free Writing Communication prepared by or on behalf of the Company, used or referred to by the Company or containing a description of the final terms of the Offered Securities or of their offering, in the form retained in the Company’s records. “Supplemental Marketing Material” means any Issuer Free Writing Communication other than any Issuer Free Writing Communication specified in Schedule B to this Agreement. (b) No order or decree preventing the use of the General Disclosure Package, the Final Offering Circular or any order asserting that the transactions contemplated by this Agreement are subject to the registration requirements of the Securities Act, has been issued and no proceeding for that purpose has commenced or is pending or, to the knowledge of the Company, is contemplated. (c) Each of the Company and its subsidiaries has been duly incorporated or formed and is an existing corporation, limited liability company, limited partnership or general partnership in good standing under the laws of its state of organization, with power and authority (corporate and other) to own its properties and conduct its business as described in the General Disclosure Package; and each of the Company and its subsidiaries is duly qualified to do business as a foreign corporation in good standing in all other jurisdictions in which its ownership or lease of property or the conduct of its business requires such qualification, except to the extent the failure to so qualify or be in good standing could not reasonably be expected to have a material adverse effect on the condition (financial or other), business, properties, results of operations or, to the knowledge of the Company, prospects of the Company and its subsidiaries, taken as a whole (a “Material Adverse Effect”). The Company has all requisite corporate power and authority to enter into the Operative Documents and has full power and authority to authorize, issue and sell the Offered Securities as contemplated by this Agreement. (d) Neither the Company nor any of its subsidiaries is (i) in default in the performance of any obligation, agreement, covenant or condition contained in any indenture, loan agreement, mortgage, lease or other agreement or instrument to which the Company or its subsidiaries is a party or by which the Company or any of its subsidiaries or their respective property is bound, or (ii) in violation of its respective charter or by-laws, operating agreement or other organizational document that governs the existence or administration of such entity, in each case, except as could not reasonably be expected to have a Material Adverse Effect. (e)(i) As of the date hereof, subject to changes in the ordinary course of business or as contemplated by the General Disclosure Package, the Company has the capitalization set forth in the General Disclosure Package, under the heading “Capitalization,” (ii) all of the issued shares of capital stock of the Company and its subsidiaries have been duly and validly authorized and issued -------------------------------------------------------------------------------- and are fully paid and non-assessable and (iii) the capital stock of each subsidiary owned by the Company, directly or through subsidiaries, is owned free from liens, encumbrances and material defects, other than those arising under the Company’s third amended and restated credit agreement, dated March 6, 2006 (the “Credit Facility”), with Citicorp USA, Inc. and JPMorgan Chase Bank, N.A., as co-administrative agents, JPMorgan Chase Bank, N.A., as collateral agent, Citigroup Global Markets Inc. and JPMorgan Securities Inc., as joint lead arrangers, and the other financial institutions parties thereto as lenders. (f) The Offered Securities have been duly and validly authorized by the Company and, when duly executed by the Company in accordance with the terms of the Indenture, assuming due authentication of the Offered Securities by the Trustee, upon delivery to the Purchasers against payment therefor in accordance with the terms hereof, will be validly issued and delivered, and will constitute valid and binding obligations of the Company entitled to the benefits of the Indenture, enforceable against the Company in accordance with their terms, except as such enforceability may be limited by (i) bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium, or other similar laws now or hereafter in effect relating to creditors’ rights generally and (ii) general principles of equity and the discretion of the court before which any proceeding therefore may be brought (regardless of whether such enforcement is considered in a proceeding in equity or at law). On the date of this Agreement the Offered Securities conform to the description thereof contained in the General Disclosure Package and on the Closing Date the Offered Securities will conform to the description thereof contained in the Final Offering Circular. (g) The Exchange Securities (as defined in the Registration Rights Agreement) have been, or as of the Registered Exchange Offer (as defined in the Registration Rights Agreement) will have been, duly and validly authorized by the Company and, when duly executed by the Company in accordance with the terms of the Indenture, assuming due authentication of the Exchange Securities by the Trustee, upon exchange for the Initial Securities (as defined in the Registration Rights Agreement), will be validly issued and delivered, and will constitute valid and binding obligations of the Company entitled to the benefits of the Indenture, enforceable against the Company in accordance with their terms, except as such enforceability may be limited by (i) bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium, or other similar laws now or hereafter in effect relating to creditors’ rights generally and (ii) general principles of equity and the discretion of the court before which any proceeding therefore may be brought (regardless of whether such enforcement is considered in a proceeding in equity or at law). The Exchange Securities will conform to the descriptions thereof contained in the Registration Statement (as defined in the Registration Rights Agreement). (h) The Indenture has been, or as of the Closing Date will have been, duly and validly authorized by the Company, and upon its execution and delivery and, assuming due authorization, execution and delivery by the Trustee, will constitute the valid and binding agreement of the Company, enforceable against the Company in accordance with its terms, except as such enforceability may be limited by (i) bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium, or other similar laws now or hereafter in effect relating to creditors’ rights generally and (ii) general principles of equity and the discretion of the court before which any proceeding therefore may be brought (regardless of whether such enforcement is considered in a proceeding in equity or at law); and assuming the accuracy of the Purchasers’ representations and warranties and the Purchasers’ compliance with the agreements in Section 4 hereof and compliance with the limitations and restrictions contained under the heading “Transfer Restrictions” in the Final Offering Circular, no qualification of the Indenture under the Trust Indenture Act of 1939, as amended (the “TIA”) is required in connection with the offer and sale of the Offered Securities contemplated hereby; and the Indenture conforms in all material respects to the requirements of the TIA, and the rules and regulations of the Commission applicable to an indenture which is qualified thereunder. On the date of this Agreement the Indenture conforms to the description thereof in the General Disclosure Package, and on the Closing Date the Indenture will conform to the description thereof in the Final Offering Circular. (i) This Agreement and the Registration Rights Agreement have been duly authorized, executed and delivered by the Company. (j) Except as disclosed in the General Disclosure Package, there are no contracts, agreements or understandings between the Company and any person that would give rise to a valid claim against the Company or any Purchaser for a brokerage commission, finder’s fee or other like payment. -------------------------------------------------------------------------------- (k) No consent, approval, authorization, or order of, or filing with, any governmental agency or body or any court is required for the consummation of the transactions contemplated by the Operative Documents in connection with the issuance and sale of the Offered Securities by the Company, except for (i) the order of the Commission declaring the Exchange Offer Registration or the Shelf Registration Statement (each as defined in the Registration Rights Agreement) effective, (ii) such as may be required under foreign or state securities laws, blue sky laws and related regulations, (iii) those that have been obtained or made on or prior to the Closing Date and (iv) those that could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect and would not materially adversely affect the ability of the Company to perform its obligations under the Operative Documents. (l) The execution, delivery and performance of the Operative Documents, and the issuance and sale of the Offered Securities and compliance with the terms and provisions thereof, will not result in a breach or violation of any of the terms and provisions of, or constitute a default under (i) any statute, any rule, regulation or order of any governmental agency or body or any court, domestic or foreign, having jurisdiction over the Company or any of its subsidiaries or any of their properties, (ii) any agreement or instrument to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries is bound or to which any of the properties of the Company or any of its subsidiaries is subject, or (iii) the charter or by-laws of the Company or any of its subsidiaries, except in the case of (i) and (ii), for such breaches, violations or defaults as could not reasonably be expected to have a Material Adverse Effect. (m) Except as disclosed in the General Disclosure Package, the Company and its subsidiaries possess adequate certificates, authorities or permits issued by appropriate governmental agencies or bodies necessary to conduct the business now operated by them and have not received any notice of proceedings relating to the revocation or modification of any such certificate, authority or permit that, if determined adversely to the Company or its subsidiaries, could individually or in the aggregate reasonably be expected to have a Material Adverse Effect. (n) Except as disclosed in the General Disclosure Package, each of the Company and its subsidiaries is in compliance with all applicable statutes, regulations and orders of, and all applicable restrictions imposed by all governmental agencies, bodies or courts, except where the failure to comply could not reasonably be expected to have a Material Adverse Effect. (o) To the knowledge of the Company, no labor dispute with the employees of the Company and its subsidiaries, that could reasonably be expected to result in a Material Adverse Effect is imminent. (p) The Company and its subsidiaries own or possess on reasonable terms, adequate trademarks, trade names and other rights to patents, copyrights and other intellectual property (collectively, “intellectual property rights”) necessary to conduct the business now operated by them, or presently employed by them, and have not received any notice of infringement of or conflict with asserted rights of others with respect to any intellectual property rights that, if determined adversely to the Company or any of its subsidiaries, could reasonably be expected to, individually or in the aggregate, have a Material Adverse Effect. (q) Except as disclosed in the General Disclosure Package, neither the Company nor any of its subsidiaries is in violation of any statute, any rule, regulation, decision or order of any governmental agency or body or any court, domestic or foreign having jurisdiction over the Company or any of its subsidiaries or any of their respective properties, relating to the use, disposal or release of hazardous or toxic substances or relating to the protection or restoration of the environment or human exposure to hazardous or toxic substances (collectively, “environmental laws”), owns or operates any real property contaminated with any substance that is subject to any environmental laws, is liable for any off-site disposal or contamination pursuant to any environmental laws, or is subject to any claim relating to any environmental laws, which violation, contamination, liability or claim could reasonably be expected to, individually or in the aggregate, have a Material Adverse Effect; and the Company is not aware of any pending investigation which might lead to such a claim. -------------------------------------------------------------------------------- (r) Except as disclosed in the General Disclosure Package, there are no pending actions, suits or proceedings against or affecting the Company, any of its subsidiaries or their respective properties that, if determined adversely to the Company or its subsidiaries, could reasonably be expected to, individually or in the aggregate, have a Material Adverse Effect, or would materially and adversely affect the ability of the Company to perform its obligations under the Operative Documents; and except as disclosed in the General Disclosure Package no such actions, suits or proceedings are, to the Company’s knowledge, threatened or contemplated. (s) The financial statements of the Company included or incorporated by reference in the General Disclosure Package present fairly the financial position of the Company and its consolidated subsidiaries as of the dates shown and their results of operations and cash flows for the periods shown, and such financial statements have been prepared in conformity with the generally accepted accounting principles in the United States applied on a consistent basis; and the assumptions used in preparing the pro forma financial statements of the Company included or incorporated by reference in the General Disclosure Package provide a reasonable basis for presenting the significant effects directly attributable to the transactions or events described therein, the related pro forma adjustments give appropriate effect to those assumptions, and the pro forma columns therein reflect the proper application of those adjustments to the corresponding historical financial statement amounts. The Company has prepared restated consolidated balance sheets as of December 31, 2004, 2003, 2002 and 2001, and a restated consolidated statement of changes in stockholders’ equity for each of the four years in the period ended December 31, 2004. PricewaterhouseCoopers LLP has audited the Company’s restated consolidated balance sheet as of December 31, 2004 and the restated consolidated statement of changes in stockholders’ equity for each of the two years in the period ended December 31, 2004 (collectively, the “Audited Restated Financial Statements”). The Company’s restated consolidated balance sheets and restated consolidated statements of changes in stockholders’ equity for periods prior to those included in the Audited Restated Financial Statements (collectively, the “Unaudited Restated Financial Statements”) were prepared by the Company on a basis consistent with the Audited Restated Financial Statements, and the selected financial data set forth under the captions “Summary Historical and Unaudited Pro Forma Condensed Consolidated Financial Data” and “Selected Financial Data” and other financial information derived from the Unaudited Restated Financial Statements that is included or incorporated by reference in the General Disclosure Package fairly present the information included therein. (t) Except as disclosed in the General Disclosure Package, since the date as of which the information is given in the General Disclosure Package, there has been no material adverse change, nor any development or event involving a prospective material adverse change, in the condition (financial or other), business, properties, results of operations or, to the knowledge of the Company, prospects of the Company and its subsidiaries, taken as a whole and, except as disclosed in or contemplated by the General Disclosure Package, there has been no dividend or distribution of any kind declared, paid or made by Company on any class of its capital stock. (u) The Company is subject to the reporting requirements of either Section 13 or Section 15(d) of the Exchange Act and files reports with the Commission on the Electronic Data Gathering, Analysis, and Retrieval (EDGAR) system. (v) The Company is not an open-end investment company, unit investment trust or face-amount certificate company that is or is required to be registered under Section 8 of the United States Investment Company Act of 1940 (the “Investment Company Act”); and the Company is not and, after giving effect to the offering and sale of the Offered Securities and the application of the proceeds thereof as described in the General Disclosure Package, will not be an “investment company” as defined in the Investment Company Act. (w) The Company has established and maintains disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act), which (i) are designed to ensure that material information relating to the Company and its consolidated subsidiaries is made known to the principal executive officer and its principal financial officer by others within those entities, particularly during the periods in which the periodic reports required under the Exchange Act are being prepared; (ii) have been evaluated for effectiveness as of a date within 90 days prior to the date of the Company’s Annual Report (as defined below); and (iii) except as disclosed in the General Disclosure Package, are effective in all material respects to perform the functions for which they were established. -------------------------------------------------------------------------------- (x) Based on the most recent evaluation of its disclosure controls and procedures, the Company is not aware of (i) any significant deficiency in the design or operation of internal controls which could adversely affect the ability of the Company to record, process, summarize and report financial data or any material weaknesses in internal controls, other than the material weakness relating to tax accounting and reconciliation controls and processes disclosed in the General Disclosure Package; or (ii) any fraud, whether or not material, that involves management or other employees who have a significant role in internal controls. (y) Since the date of the most recent evaluation of such disclosure controls and procedures, there have been no significant changes in internal controls or in other factors that could significantly affect internal controls, including any corrective actions with regard to significant deficiencies and material weaknesses, except as disclosed in the General Disclosure Package. (z) PricewaterhouseCoopers LLP who have certified certain financial statements of the Company and its subsidiaries are independent public accountants with respect to the Company as required by the Securities Act and the rules and regulations of the Commission thereunder. (aa) Except as set forth in the General Disclosure Package, neither the Company nor any of its subsidiaries is (i) subject to regulation under the Federal Power Act, as amended (“FPA”), other than as a power marketer or an “exempt wholesale generator” (“EWG”) with market-based rate authority, or as a “qualifying facility” (“QF”) under the Public Utility Regulatory Policies Act of 1978, as amended (16 U.S.C. Section 796 et seq.) (“PURPA”), as contemplated by 18 C.F.R. Section 292.601(c), or (ii) with respect to each of the power generation projects in which any of the Company or its subsidiaries has an interest that is a QF, subject to any state law or regulation with respect to rates or the financial or organizational regulation of electric utilities, other than as contemplated by 18 C.F.R. Section 292.602(c). (bb) Each of the Company’s subsidiaries providing retail electric service in the states of California and Texas is authorized under applicable statutes and administrative rules to sell electricity on a retail basis, and such authority is not subject to any pending challenge, investigation, or proceeding. In Illinois, the Company’s subsidiary is in compliance with all laws and administrative rules with respect to providing retail electric service in that state and is in the process of making a revised filing attesting to such compliance based on changed circumstances None of the Company’s subsidiaries providing retail electric service is subject to any rate cap or mitigation measure other than rate caps and mitigation measures generally applicable to similarly situated retail service providers selling in the geographic market where such subsidiary conducts its business. (cc) Except as disclosed in the General Disclosure Package, each of the power generation projects certified as a QF under PURPA in which the Company or its subsidiaries has an interest meets the requirements for certification as a QF as set out in PURPA and the regulations of the Federal Energy Regulatory Commission (“FERC”) promulgated thereunder, as amended from time to time. (dd) Each of the Company and its subsidiaries that sells power at market-based rates outside of the Electric Reliability Council of Texas, Inc. (“ERCOT”) has a validly-issued order from the FERC authorizing it to engage in wholesale sales of electricity, ancillary services in certain markets and, to the extent permitted under its market-based rate tariff, other products and services at market-based rates. The FERC has not issued any orders limiting the ability of each such entity to engage in the wholesale sales of electricity at market-based prices, and had not imposed any rate caps or mitigation measures other than rate caps and mitigation measures generally applicable to similarly situated marketers or generators selling electricity, ancillary services or other products at wholesale in the geographic market where each such entity conducts its business. (ee) Each of the Company’s subsidiaries participating in the ERCOT wholesale electric market has registered with the Public Utilities Commission of Texas (“PUCT”) as a power -------------------------------------------------------------------------------- generation company, and has authority to sell power at wholesale at a market-based rate that is not subject to any rate cap or mitigation measure other than those generally applicable to similarly situated marketers or generators selling electricity in the ERCOT wholesale electric market. (ff) There are no pending complaints filed with the FERC seeking abrogation or modification of a contract for the sale of power by the Company or any of its subsidiaries. (gg) No securities of the same class (within the meaning of Rule 144A(d)(3) under the Securities Act) as the Offered Securities are listed on any national securities exchange registered under Section 6 of the Exchange Act or quoted in a U.S. automated inter-dealer quotation system. (hh) The offer and sale of the Offered Securities by the Company to the several Purchasers in the manner contemplated by this Agreement (assuming that the representations and warranties in Section 4 of this Agreement are true and correct and the Purchasers comply with the offer and sale procedures set forth in this Agreement) will be exempt from the registration requirements of the Securities Act by reason of Section 4(2) thereof, and Regulation D and Regulation S thereunder. (ii) Neither the Company nor any of its affiliates, nor any person acting on its or their behalf (it being understood that no representation is made with respect to any Purchaser or any Purchaser’s affiliates or any of their representatives) (i) has, within the six-month period prior to the date hereof, offered or sold in the United States or to any U.S. person (as such terms are defined in Regulation S under the Securities Act) the Offered Securities or any security of the same class or series as the Offered Securities or (ii) has offered or will offer or sell the Offered Securities (A) in the United States by means of any form of general solicitation or general advertising within the meaning of Rule 502(c) under the Securities Act or (B) with respect to any such securities sold in reliance on Rule 903 of Regulation S under the Securities Act, by means of any directed selling efforts within the meaning of Rule 902(c) of Regulation S. The Company, its respective affiliates and any person acting on its or their behalf (it being understood that no representation is made with respect to any Purchaser or any Purchaser’s affiliates or any of their representatives) have complied and will comply with the offering restrictions requirement of Regulation S and the sale of the Offered Securities pursuant to Regulation S is not part of a plan or scheme to evade the registration provisions of the Securities Act. The Company has not entered and will not enter into any contractual arrangement with respect to the distribution of the Offered Securities except for this Agreement. (jj) Except as disclosed in the General Disclosure Package, there are no contracts, agreements or understandings between the Company and any person granting such person the right to require the Company to file a registration statement under the Securities Act with respect to any securities of the Company or to require the Company to include such securities with the Offered Securities registered pursuant to any registration statement. (kk) Neither the Company nor any of its subsidiaries nor any agent thereof acting on the behalf of them has taken, and none of them will take, any action that might cause this Agreement or the issuance or sale of the Offered Securities to violate Regulation T, Regulation U or Regulation X of the Board of Governors of the Federal Reserve System. (ll) The Company and each of its subsidiaries carry, or are covered by, insurance in such amounts and covering such risks as is adequate for the conduct of their respective businesses and the value of their respective properties and as is customary for companies engaged in similar businesses in similar industries. (mm) No “nationally recognized statistical rating organization” as such term is defined for purposes of Rule 436(g)(2) under the Securities Act (i) has imposed (or has informed the Company that it is considering imposing) any condition (financial or otherwise) on the Company’s retaining any rating assigned to the Company or any securities of the Company or (ii) has indicated to the Company that it is considering (a) the downgrading, suspension, or withdrawal of, or any review for a possible change that does not indicate the direction of the possible change in, any rating so assigned or (b) any change in the outlook for any rating of the Company or any securities of the Company. -------------------------------------------------------------------------------- (nn) Except for such matters as could not reasonably be expected to have a Material Adverse Effect, the Company is in compliance with all presently applicable provisions of ERISA; no “reportable event” (as defined in ERISA), has occurred with respect to any “pension plan” (as defined in ERISA), for which the Company would have any liability; the Company has not incurred and does not expect to incur liability under (i) Title IV of ERISA with respect to termination of, or withdrawal from, any “pension plan” or (ii) Sections 412 or 4971 of the Internal Revenue Code of 1986, as amended, including the regulations and published interpretations thereunder (the “Code”); and each “pension plan” for which the Company would have any liability that is intended to be qualified under Section 401(a) of the Code is so qualified in all material respects and nothing has occurred, whether by action or by failure to act, which would cause the loss of such qualification. (oo) The Company has filed all material federal, state and local income and franchise tax returns required to be filed through the date hereof and has paid all taxes due thereon, and no tax deficiency except where the same may be contested in good faith by appropriate proceedings, and no tax deficiency has been determined adversely to the Company or any of its subsidiaries which has had (nor does the Company has any knowledge of any tax deficiency in writing which, if determined adversely to the Company or any of its subsidiaries, could reasonably be expected to have) a Material Adverse Effect. (pp) Prior to the date hereof, neither the Company nor any of its affiliates has taken any action which is designed to or which has constituted or which might have been expected to cause or result in stabilization or manipulation of the price of any security of the Company in connection with the offering of the Offered Securities. (qq) The General Disclosure Package contains all the information specified in, and meeting the requirements of, Rule 144A(d)(4) under the Securities Act. (rr) The statements set forth in the Preliminary and the Final Offering Circular under the caption “Description of Notes,” insofar as they purport to constitute a summary of the terms of the Offered Securities, under the captions “Material U.S. Federal Income Tax Considerations,” “Description of Certain Indebtedness” and “Plan of Distribution,” insofar as they purport to describe the provisions of the laws and documents referred to therein, are accurate and fair summaries in all material respects. 3. Purchase, Sale and Delivery of Offered Securities. On the basis of the representations, warranties and agreements herein contained, but subject to the terms and conditions herein set forth, the Company agrees to sell to the Purchasers, and the Purchasers agree, severally and not jointly, to purchase from the Company, at a purchase price of 98% of the principal amount thereof plus accrued interest from April 12, 2006 to the Closing Date (as hereinafter defined), the respective principal amounts of Offered Securities set forth opposite the names of the several Purchasers in Schedule A hereto. The Company will deliver against payment of the purchase price the Offered Securities in the form of one or more permanent global securities in definitive form (the “Global Securities”) deposited with the Trustee as custodian for The Depository Trust Company (“DTC”) and registered in the name of Cede & Co., as nominee for DTC. Interests in any permanent global securities will be held only in book-entry form through DTC, except in the limited circumstances described in the Final Offering Circular. Payment for the Offered Securities shall be made by the Purchasers in Federal (same day) funds by wire transfer to an account at a bank acceptable to Credit Suisse, on April 12, 2006, or at such other time not later than seven full business days thereafter as Credit Suisse and the Company determine, such time being herein referred to as the “Closing Date”, against delivery to the Trustee as custodian for DTC of the Global Securities representing all of the Offered Securities. The Global Securities will be made available for inspection at the office of Cravath, Swaine & Moore LLP at least 24 hours prior to the Closing Date. 4. Representations by Purchasers; Resale by Purchasers. (a) Each Purchaser severally represents and warrants to the Company that it is an “accredited investor” within the meaning of Regulation D under the Securities Act. (b) Each Purchaser severally acknowledges that the Offered Securities have not been registered under the Securities Act and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons except in accordance with Regulation S or pursuant to an exemption from the registration requirements of the Securities Act. Each Purchaser severally represents and agrees that it has -------------------------------------------------------------------------------- offered and sold the Offered Securities and will offer and sell the Offered Securities (i) as part of their distribution at any time and (ii) otherwise until 40 days after the later of the commencement of the offering and the Closing Date, only in accordance with Rule 144A (“Rule 144A”) or Rule 903 under the Securities Act. Accordingly, neither such Purchaser nor its affiliates, nor any persons acting on its or their behalf, have engaged or will engage in any directed selling efforts with respect to the Offered Securities, and such Purchaser, its affiliates and all persons acting on its or their behalf have complied and will comply with the offering restrictions requirement of Regulation S. Each Purchaser severally agrees that, at or prior to confirmation of sale of the Offered Securities, other than a sale pursuant to Rule 144A, such Purchaser will have sent to each distributor, dealer or person receiving a selling concession, fee or other remuneration that purchases the Offered Securities from it during the restricted period a confirmation or notice to substantially the following effect: “The Securities covered hereby have not been registered under the U.S. Securities Act of 1933 (the “Securities Act”) and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons (i) as part of their distribution at any time or (ii) otherwise until 40 days after the later of the date of the commencement of the offering and the closing date, except in either case in accordance with Regulation S (or Rule 144A if available) under the Securities Act. Terms used above have the meanings given to them by Regulation S.” Terms used in this subsection (b) have the meanings given to them by Regulation S. (c) Each Purchaser severally agrees that it and each of its affiliates has not entered and will not enter into any contractual arrangement with respect to the distribution of the Offered Securities except for any such arrangements with the other Purchasers or affiliates of the other Purchasers or with the prior written consent of the Company. (d) Each Purchaser severally agrees that it and each of its affiliates will not offer or sell the Offered Securities by means of any form of general solicitation or general advertising, within the meaning of Rule 502(c) under the Securities Act, including, but not limited to (i) any advertisement, article, notice or other communication published in any newspaper, magazine or similar media or broadcast over television or radio, or (ii) any seminar or meeting whose attendees have been invited by any general solicitation or general advertising. Each Purchaser severally agrees, with respect to resales made in reliance on Rule 144A of any of the Offered Securities, to deliver either with the confirmation of such resale or otherwise prior to settlement of such resale a notice to the effect that the resale of such Offered Securities has been made in reliance upon the exemption from the registration requirements of the Securities Act provided by Rule 144A. (e) Each of the Purchasers severally represents and agrees that (i) it has only communicated or caused to be communicated and will only communicate or cause to be communicated any invitation or inducement to engage in investment activity (within the meaning of section 21 of the Financial Services and Markets Act 2000 (the “FSMA”)) received by it in connection with the issue or sale of any Offered Securities in circumstances in which section 21(1) of the FSMA does not apply to the Company; and (ii) it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the Offered Securities in, from or otherwise involving the United Kingdom 5. Certain Agreements of the Company. The Company agrees with the several Purchasers that: (a) The Company will advise Credit Suisse promptly of any proposal to amend or supplement the Preliminary or Final Offering Circular and will not effect such amendment or supplementation without Credit Suisse’s consent (which consent shall not be unreasonably withheld or delayed). If, at any time prior to the completion of the resale of the Offered Securities by the Purchasers, there occurs an event or development as a result of which any document included in the Preliminary or Final Offering Circular, the General Disclosure Package or any Supplemental Marketing Material included or would include an untrue statement of a material fact or omitted or would omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances prevailing at such time, not misleading, the Company promptly will notify Credit Suisse of such event and promptly will prepare, at its own expense, an amendment or supplement which will correct such statement or omission. Neither Credit Suisse’s consent to, nor the Purchasers’ delivery to offerees or investors of, any such amendment or supplement shall constitute a waiver of any of the conditions set forth in Section 6. -------------------------------------------------------------------------------- (b) The Company will furnish to Credit Suisse copies of the Preliminary Offering Circular, each other document comprising a part of the General Disclosure Package, the Final Offering Circular, all amendments and supplements to such documents and each item of Supplemental Marketing Material, in each case as soon as available and in such quantities as Credit Suisse reasonably requests. At any time when the Company is not subject to Section 13 or 15(d) of the Exchange Act, and any Offered Securities remain “restricted securities” within the meaning of the Securities Act, the Company will promptly furnish or cause to be furnished to Credit Suisse (and, upon request, to each of the other Purchasers) and, upon request of holders and prospective purchasers of the Offered Securities, to such holders and purchasers, copies of the information required to be delivered to holders and prospective purchasers of the Offered Securities pursuant to Rule 144A(d)(4) under the Securities Act (or any successor provision thereto) in order to permit compliance with Rule 144A in connection with resales by such holders of the Offered Securities. The Company will pay the expenses of printing and distributing to the Purchasers all such documents. (c) The Company will use all commercially reasonable efforts to obtain the qualification of the Offered Securities for sale and the determination of their eligibility for investment under the laws of such jurisdictions in the United States and Canada as Credit Suisse designates and will continue such qualifications in effect so long as required for the resale of the Offered Securities by the Purchasers, provided that the Company will not be required to qualify as a foreign corporation or to file a general consent to service of process in any such state. (d) During the period of two years after the Closing Date, the Company will, upon request, furnish to Credit Suisse, each of the other Purchasers and any holder of Offered Securities a copy of the restrictions on transfer applicable to the Offered Securities. (e) During the period of five years hereafter, unless such documents are available electronically via the EDGAR system maintained by the Commission, the Company will furnish to Credit Suisse and, upon request, to each of the other Purchasers, as soon as practicable after the end of each fiscal year, a copy of its annual report to stockholders for such year; and the Company will furnish to Credit Suisse and, upon reasonable request, to each of the other Purchasers (i) as soon as available, a copy of each report and any definitive proxy statement of the Company mailed to stockholders, and (ii) the information required to be provided to the Trustee for the Offered Securities pursuant to the Indenture. (f) Subject to the Purchasers’ compliance with its representations and warranties and agreements set forth in Section 4 hereof, the Company consents to the use of the Preliminary Offering Circular, any other documents comprising any part of the General Disclosure Package, the Final Offering Circular and any amendments and supplements thereto required pursuant to Section 5(a) hereto, by the Purchasers. (g) During the period of two years after the Closing Date, the Company will not, and will not permit any of its affiliates (as defined in Rule 144 under the Securities Act) to, resell any of the Offered Securities that have been reacquired by any of them, unless such Offered Securities are resold in a transaction registered under the Securities Act. (h) During the period of two years after the Closing Date, the Company will not be or become, an open-end investment company, unit investment trust or face-amount certificate company that is or is required to be registered under Section 8 of the Investment Company Act. (i) The Company agrees to pay all expenses incidental to the performance of its obligations under the Operative Documents including (i) the fees and expenses of the Trustee and their respective professional advisers, (ii) all expenses in connection with the execution, issue, authentication, packaging and initial delivery of the Offered Securities and, as applicable, the Exchange Securities (as defined in the Registration Rights Agreement), the preparation and printing of the Preliminary Offering Circular, any other documents comprising any part of the General Disclosure Package, the Final Offering Circular, all amendments and supplements thereto, each item of Supplemental Marketing Material and any other document relating to the issuance, offer, -------------------------------------------------------------------------------- sale and delivery of the Offered Securities and as applicable the Exchange Securities, (iii) the cost of qualifying the Offered Securities for trading in The PortalSM Market (“PORTAL”) of The Nasdaq Stock Market, Inc. and any expenses incidental thereto, (iv) for any expenses (including fees and disbursements of counsel) incurred in connection with qualification of the Offered Securities or the Exchange Securities for sale under the state securities laws as provided in Section 5(c) and the printing of memoranda relating thereto, (v) for any fees charged by investment rating agencies for the rating of the Offered Securities or the Exchange Securities, and (vi) for expenses incurred in distributing the Preliminary Offering Circular, any other documents comprising any part of the General Disclosure Package, the Final Offering Circular (including any amendments and supplements thereto) and any Supplemental Marketing Material to the Purchasers. (j) In connection with the offering, until Credit Suisse shall have notified the Company and the other Purchasers, which notice shall be promptly provided upon the written request of the Company, of the completion of the resale of the Offered Securities, neither the Company nor any of its affiliates has or will, either alone or with one or more other persons, bid for or purchase for any account in which it or any of its affiliates has a beneficial interest any Offered Securities or attempt to induce any person to purchase any Offered Securities; and neither it nor any of its affiliates will make bids or purchases for the purpose of creating actual, or apparent, active trading in, or of raising the price of, the Offered Securities. (k) The Company will apply the net proceeds from the sale of the Offered Securities to be sold by it hereunder substantially in accordance with the description set forth in the Final Offering Circular under the caption “Use of Proceeds.” (l) Except as stated in this Agreement, the General Disclosure Package or the Final Offering Circular, neither the Company nor any of its affiliates have taken, nor will any of them take, directly or indirectly, any action designed to or that might reasonably be expected to cause or result in stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Offered Securities. (m) The Company will use its best efforts to permit the Offered Securities to be designated PORTAL securities in accordance with the rules and regulations adopted by the National Association of Securities Dealers, Inc. relating to trading in PORTAL and to permit the Offered Securities to be eligible for clearance and settlement through DTC. (n) The Company agrees not to sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined in the Securities Act), that would be integrated with the sale of the Offered Securities in a manner that would require the registration under the Securities Act of the sale to the Purchasers or the resale of the Offered Securities. (o) The Company agrees to comply with all the terms and conditions of the Operative Documents and all agreements set forth in the representation letter of the Company to DTC relating to the approval of the Offered Securities by DTC for “book entry” transfer. (p) The Company will do and perform all things required or necessary to be done and performed under this Agreement by them prior to the Closing Date, and to satisfy all conditions precedent to the Purchasers’ obligations hereunder to purchase the Offered Securities. (q) In connection with the sale of the Offered Securities to the Purchasers, the Company will file the notice on Form D required by Rule 503 under the Securities Act within the time required by such Rule and otherwise in compliance with such Rule. A copy of such notice shall be furnished promptly to Credit Suisse. 6. Free Writing Communications. (a) The Company represents and agrees that, unless it obtains the prior consent of Credit Suisse, and each Purchaser represents and agrees that, unless it obtains the prior consent of the Company and Credit Suisse, it has not made and will not make any offer relating to the Offered Securities that would constitute an Issuer Free Writing Communication. (b) The Company consents to the use by any Purchaser of a Free Writing Communication that (i) contains only (A) information describing the preliminary terms of the Offered -------------------------------------------------------------------------------- Securities or their offering or (B) information that describes the final terms of the Offered Securities or their offering and that is included in the Terms Communication or is included in or is subsequently included in the Final Offering Circular or (ii) does not contain any material information about the Company or its securities that was provided by or on behalf of the Company, it being understood and agreed that any such Free Writing Communication referred to in clause (i) or (ii) shall not be an Issuer Free Writing Communication for purposes of this Agreement. 7. Conditions of the Obligations of the Purchasers. The obligations of the several Purchasers to purchase and pay for the Offered Securities will be subject to the accuracy of the representations and warranties on the part of the Company herein as of the date hereof and on the Closing Date, to the accuracy of the statements of officers of the Company made pursuant to the provisions hereof, to the performance by the Company of its obligations hereunder and to the following additional conditions precedent: (a) The Purchasers shall have received a letter, dated the date of this Agreement, of PricewaterhouseCoopers LLP, independent public accountants of the Company, substantially in the form attached hereto as Annex A, confirming that they are independent public accountants within the meaning of the Securities Act and the applicable published rules and regulations thereunder. Such letter shall be in form and substance reasonably satisfactory to the Purchasers as agreed as of the date hereof and shall cover the matters ordinarily covered by accountants’ “comfort letters” to initial purchasers in connection with offerings similar to the offering of the Offered Securities. (b) Subsequent to the execution and delivery of this Agreement, there shall not have occurred (i) any change, or any development or event involving a prospective change, in the condition (financial or other), business, properties or results of operations of the Company and its subsidiaries taken as a whole which, in the judgment of a majority in interest of the Purchasers, including Credit Suisse, is material and adverse and makes it impractical or inadvisable to proceed with completion of the offering or the sale of and payment for the Offered Securities; (ii) any downgrading in the rating of any debt securities of the Company by any “nationally recognized statistical rating organization” (as defined for purposes of Rule 436(g) under the Securities Act), or any public announcement that any such organization has under surveillance or review its rating of any debt securities of the Company (other than an announcement with positive implications of a possible upgrading, and no implication of a possible downgrading, of such rating) or any announcement that the Company has been placed on negative outlook as of or after the date of this Agreement; (iii) any change in U.S. or international financial, political or economic conditions or currency exchange rates or exchange controls as would, in the judgment of a majority in interest of the Purchasers, including Credit Suisse, be likely to prejudice materially the success of the proposed issue, sale or distribution of the Offered Securities, whether in the primary market or in respect of dealings in the secondary market; (iv) any material suspension or material limitation of trading in securities generally on the New York Stock Exchange or any setting of minimum prices for trading on such exchange, or any suspension of trading of any securities of the Company on any exchange or in the over-the-counter market; (v) any general banking moratorium declared by U.S. Federal or New York authorities; (vi) any major disruption of settlements of securities or clearance services in the United States; or (vii) any attack on, outbreak or escalation of hostilities or act of terrorism involving the United States, any declaration of war by Congress or any other national or international calamity or emergency if, in the judgment of a majority in interest of the Purchasers including Credit Suisse, the effect of any such attack, outbreak, escalation, act, declaration, calamity or emergency makes it impractical or inadvisable to proceed with completion of the offering or sale of and delivery and payment for the Offered Securities. (c) The Purchasers shall have received an opinion, dated the Closing Date, of Akin Gump Strauss Hauer & Feld LLP, counsel for the Company, that: (i) The Company is validly existing as a corporation in good standing under the laws of the State of Delaware, has the corporate power and authority under the Delaware General Corporate Law and its certificate of incorporation and bylaws to own its properties and conduct its business as described in the General Disclosure Package; -------------------------------------------------------------------------------- (ii) Each subsidiary of the Company listed in an annex to this opinion is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation; (iii) The Company has the corporate power and authority to (i) enter into the Operative Documents and the Exchange Securities (collectively, the “Transaction Documents”) and (ii) authorize, issue and sell the Offered Securities, as contemplated by this Agreement; (iv) The Offered Securities when duly authenticated in accordance with the terms of the Indenture and duly paid for by and delivered to the Purchasers in accordance with the terms of the Purchase Agreement will constitute valid and binding obligations of the Company entitled to the benefits of the Indenture and will be enforceable against the Company in accordance with their terms. The Offered Securities conform in all material respects to the description thereof in the General Disclosure Package and the Final Offering Circular; (v) The Exchange Securities, when duly executed, authenticated, issued and delivered as provided in the Indenture and the Registration Rights Agreement, will constitute valid and binding obligations of the Company, enforceable against the Company in accordance with their terms. (vi) The Indenture is a valid and binding obligation of the Company, enforceable against the Company in accordance with its terms. The Indenture conforms in all material respects to the description thereof in the General Disclosure Package and the Final Offering Circular; (vii) The Indenture conforms in all material respects to the requirements of the TIA, and the rules and regulations of the Commission applicable to an indenture which is qualified thereunder; (viii) The Company is not and, after giving effect to the offering and sale of the Offered Securities and the application of the proceeds thereof as described in the General Disclosure Package and the Final Offering Circular, will not be an “investment company” as defined in the Investment Company Act; (ix) No FPA approval or authorization is required for the execution and delivery by the Company of the Operative Documents and the performance by the Company of the obligations thereunder; (x) No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body (each, a “Filing”) is required under any laws for the due execution and delivery of the Transaction Documents by the Company and the performance by the Company of its obligations thereunder, subject to the assumptions set forth in paragraph (xvi) and except (i) routine Filings necessary in connection with the conduct of the Company’s business, including routine Filings required to be made under the Exchange Act, (ii) such other Filings as have been obtained or made, (iii) Filings required under Federal and state securities laws as provided in the Registration Rights Agreement and (iv) Filings required to maintain corporate and similar standing and existence. (xi) The execution and delivery of the Transaction Documents by the Company do not, and the performance by the Company of their obligations thereunder will not, result in any violation of any order, writ, judgment or decree known to us. (xii) The execution and delivery of each Transaction Document by the Company does not, and the performance by the Company of its obligations thereunder will not, (a) violate the Certificate of Incorporation or By-Laws of the Company, (b) breach or result in a default of any currently existing agreement or instrument listed as an exhibit to the Exchange Act Documents, or (c) violate any law, rule or regulation. -------------------------------------------------------------------------------- (xiii) (a) The execution and delivery of each Transaction Document by the Company, and the performance by the Company of its obligations under the Transaction Documents, have been duly authorized by all necessary corporate action on the part of the Company and (b) each Transaction Document (other than the Exchange Securities) has been duly executed and delivered by the Company. (xiv) The Registration Rights Agreement is a valid and binding obligation of the Company, enforceable against the Company in accordance with its terms. (xv) The statements contained in the Preliminary and the Final Offering Circular under the captions (a) “Description of Notes,” insofar as such statements purport to constitute a summary of the terms of the Indenture and the Offered Securities, (b) “Description of Certain Indebtedness and “Plan of Distribution”, insofar as such statements purport to constitute a summary of the documents referred to therein, and (c) “Material U.S. Federal Income Tax Considerations” insofar as such statements purport to constitute a summary of the United States federal tax laws referred to therein, in each case, are accurate and fairly summarize in all material respects the matters referred to therein; and (xvi) Assuming without independent investigation, (a) that the Offered Securities are sold to the Purchasers, and initially resold by the Purchasers, in accordance with the terms of and in the manner contemplated by, the Purchase Agreement and the Final Offering Circular; (b) the accuracy of the representations and warranties of the Company set forth in the Purchase Agreement and in those certain certificates delivered at the closing; (c) the accuracy of the representations and warranties of the Purchasers set forth in the Purchase Agreement; (d) the due performance and compliance by the Company and the Purchasers of their respective covenants and agreements set forth in the Purchase Agreement; and (e) the Purchasers’ compliance with the Final Offering Circular and the transfer procedures and restrictions described therein, it is not necessary to register the Offered Securities under the Securities Act or to qualify an indenture in respect thereof under the TIA in connection with the issuance and sale of the Offered Securities by the Company to the Purchasers or in connection with the offer, resale and delivery of the Offered Securities by the Purchasers in the manner contemplated by the Purchase Agreement and the Final Offering Circular, it being expressly understood that such counsel expresses no opinion in this paragraph (xvi) or paragraph (x) as to any subsequent offer or resale of any of the Offered Securities. Such counsel shall also state that it has no reason to believe that the Final Offering Circular, or any amendment or supplement thereto, as of its date and as of the Closing Date, contained any untrue statement of a material fact or omitted to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; such counsel has no reason to believe that the documents specified in a schedule to such counsel’s letter, consisting of those included in the General Disclosure Package, as of the Applicable Time and as of the Closing Date, contained any untrue statement of a material fact, or omitted to state any material fact, necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading; it being understood that such counsel need express no opinion as to the financial statements or other financial data or statistical data (including statistical data related to capacity and other matters with respect to various power plants) contained in the General Disclosure Package or the Final Offering Circular. (d) The Purchasers shall have received an opinion, dated the Closing Date, of J. Kevin Blodgett, General Counsel and Executive Vice President, Administration, of Dynegy Inc., that: (i) As of the Closing Date, the Company has an authorized equity capitalization as set forth in the General Disclosure Package and the Final Offering Circular, and all of the issued shares of capital stock of the Company have been duly and validly authorized and issued and are fully paid and non-assessable; and except as set forth in the General Disclosure Package and the Final Offering Circular, the capital stock of each subsidiary owned by the Company, directly or through subsidiaries, to his knowledge is owned free from liens, encumbrances and material defects other than liens under the Credit Facility; -------------------------------------------------------------------------------- (ii) Except as set forth in the General Disclosure Package and the Final Offering Circular, there are no contracts, agreements or understandings between the Company and any person granting such person the right to require the Company to file a registration statement under the Securities Act with respect to any securities of the Company or to require the Company to include such securities with the Offered Securities registered pursuant to any registration statement; and (iii) To such counsel’s knowledge, and other than as set forth in the General Disclosure Package and the Final Offering Circular, there are no pending actions, suits or proceedings against or affecting the Company or its subsidiaries or any of their respective properties that, if determined adversely to the Company or any of its subsidiaries, would individually or in the aggregate have a Material Adverse Effect, or would materially and adversely affect the ability of the Company to perform its obligations under the Operative Documents, or which are otherwise material in the context of the sale of the Offered Securities; and no such actions, suits or proceedings are, to such counsel’s knowledge, threatened or contemplated; and such counsel shall also state that he has no reason to believe that the Final Offering Circular, or any amendment or supplement thereto, as of the date hereof and as of the Closing Date, contained any untrue statement of a material fact or omitted to state any material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading; such counsel has no reason to believe that the documents specified in a schedule to such counsel’s letter, consisting of those included in the General Disclosure Package, as of the Applicable Time and as of the Closing Date, contained any untrue statement of a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; it being understood that such counsel need express no opinion as to the financial statements or other financial data or any statistical data (including statistical data related to capacity and other matters with respect to various power plants) contained in the General Disclosure Package or the Final Offering Circular. (e) The Purchasers shall have received from Cravath, Swaine & Moore LLP, counsel for the Purchasers, such opinion or opinions, dated the Closing Date, with respect to the incorporation of the Company, the validity of the Offered Securities, the Final Offering Circular, the General Disclosure Package, the exemption from registration for the offer and sale of the Offered Securities by the Company to the several Purchasers and the resales by the several Purchasers as contemplated hereby and other related matters as Credit Suisse may require, and the Company shall have furnished to such counsel such documents as they request for the purpose of enabling them to pass upon such matters. (f) The Purchasers shall have received a certificate, dated the Closing Date, of the President or any Vice President and a principal financial or accounting officer of the Company in which such officers, to the best of their knowledge after reasonable investigation, shall state that the representations and warranties of the Company in this Agreement are true and correct, that the Company has complied with all agreements and satisfied all conditions on its part to be performed or satisfied hereunder at or prior to the Closing Date, and that, subsequent to the date of the most recent financial statements in the General Disclosure Package there has been no material adverse change, nor any development or event that reasonably could be expected to result in a prospective material adverse change, in the condition (financial or other), business, properties, results of operations or prospects of the Company or any of its subsidiaries except as set forth in the General Disclosure Package. (g) The Purchasers shall have received a letter, dated the Closing Date, of PricewaterhouseCoopers LLP which meets the requirements of subsection (a) of this Section, except that the specified date referred to in Annex A will be a date not more than three days prior to the Closing Date for the purposes of this subsection. (h) As of the Closing Date, the representations and warranties contained in the Operative Documents will be true and correct in all material respects. (i) The Company shall have furnished or caused to be furnished to the Trustee on the Closing Date certificates of officers of the Company reasonably satisfactory to the Trustee as to the accuracy of the representations and warranties of the Company in the Operative Documents at and as of such Closing Date and as to such other matters as the Trustee may reasonably request. -------------------------------------------------------------------------------- (j) On the Closing Date, each Operative Document will conform, as to legal matters, in all material respects to the description thereof contained in the General Disclosure Package and the Final Offering Circular. (k) On or prior to the Closing Date, the transactions contemplated by the Company’s Offer to Purchase and Consent Solicitation Statement dated March 15, 2006 (the “SPN Tender Offer”) shall have been consummated on the terms set forth in the General Disclosure Package and the Final Offering Circular, including the satisfaction of the Requisite Consents Condition (as defined in the SPN Tender Offer), the execution of the Supplemental Indenture (as defined in the SPN Tender Offer) and the acceptance for purchase of all validly tendered notes in the SPN Tender Offer. (l) The Company will furnish the Purchasers with such conformed copies of such opinions, certificates, letters and documents as the Purchasers reasonably request. Credit Suisse may in its sole discretion waive on behalf of the Purchasers compliance with any conditions to the obligations of the Purchasers hereunder. 8. Indemnification and Contribution. (a) The Company will indemnify and hold harmless each Purchaser, its officers, partners, members, directors and its affiliates and each person, if any, who controls such Purchaser within the meaning of Section 15 of the Securities Act, against any losses, claims, damages or liabilities, joint or several, to which such Purchaser may become subject, under the Securities Act or the Exchange Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the Preliminary Offering Circular or the Final Offering Circular, in each case as amended or supplemented, or any Issuer Free Writing Communication or Supplemental Marketing Material or the Exchange Act Reports, or arise out of or are based upon the omission or alleged omission to state therein a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, including any losses, claims, damages or liabilities arising out of or based upon the Company’s failure to perform its obligations under Section 5(a) of this Agreement, and will reimburse each Purchaser for any legal or other expenses reasonably incurred by such Purchaser in connection with investigating or defending any such loss, claim, damage, liability or action as such expenses are incurred; provided, however, that the Company will not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement in or omission or alleged omission from any of such documents in reliance upon and in conformity with written information furnished to the Company by any Purchaser through Credit Suisse specifically for use therein, it being understood and agreed that the only such information consists of the information described as such in subsection (b) below. (b) Each Purchaser will severally and not jointly indemnify and hold harmless the Company, its directors and officers and each person, if any, who controls the Company within the meaning of Section 15 of the Securities Act, against any losses, claims, damages or liabilities to which the Company may become subject, under the Securities Act or the Exchange Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the Preliminary Offering Circular or the Final Offering Circular, in each case as amended or supplemented, or any Issuer Free Writing Communication or Supplemental Marketing Material or arise out of or are based upon the omission or the alleged omission to state therein a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Company by such Purchaser through Credit Suisse specifically for use therein, and will reimburse any legal or other expenses reasonably incurred by the Company in connection with investigating or defending any such loss, claim, damage, liability or action as such expenses are incurred, it being understood and agreed that the only such information furnished by any Purchaser consists of the information in the Preliminary and Final Offering Circular under the caption “Plan of Distribution” in paragraph three, fifteen and the third sentence of paragraph thirteen; provided however, that the Purchasers shall not be liable for any losses, claims, damages or liabilities arising out of or based upon the Company’s failure to perform its obligations under Section 5(a) of this Agreement. (c) Promptly after receipt by an indemnified party under this Section of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against the indemnifying -------------------------------------------------------------------------------- party under subsection (a) or (b) above, notify the indemnifying party of the commencement thereof; but the failure to notify the indemnifying party shall not relieve it from any liability that it may have under subsection (a) or (b) above except to the extent that it has been materially prejudiced (through the forfeiture of substantive rights or defenses) by such failure; and provided further that the failure to notify the indemnifying party shall not relieve it from any liability that it may have to an indemnified party otherwise than under subsection (a) or (b) above. In case any such action is brought against any indemnified party and it notifies the indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel satisfactory to such indemnified party (who shall not, except with the consent of the indemnified party, be counsel to the indemnifying party), and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party will not be liable to such indemnified party under this Section for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation. If the indemnifying party has assumed the defense in any such proceedings, any indemnified party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such indemnified party unless (i) the indemnifying party and the indemnified party shall have mutually agreed to the contrary; (ii) the indemnifying party has failed within a reasonable time to retain counsel reasonably satisfactory to the indemnified party; (iii) the indemnified party shall have reasonably concluded that there may be legal defenses available to it that are different from or in addition to those available to the indemnifying party; or (iv) the named parties in any such proceeding (including any impleaded parties) include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. It is understood and agreed that the indemnifying party shall not, in connection with any proceeding or related proceeding in the same jurisdiction, be liable for the fees and expenses of more than one separate firm (in addition to any local counsel) for all indemnified parties, and that all such fees and expenses shall be reimbursed as they are incurred. Any such separate firm for any Purchaser, its affiliates, directors and officers and any control persons of such Purchaser shall be designated in writing by Credit Suisse and any such separate firm for the Company and its directors and officers and any control persons of the Company shall be designated in writing by the Company. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened action in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party unless such settlement includes (i) an unconditional release of such indemnified party from all liability on any claims that are the subject matter of such action and (ii) does not include a statement as to or an admission of fault, culpability or failure to act by or on behalf of any indemnified party. (d) If the indemnification provided for in this Section is unavailable or insufficient to hold harmless an indemnified party under subsection (a) or (b) above, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of the losses, claims, damages or liabilities referred to in subsection (a) or (b) above (i) in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and the Purchasers on the other from the offering of the Offered Securities or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company on the one hand and the Purchasers on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and the Purchasers on the other shall be deemed to be in the same proportion as the total net proceeds from the offering (before deducting expenses) received by the Company bear to the total discounts and commissions received by the Purchasers from the Company under this Agreement. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or the Purchasers and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. The amount paid by an indemnified party as a result of the losses, claims, damages or liabilities referred to in the first sentence of this subsection (d) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any action or claim which is the subject of this subsection (d). Notwithstanding the provisions of this subsection (d), no Purchaser shall be required to contribute any amount in excess of the amount by which the total price at which the Offered Securities purchased by it were resold exceeds the amount of any damages which such Purchaser has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. The Purchasers’ obligations in this subsection (d) to contribute are several in proportion to their respective purchase obligations and not joint. -------------------------------------------------------------------------------- (e) The obligations of the Company under this Section shall be in addition to any liability which the Company may otherwise have and shall extend, upon the same terms and conditions, to each person, if any, who controls any Purchaser within the meaning of the Securities Act or the Exchange Act; and the obligations of the Purchasers under this Section shall be in addition to any liability which the respective Purchasers may otherwise have and shall extend, upon the same terms and conditions, to each person, if any, who controls the Company within the meaning of the Securities Act or the Exchange Act. 9. Default of Purchasers. If any Purchaser or Purchasers default in their obligations to purchase Offered Securities hereunder and the aggregate principal amount of the Offered Securities that such defaulting Purchaser or Purchasers agreed but failed to purchase does not exceed 10% of the total principal amount of the Offered Securities, Credit Suisse may make arrangements satisfactory to the Company for the purchase of such Offered Securities by other persons, including any of the Purchasers, but if no such arrangements are made by the Closing Date, the non-defaulting Purchasers shall be obligated severally, in proportion to their respective commitments hereunder, to purchase the Offered Securities that such defaulting Purchasers agreed but failed to purchase. If any Purchaser or Purchasers so default and the aggregate principal amount of the Offered Securities with respect to which such default or defaults occur exceeds 10% of the total principal amount of the Offered Securities and arrangements satisfactory to Credit Suisse and the Company for the purchase of such Offered Securities by other persons are not made within 36 hours after such default, this Agreement will terminate without liability on the part of any non-defaulting Purchaser or the Company, except as provided in Section 10. As used in this Agreement, the term “Purchaser” includes any person substituted for a Purchaser under this Section. Nothing herein will relieve a defaulting Purchaser from liability for its default. 10. Survival of Certain Representations and Obligations. The respective indemnities, agreements, representations, warranties and other statements of the Company or its officers and of the several Purchasers set forth in or made pursuant to this Agreement will remain in full force and effect, regardless of any investigation, or statement as to the results thereof, made by or on behalf of any Purchaser, the Company or any of their respective representatives, officers or directors or any controlling person, and will survive delivery of and payment for the Offered Securities. If this Agreement is terminated pursuant to Section 9 or if for any reason the purchase of the Offered Securities by the Purchasers is not consummated, the Company shall remain responsible for the expenses to be paid or reimbursed by it pursuant to Section 5 and the respective obligations of the Company and the Purchasers pursuant to Section 8 shall remain in effect. If the purchase of the Offered Securities by the Purchasers is not consummated for any reason other than solely because of the termination of this Agreement pursuant to Section 9 or the occurrence of any event specified in clause (iii), (iv), (v), (vi) or (viii) of Section 7(b), the Company will reimburse the Purchasers for all out-of-pocket expenses (including fees and disbursements of counsel) reasonably incurred by them in connection with the offering of the Offered Securities. 11. Notices. All communications hereunder will be in writing and, if sent to the Purchasers will be mailed, delivered, faxed or sent by courier and confirmed to the Purchasers, c/o Credit Suisse Securities (USA) LLC, Eleven Madison Avenue, New York, N.Y. 10010-3629, Attention: LCD-IBD, or, if sent to the Company, will be mailed, delivered or telegraphed and confirmed to it at 1000 Louisiana Street, Suite 5800, Houston, Texas 77002 Attention: General Counsel (Fax: 713-507-6808); provided, however, that any notice to a Purchaser pursuant to Section 8 will be mailed, delivered, faxed or sent by courier and confirmed to such Purchaser. 12. Successors. This Agreement will inure to the benefit of and be binding upon the parties hereto and their respective successors and the controlling persons referred to in Section 8, and no other person will have any right or obligation hereunder, except that holders of Offered Securities shall be entitled to enforce the agreements for their benefit contained in the second and third sentences of Section 5(b) hereof against the Company as if such holders were parties thereto. 13. Representation of Purchasers. Credit Suisse will act for the several Purchasers in connection with this purchase, and any action under this Agreement taken by Credit Suisse will be binding upon all the Purchasers. 14. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all such counterparts shall together constitute one and the same Agreement. 15. Absence of Fiduciary Relationship. The Company acknowledges and agrees that: (a) The Purchasers have been retained solely to act as initial purchasers in connection with the initial purchase, offering and resale of the Offered Securities and that no fiduciary, advisory or agency relationship between the Company and the Purchasers has been created in respect of any of the transactions contemplated by this Agreement or the Preliminary or Final Offering Circular, irrespective of whether the Purchasers have advised or are advising the Company on other matters; -------------------------------------------------------------------------------- (b) the purchase price of the Offered Securities set forth in this Agreement was established by the Company following discussions and arms-length negotiations with the Purchasers and the Company is capable of evaluating and understanding and understands and accepts the terms, risks and conditions of the transactions contemplated by this Agreement; (c) the Company has been advised that the Purchasers and their affiliates are engaged in a broad range of transactions which may involve interests that differ from those of the Company and that the Purchasers have no obligation to disclose such interests and transactions to the Company by virtue of any fiduciary, advisory or agency relationship; and (d) the Company waives, to the fullest extent permitted by law, any claims it may have against the Purchasers for breach of fiduciary duty or alleged breach of fiduciary duty and agrees that the Purchasers shall have no liability (whether direct or indirect) to the Company in respect of such a fiduciary duty claim or to any person asserting a fiduciary duty claim on behalf of or in right of the Company, including stockholders, employees or creditors of the Company. 16. Applicable Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York without regard to principles of conflicts of laws. The Company hereby submits to the non-exclusive jurisdiction of the Federal and state courts in the Borough of Manhattan in The City of New York in any suit or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby. -------------------------------------------------------------------------------- If the foregoing is in accordance with the Purchasers’ understanding of our agreement, kindly sign and return to the Company one of the counterparts hereof, whereupon it will become a binding agreement between the Company and the several Purchasers in accordance with its terms. Very truly yours,   DYNEGY HOLDINGS INC. By   /s/ Charles C. Cook Name:   Charles C. Cook Title:   Senior Vice President and Treasurer   The foregoing Purchase Agreement is hereby con-firmed and accepted as of the date first above written. Credit Suisse Securities (USA) LLC Citigroup Global Markets Inc., Banc of America Securities LLC J.P. Morgan Securities Inc.,     BY CREDIT SUISSE SECURITIES (USA) LLC   By   /s/ Mary Beth Mandanas   Name:   Mary Beth Mandanas   Title:   Director

FOURTH AMENDMENT TO INVESTMENT AGREEMENT ---------------------------------------- THIS FOURTH AMENDMENT TO INVESTMENT AGREEMENT (this "Amendment") is made this 17th day of February 2006 by and between Revlon, Inc., a Delaware corporation (the "COMPANY"), and MacAndrews & Forbes Holdings Inc. (formerly known as Mafco Holdings Inc.), a Delaware corporation (the "INVESTOR"). W I T N E S S E T H: ------------------- WHEREAS, the parties have entered into an Investment Agreement dated February 20, 2004 (as amended, the "Investment Agreement"); and WHEREAS, the parties have determined to further amend the Investment Agreement pursuant to Section 9.6 thereof, as provided herein. NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements contained in this Amendment, the parties hereto hereby agree as follows: Section 1. Definitions. Capitalized terms used herein and not defined herein shall have the meaning ascribed to such terms in the Investment Agreement. Section 2. Amendments. 2.1 Extension of Back-stop of Additional Offerings. Section 5A.1 of the Investment Agreement is amended by deleting the phrase "March 31, 2006" and substituting the phrase "June 30, 2006" in lieu thereof. Section 3. Miscellaneous. 3.1 Ratification of Investment Agreement. As modified hereby, the Investment Agreement and its terms and provisions are hereby ratified and confirmed for all purposes and in all respects. 3.2 Counterparts. This Amendment may be executed in two or more counterparts, which may be by facsimile, each of which will be deemed an original but all of which together will constitute one and the same instrument. All such counterparts will be deemed an original, will be construed together and will constitute one and the same instrument. 3.3 Headings. The headings in this Amendment are for reference purposes only and will not in any way affect the meaning or interpretation of this Amendment. 3.4 Governing Law. This Amendment will be governed by and construed in accordance with the laws of the State of New York without regard to any choice of law or conflict of law provision or rule that would cause the application of the laws of any jurisdiction other than the State of New York. Any legal or equitable action or proceeding arising out of or in connection with this Amendment will be brought only in the courts of the State of New York, in the County and City of New York or of the United States District Court for the Southern District of New York, and by execution and delivery of this Amendment, each of the parties hereby irrevocably accepts for itself and in respect of its property, generally and unconditionally, the exclusive jurisdiction of the aforesaid courts. Each of the parties hereby irrevocably waives any objection which it may now or hereafter have to laying of jurisdiction or venue of any actions or proceedings arising out of or in connection with this Amendment or in any certificate, report or other instrument delivered under or pursuant to any term of this Amendment brought in the courts referred to above and hereby further irrevocably waive and agree not to plead or claim in any such court that any such action or proceeding has been brought in an inconvenient forum. Each of the parties further agrees that the mailing by certified or registered mail, return receipt requested, of any process required by any such court will constitute valid and lawful service of process against it, without necessity for service by any other means provided by statute or rule of court. Each of the parties hereto hereby irrevocably waives any and all right to trial by jury in any legal proceeding arising out of or related to this Amendment or the transactions contemplated hereby. [Execution Page Follows] 2 IN WITNESS WHEREOF, the parties have duly executed this Amendment as of the date first above written. REVLON, INC. By: /s/ Robert K. Kretzman ---------------------------------------- Name: Robert K. Kretzman Title: Executive Vice President, Chief Legal Officer MACANDREWS & FORBES HOLDINGS INC. (f/k/a Mafco Holdings Inc.) By: /s/ Todd J. Slotkin --------------------------------------- Name: Todd J. Slotkin Title: Executive Vice President and Chief Financial Officer 3

Exhibit 10.1 TERMINATION AGREEMENT AGREEMENT, dated as of September 28, 2006, between INTEREP NATIONAL RADIO SALES, INC., New York corporation (the “Company”), and MARC G. GUILD (“Guild”). W I T N E S S E T H: WHEREAS, Guild has served the Company as a member of its Board of Directors, a trustee of the Company’s Stock Growth Plan and, pursuant to an Amended and Restated Employment Agreement, dated as of April 1, 2000 (the “Employment Agreement”), as President, Marketing Division, of the Company; WHEREAS, the Company and Guild wish to set forth their agreement as to the termination of Guild’s employment; NOW, THEREFORE, in consideration of the premises and of the mutual agreements set forth herein, the parties agree as follows: 1. Resignation and Termination of Employment. Effective as of the date of this Agreement (except as provided in Section 2(a)), Guild’s employment with the Company shall terminate and Guild shall resign from the office of President, Marketing Division, and from all offices and directorships that he holds with any of the Company’s subsidiaries or affiliates. Concurrently with the execution of this Agreement, Guild has delivered to the Company a signed letter of resignation to such effect. Guild shall continue to serve as a director of the Company through the Company’s 2006 Annual Meeting and possibly thereafter, as shall be agreed by the Company and Guild. Guild shall also continue to serve as a Trustee of the Interep Radio Store Stock Growth Plan at the pleasure of the Company’s Board of Directors. 2. Payments. (a) The period beginning on August 1, 2006 and ending on March 31, 2013 is referred to as the “Term”. During the first two years of the Term, the Company shall pay Guild consulting fees, and during the remainder of the Term, severance compensation, at the rate of $360,000 per year, less applicable federal and state withholdings. Subject to the provisions of Section 2(b), the Company shall pay such compensation in equal semi-monthly installments. During the first two years of the Term, Guild shall provide the Company with such advice, assistance and consulting services regarding aspects of the Company’s business and affairs with respect to which he has been active as the Company shall reasonably request and Guild shall agree to provide. All of the compensation referred to in this Section 2 shall be paid to Guild by direct deposit to such account as Guild shall designate to the Company. In consideration of the Company’s payment of such consulting and severance compensation, Guild waives and forever forfeits any payments otherwise payable to him under the Employment Agreement as salary, bonus, severance compensation or consulting fees. -------------------------------------------------------------------------------- (b) If a Change in Control (as defined in Section 2(c)) occurs, Guild or his personal representative (should he die or become incompetent during the Term) shall have the right to require the Company, at any time during the Term, and on not less than 30 days’ written notice to the Company, to pay to Guild, his designee or his estate or heirs an amount equal to all of the remaining severance compensation and consulting fees payable to him during the then remainder of the Term, discounted at the Discount Rate (as defined below) to its present value as of the date of such notice (the “Notice Date”). The Company shall pay such amount to Guild in a lump sum not later than 30 days after the Notice Date. “Discount Rate” means the yield to maturity, as determined on the Notice Date, on U.S. Treasury obligations having a maturity date then as near as possible to the last day of the Term. (c) For purposes of this Section 2, “Change in Control”, means the occurrence of any of the following events: (i) any “person,” including a “group” (as such terms are used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934 (the “Exchange Act”), but excluding the Company, its “Affiliates” (that is, any of its subsidiaries or any parent corporation), or any employee benefit plan or employees of the Company or any of its Affiliates, or any group of which any of the foregoing is a member, is or becomes the “beneficial owner” (as defined in Rule 13(d)(3) under the Exchange Act), directly or indirectly, of the Company’s securities representing 30% or more of the combined voting power of its then outstanding securities; (ii) during any period of 24 consecutive months, individuals (A) who on the date of this Agreement constitute the Company’s entire Board of Directors (“Initial Directors”) or (B) whose election, appointment or nomination for election was approved prior to such election or appointment by a vote of at least two-thirds of the Initial Directors who were in office immediately prior to such election or appointment, cease for any reason to constitute at least a majority of the Company’s Board of Directors; (iii) the consummation of a merger, business combination, share exchange, division or other reorganization of the Company with any other corporation, where, following such transaction, (A) a majority of the directors of the surviving entity are persons who (I) were not members of the Company’s Board of Directors immediately prior to the merger or other combination and (II) are not the Company’s nominees or representatives, (B) the Company’s shareholders immediately prior to such merger or combination beneficially own, directly or indirectly, less than 60% or more of the combined voting power of the surviving corporation, as well as 60% or more of the total market value of its outstanding equity securities, in substantially the same proportion as they owned the combined voting power of the Company, (C) any “person,” including a “group” (each as defined in clause (i) above), but excluding the Company, its Affiliates, or any of the Company’s or its Affiliates’ employee benefit plans or employees, or any group of which any of the foregoing is a member, is or becomes the “beneficial owner” (as defined in Rule 13(d)(3) under the Exchange Act), directly or indirectly, of securities representing 30% or more of the combined voting power of the surviving corporation or (D) in the case of a division, the Company’s shareholders immediately prior to such division beneficially own, directly or indirectly, less than 60% or more of the combined voting power of the outstanding voting securities of each entity resulting from the division as well as 60% or more of the total market value of each such entity’s outstanding equity securities, in each case in substantially the same proportion as such shareholders owned shares of the Company prior to such transaction;   -2- -------------------------------------------------------------------------------- (iv) the consummation of a direct or indirect sale or other disposition of all or substantially all of the Company’s assets; (v) the Company’s adoption of any plan of liquidation providing for the distribution of all or substantially all of its assets; (vi) any other change in control of the Company of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A under the Exchange Act; or (vii) any other event or transaction that is declared by resolution of the Company’s Board of Directors to be a Change in Control. 3. Plan Coverage. From and after August 1, 2006 and until the earlier of March 31, 2013 or such time as another employer makes available to Guild medical and dental coverage comparable to that which the Company currently provides to Guild, the Company, under COBRA, but at its expense, shall provide medical and dental coverage for Guild under, and subject to the terms and conditions of, such group insurance plans as the Company now and in the future makes available generally for its employees. Nothing in this Section 3 shall be construed to require the Company to institute or maintain any or any particular benefit plan, program or policy. If and to the extent that this Section 3 conflicts with any COBRA notice or other document issued by the Company at any time, the provisions of this Section 3 shall prevail. 4. Certain Expenses. Promptly after the date of this Agreement, the Company shall reimburse Guild for his reasonable travel, lodging and entertainment expenses incurred by him prior to the date hereof in connection with the business of the Company, in accordance with the Company’s policies and procedures. Inasmuch as the Company has used Guild’s membership at the Union League to have access to its meeting rooms and dining facilities for client entertainment, meetings, events and training sessions and wishes to continue to do so, the Company shall, until further notice, pay the dues owed by Guild to such club. Guild shall reimburse the Company for all of his personal use of such club. Guild may retain the company cell phone, lap top and Blackberry that he has been using and the Company shall continue to pay all related charges through December 31, 2006; provided, however, that Guild shall have no access to the Company’s networks, systems or data through such equipment on and after the date of this Agreement. 5. Other Benefit Plans. Guild shall be entitled to receive all rights, distributions and benefits which have accrued or shall accrue to him under the Company’s Stock Growth Plan and 401-K Plan, in accordance with the terms of such benefit plans. On and after the date of this Agreement, the Company shall not make any further contributions to any such benefit plan for Guild’s account and all his benefit plan accounts shall be frozen with a review to roll over or termination. The Company shall use its best efforts to insure that all transfers of securities or accounts and payments of cash contemplated in the preceding sentence are made as promptly as is   -3- -------------------------------------------------------------------------------- practicable, consistent with the terms and procedures of such benefit plans. On and after the date of this Agreement, the Company shall not make any further contributions to any such benefit plan for Guild’s account and all his benefit plan accounts shall be frozen with a view to roll-over or termination. 6. Options. The stock options held by Guild to purchase an aggregate of 353,440 shares of Interep Common Stock shall remain exercisable on and after the date of this Agreement, for the respective full terms thereof as stated in the related option agreements and otherwise in accordance with their terms. 7. Automobile Allowance. The Company shall continue to provide Guild with the use of the automobile it currently leases for him through the end of the current lease on the same terms and conditions that are currently applicable. 8. Statements. In any written or oral discussion or disclosure by Guild or the Company regarding the termination of Guild’s employment with the Company, Guild and the Company shall each characterize such termination as amicable and in a manner consistent with the contents of this Agreement. Further, Guild shall not denigrate or disparage the Company or any of its subsidiaries or divisions or the businesses, services, officers, directors, employees, agents or shareholders of any of them, or take any action which would tend to cast any of them into disrepute. Similarly, the Company shall not denigrate or disparage Guild or take any action which would tend to cast him into disrepute. Guild shall maintain the existence and terms of this Agreement in confidence at all times on and after the date hereof; provided, however, that the foregoing shall not restrict him from making any disclosure about the existence and terms of this Agreement as may be required by applicable law or from testifying truthfully pursuant to a valid subpoena issued by any court or regulatory body having competent jurisdiction. 9. Confidentiality. At all times on and after the date of this Agreement, Guild shall not disclose to any party or use any information respecting the Company or its business and affairs which is treated as confidential by the Company, including, without limitation, trade secrets, business and marketing plans and information, financial data, commission rate information, identity of actual or prospective clients and customers and salary or bonus information relating to any of the Company’s employees; provided, however, that such obligation shall not apply to any information (i) to the extent that it is or becomes part of public or industry knowledge from authorized sources other than Guild or (ii) which Guild is required by law to disclose (but only to the extent required to be so disclosed); and provided, further, that Guild may disclose this Agreement and its terms to his or its accountants, tax advisors and legal counsel, provided that any such third party has been informed of, and has agreed to abide by, this confidentiality provision. On or before the date of this Agreement, Guild shall deliver to the Company all material of a confidential nature (whether or not marked as such), including, without limitation, business plans, budgets, financial statements or projections, commission rate schedules, manuals, letters, notes, notebooks, reports and customer and supplier lists, and all copies or summaries thereof, relating to the business or affairs of the Company and its subsidiaries that are in Guild’s possession or control.   -4- -------------------------------------------------------------------------------- 10. Non-Competition. In consideration of the payments and accommodations to be made to Guild pursuant to this Agreement, Guild agrees that, during the Term, and so long as the Company is not in breach of its obligations under this Agreement, he shall not, anywhere in the United States of America (or for such lesser area or such lesser period as may be determined by a court of competent jurisdiction to be a reasonable limitation on the competitive activity of Guild), directly or indirectly: (a) act as an officer, director, employee, agent, consultant or in any other capacity for Katz Media Corporation or any of its subsidiaries, parents or affiliates (together, “Katz”); provided, however, that the foregoing shall not restrict Executive from marketing, promoting or selling products or services to Katz on behalf of third parties other than Katz; (b) engage in any terrestrial or satellite radio or broadcast, cable or satellite television or Internet national sales representation business (“Representation Business”, which shall not include any representation business other than national sales) on behalf of himself or any third party, including any representation firm or radio or television group; (c) solicit or attempt to solicit Representation Business on behalf of himself or any third party from any parties who are clients or customers of the Company; or to which the Company has made specific proposals for services, during the 12 months prior to the date of this Agreement and with respect to which Guild either (i) possess confidential information of the Company or (ii) Guild was directly involved as to solicitation, negotiation or servicing of contracts; (d) solicit or attempt to solicit for any business endeavor any employee of the Company; (e) interfere with the Company or the conduct of its Representation Business or otherwise divert or attempt to divert from Interep any business whatsoever; or (f) render any services as a joint venturer, partner, consultant or otherwise to, or have any interest as a stockholder, partner, lender or otherwise in, any person or entity which is engaged in activities which, if performed by Guild, would violate this Section 10. The foregoing provisions of this Section 10 shall not prevent Guild from purchasing or owning up to 5% of the voting securities of any corporation, the securities of which are publicly-traded. For all purposes of this Section 10, as well as Section 9 and 11, references to the Company shall include all of its subsidiaries, affiliates and joint ventures. 11. Remedies and Survival. Because the Company would not have an adequate remedy at law to protect its business from unfair competition and its interest in its trade secrets, proprietary or confidential information or similar commercial assets should Guild breach any provision of Sections 8, 9 or 10, the Company shall be entitled, in the event of such a breach or threatened breach thereof by Guild, to injunctive relief, in addition to such other remedies and relief that would be available to the Company. In the event of such a breach, in addition to any other remedies, the Company shall be entitled to receive from Guild payment of, or reimbursement for, their reasonable attorneys’ fees and disbursements incurred in successfully enforcing any such provision. The provisions of Sections 8, 9 and 10 and of this Section 11 shall survive any termination of this Agreement.   -5- -------------------------------------------------------------------------------- 12. Termination of Prior Agreements. On the date of this Agreement, the Employment Agreement and any other agreements and understandings between the Company and Guild relating to his employment, other than this Agreement, the benefit plans and options referred to in Sections 5 and 6 of this Agreement and the Indemnification Agreement between the parties (together, the “Surviving Agreements”), shall terminate and be of no further force or effect; provided, however, that any rights to indemnification, defense and insurance in favor of Guild arising under the Restated Certificate of Incorporation or By-Laws of the Company, shall continue in full force and effect. Guild shall continue to be covered under such directors and officers liability insurance policies as the Company maintains for its directors so long as he is eligible to be covered under such policies in accordance with the terms thereof. 13. Releases. (a) Guild, in consideration of good and valuable consideration received and to be received from the Company hereunder, the sufficiency of which is acknowledged, releases and discharges the Company, its subsidiaries and affiliates and its and their respective officers, directors, shareholders, employees, agents, attorneys and affiliates and its and their respective heirs, personal representatives, successors and assigns (together, the “Company Releasees”), of and from all claims, demands, causes of action, suits, actions, proceedings, judgments, debts, damages, liabilities and obligations, at law, equity or otherwise, including, without limitation, any federal, state, local or administrative Equal Employment Opportunity or other claims arising under the Civil Rights Acts of 1866, 1870 and 1871, the Equal Pay Act of 1963, Title VII of the Civil Rights Act of 1964, as amended, the Age Discrimination in Employment Act of 1967, as amended, the Older Workers Benefits Protection Act, the Civil Rights Act of 1968, the Rehabilitation Act of 1973, the Vietnam-Era Veterans’ Readjustment Assistance Act of 1974, the Veteran’s Reemployment Rights Act, the Immigration Reform and Control Act, the Americans with Disabilities Act of 1990, the Civil Rights Act of 1991, the Family and Medical Leave Act, the Worker Adjustment and Retraining Notification Act, the Employee Retirement Income Security Act of 1974, as amended, the Fair Labor Standards Act, the New York Executive Law, the New York State Human Rights Law, New York Civil Rights Law, Section 47 et seq., New York Civil Rights Law, Article 4-C, Section 48 et seq., New York Labor Law Section 201-d, New York Civil Rights Law, Article 4, Section 40-c to 45 and any applicable federal, state, or local anti-discrimination or equal employment opportunity statues or regulations, including, without limitation, any fair employment or human rights ordinance of any municipality or county in the State of New York; which Guild or his heirs, personal representatives, successors and assigns had, have or may hereafter have against the Company Releasees for, on or by reason of any matter, cause or thing whatsoever from the beginning of the world to the date hereof; except that, Guild in no way releases or discharges the Company’s obligations under this Agreement or any of the Surviving Agreements. Nothing herein shall be construed as an admission by the Company that Guild has any claim against it. Guild and his heirs, personal representatives, successors and assigns, further waive any and all manner of notice, knowledge or discovery of any and all such actual or alleged claims of cause of action. (b) Guild shall have 21 days to review the release contemplated by Section 13(a) and is advised to consult with an attorney before signing it. After Guild signs this Agreement, he shall have seven days to cancel it. If Guild does not cancel it, the release contemplated by Section 13(a) shall become effective.   -6- -------------------------------------------------------------------------------- (c) Subject to the last sentence of this Section 13(c), the Company, in consideration of good and valuable consideration received and to be received from Guild hereunder, the sufficiency of which is acknowledged, releases and discharges Guild and his heirs, personal representatives, successors and assigns (together, the “Guild Releasees”), of and from all claims, demands, causes of action, suits, actions, proceedings, judgments, debts, damages, liabilities and obligations, at law, equity or otherwise, which the Company or any of its affiliates and any of their respective successors or assigns had, have or may hereafter have against the Guild Releasees for, on or by reason of any matter, cause or thing whatsoever from the beginning of the world to the date hereof; except that, the Company in no way releases or discharges Guild’s obligations under this Agreement and the Surviving Agreements. Nothing herein shall be construed as an admission by Guild that the Company has any claim against him. The Company, its affiliates and their respective successors and assigns, further waive any and all manner of notice, knowledge or discovery of any and all such actual or alleged claims of cause of action. The foregoing release shall become effective automatically on the effectiveness of the release contemplated by Section 13(a). 14. Litigation Cooperation. From time to time, if requested by the Company, Guild shall make his time and attention reasonably available to, and shall cooperate with the Company with respect to, any aspect of any litigation or governmental proceedings involving the Company regarding periods during which he was an employee of the Company and a reasonable period thereafter. The Company shall reimburse Guild for any travel, lodging and other expenses he reasonably incurs in this regard, in accordance with their standard reimbursement policies. 15. Entire Agreement. This Agreement sets forth the entire understanding of the parties with respect to its subject matter, merges and supersedes any prior or contemporaneous understandings with respect to its subject matter, and shall not be modified or terminated except by a written instrument executed by the Company and Guild. Failure of a party to enforce one or more of the provisions of this Agreement or to require at any time performance of any of the obligations hereunder shall not be construed to be a waiver of such provisions by such party nor to in any way affect the validity of this Agreement or such party’s right thereafter to enforce any provision of this Agreement, nor to preclude such party from taking any other action at any time which it would legally be entitled to take. Notwithstanding the foregoing, the provisions of this Section 15 and the release set forth in Section 13(a) shall not apply to the letter agreement, dated June 7, 2006, respecting Guild’s entitlement to a special bonus with respect to the transaction referred to in such letter agreement. 16. Severability. If any provision of this Agreement is held to be invalid or unenforceable by any court or tribunal of competent jurisdiction, the remainder of this Agreement shall not be affected by such judgment, and such provision shall be carried out as nearly as possible according to its original terms and intent to eliminate such invalidity or unenforceability. In this regard, the Company and Guild agree that the provisions of Section 10, including, without limitation, the scope of its territorial and time restrictions, are reasonable and necessary to protect and preserve the Company’s legitimate interests. If the provisions of Section 10 are held by a court of competent jurisdiction to be in any respect unreasonable, then such court may reduce the territory or time to which it pertains or otherwise modify such provisions to the extent necessary to render such provisions reasonable and enforceable.   -7- -------------------------------------------------------------------------------- 17. Successors and Assigns. Guild shall have no right to assign this personal Agreement, or any rights or obligations hereunder, without the consent of the Company. On the sale of all or substantially all of the assets of the Company to another party, or on the merger of the Company with another corporation, this Agreement shall inure to the benefit of, and be binding on, both Guild and the party purchasing such assets or surviving such merger in the same manner and to the same extent as though such other party were the Company. Subject to the foregoing, this Agreement shall inure to the benefit of, be binding on and be enforceable by, the parties and their respective heirs, personal representatives, successors and assigns. 18. Communications. All notices, consents and other communications given under this Agreement shall be in writing and shall be deemed to have been duly given (a) when delivered by hand or by FedEx or a similar overnight courier to, (b) five days after being deposited in any United States post office enclosed in a postage prepaid registered or certified envelope addressed to, or (c) when successfully transmitted by fax (with a confirming copy of such communication to be sent as provided in (a) or (b) above) to, the party for whom intended, at the address or fax number for such party set forth below, or to such other address or fax number as may be furnished by such party by notice in the manner provided herein; provided, however, that any notice of change of address or fax number shall be effective only on receipt.   If to the Company:    If to Guild: Interep National Radio Sales, Inc.    Mr. Marc G. Guild 100 Park Avenue    107 White Plains Road New York, New York 10017    Bronxville, New York 10708 Attention: Mr. Ralph C. Guild    Fax No.: (914) 779-2818 Fax No.: (212) 916-0749    19. Construction; Counterparts. The headings contained in this Agreement are for convenience only and shall in no way restrict or otherwise affect the construction of the provisions hereof. References in this Agreement to Sections are to the sections of this Agreement. This Agreement may be executed in multiple counterparts, each of which shall be an original and all of which together shall constitute one and the same instrument. 20. Governing Law. This Agreement shall be governed by the laws of the State of New York applicable to agreements made and fully to be performed in such state, without giving effect to conflicts of law principles. IN WITNESS WHEREOF, each of the parties has executed this Agreement as of the date first set forth above.   INTEREP NATIONAL RADIO SALES, INC.     By:    /s/ William J. McEntee       /s/ Marc G. Guild   William J. McEntee Chief Financial Officer       MARC G. GUILD   -8-

  EXHIBIT 10.5 FIRST AMENDMENT TO THE CAPITAL BANK & TRUST COMPANY SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN AGREEMENT DATED MAY 26, 2004 FOR SALLY P. KIMBLE      THIS FIRST AMENDMENT is adopted this 20th day of December, 2006, effective as of January 1, 2005, except as otherwise provided herein, by and among CAPITAL BANK & TRUST COMPANY, a state-chartered bank located in Nashville, Tennessee (the “Bank”); CAPITAL BANCORP, INC., a Tennessee corporation (the “Corporation”) and Sally P. Kimble (the “Executive”).      The Bank, the Corporation and the Executive executed the Capital Bank & Trust Company Supplemental Executive Retirement Plan Agreement effective as of May 26, 2004 (the “Agreement”).      The undersigned hereby amend the Agreement for the purpose of bringing the Agreement into compliance with Section 409A of the Internal Revenue Code. Therefore, the following changes shall be made:      Section 1.1.1 of the Agreement shall be deleted in its entirety and replaced by the following: 1.1.1 “Change in Control” means any of the following:   (a)   any person (as such term is used in Sections 13d and 14d-2 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), other than the Corporation, a subsidiary of the Corporation, and employee benefit plan (or related trust) maintained by the Corporation or a direct or indirect subsidiary of the Corporation or affiliates of the Corporation (as defined in Rule 12b-2 under the Exchange Act), becomes the beneficial owner (as determined pursuant to Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Corporation or the Bank representing more than thirty-five percent (35%) of the combined voting power of the Corporation’s or Bank’s then outstanding securities (other than a person owing ten percent (10%) or more of the total voting power of stock on the date hereof);     (b)   during any period of two (2) consecutive years, individuals who at the beginning of such period constitute the Board of Directors of the Corporation or the Bank, cease for any reason to constitute a majority thereof, unless the election of each new director was approved in advance by a vote of at least a majority of the directors then still in office who were directors at the beginning of the period;   --------------------------------------------------------------------------------     (c)   consummation of a merger, consolidation or other business combination of the Corporation or the Bank with any other Person or affiliate thereof, other than a merger, consolidation or business combination which would result in the outstanding common stock of the Corporation or the Bank immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into common stock of the surviving entity, or a parent or affiliate thereof) at least fifty percent (50%) of the outstanding common stock of the Corporation or the Bank, or such entity or parent or affiliate thereof outstanding immediately after such merger, consolidation or business combination; or     (d)   consummation of a plan of complete liquidation of the Corporation or the Bank or an agreement for the sale or disposition by the Corporation or the Bank of all or substantially all of the Corporation’s or the Bank’s assets.           The following Section 1.1.8a shall be added to the Agreement immediately following Section 1.1.8: 1.1.8a   “Specified Employee” means a key employee (as defined in Section 416(i) of the Code without regard to paragraph 5 thereof) of the Bank (including any affiliate of the Bank that together with the Bank is considered a single employer under Code Section 414(b)) if any stock of the Bank is publicly traded on an established securities market or otherwise.           Section 1.1.9 of the Agreement shall be deleted in its entirety and replaced by the following: 1.1.9   “Termination of Employment” means the separation from service with the Bank and its affiliates as contemplated under Code Section 409A(a)(2)(A)(i) for reasons other than death. Whether a Termination of Employment takes place is determined based on the facts and circumstances surrounding the termination of the Executive’s employment and whether the Bank and the Executive intended for the Executive to provide significant services for the Bank following such termination. A change in the Executive’s employment status will not be considered a Termination of Employment if:   (i)   the Executive continues to provide services as an employee of the Bank at an annual rate that is twenty percent (20%) or more of the services rendered, on average, during the immediately preceding three (3) full calendar years of employment (or, if employed less than three (3) years, such lesser period) and the annual remuneration for such services is twenty percent (20%) or more of the average annual remuneration earned during the final three (3) full calendar years of employment (or, if less, such lesser period), or     (j)   the Executive continues to provide services to the Bank in a capacity other than as an employee of the Bank at an annual rate that is fifty percent (50%) or more   --------------------------------------------------------------------------------   of the services rendered, on average, during the immediately preceding three (3) full calendar years of employment (or if employed less than three (3) years, such lesser period) and the annual remuneration for such services is fifty percent (50%) or more of the average annual remuneration earned during the final three (3) full calendar years of employment (or if less, such lesser period ).        Section 2.1.3 of the Agreement shall be deleted in its entirety, effective November 1, 2006, and replaced with the following: 2.1.3   Benefit Increases. Commencing on the first anniversary of the first benefit payment and continuing on each subsequent anniversary of that date, this annual benefit shall increase by three percent (3%) from the immediately preceding anniversary date.     Sections 2.2.3 and 2.3.3 of the Agreement shall be deleted in their entirety.       The following Sections 2.5, 2.6 and 2.7 shall be added to the Agreement immediately following Section 2.4.2: 2.5   Restriction on Timing of Distributions. Notwithstanding any provision of this Agreement to the contrary, if the Executive is considered a Specified Employee at Termination of Employment under such procedures as established by the Bank in accordance with Section 409A of the Code, benefit distributions that are made upon Termination of Employment may not commence earlier than six (6) months after the date of such Termination of Employment. Therefore, in the event this Section 2.5 is applicable to the Executive, any distribution which would otherwise be paid to the Executive within the first six (6) months following the Termination of Employment shall be accumulated and paid to the Executive in a lump sum as soon as practicable following the six-month anniversary of the Termination of Employment. All subsequent distributions shall be paid in the manner specified. 2.6   Distributions Upon Income Inclusion Under Section 409A of the Code. Upon the inclusion of any amount into the Executive’s income as a result of the failure of this non-qualified deferred compensation plan to comply with the requirements of Section 409A of the Code, to the extent such tax liability can be covered by the amount the Bank has accrued with respect to the Bank’s obligations hereunder, a distribution shall be made as soon as is administratively practicable following the discovery of the plan failure. 2.7   Change in Form or Timing of Distributions. All changes in the form or timing of distributions hereunder must comply with the following requirements. The changes:   (m)   may not accelerate the time or schedule of any distribution, except as provided in Section 409A of the Code and the regulations thereunder;     (n)   must, for benefits distributable under Sections 2.1, 2.2, 2.3 and 2.4, delay the commencement of distributions for a minimum of five (5) years from the date the first distribution was originally scheduled to be made; and   --------------------------------------------------------------------------------     (o)   must take effect not less than twelve (12) months after the election is made. Article 6 of the Agreement shall be deleted in its entirety and replaced by the following: Article 6 Claims and Review Procedures 6.5 Claims Procedure: As used in this Article, “Plan Administrator” shall mean the Bank the Bank until its resignation or removal by the Board of Directors of the Bank.   6.5.1   Notice of Denial. If a claimant is denied a claim for benefits under the Agreement, the Plan Administrator shall provide to the claimant written notice of the denial within ninety (90) days (forty-five (45) days with respect to a denial of any claim for benefits due to the Executive’s Disability) after the Plan Administrator receives the claim, unless special circumstances require an extension of time for processing the claim. If such an extension of time is required, written notice of the extension shall be furnished to the claimant prior to the termination of the initial 90-day period. In no event shall the extension exceed a period of ninety (90) days (thirty (30) days with respect to a claim for benefits due to the Executive’s Disability) from the end of such initial period. With respect to a claim for benefits due to the Executive’s Disability, an additional extension of up to thirty (30) days beyond the initial 30-day extension period may be required for processing the claim. In such event, written notice of the extension shall be furnished to the claimant within the initial 30-day extension period. Any extension notice shall indicate the special circumstances requiring the extension of time, the date by which the Plan Administrator expects to render the final decision, the standards on which entitlement to benefits are based, the unresolved issues that prevent a decision on the claim and the additional information needed to resolve those issues.     6.5.2   Contents of Notice of Denial. If a claimant is denied a claim for benefits under the Agreement, the Plan Administrator shall provide to such claimant written notice of the denial which shall set forth:   (a)   the specific reasons for the denial;     (b)   specific references to the pertinent provisions of the Agreement on which the denial is based;     (c)   a description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary;     (d)   an explanation of the Agreement’s claim review procedures, and the time limits applicable to such procedures, including a statement of the claimant’s right to bring a civil action under Section 502(a) of ERISA   --------------------------------------------------------------------------------         following an adverse benefit determination on review;     (e)   in the case of a claim for benefits due to the Executive’s Disability, if an internal rule, guideline, protocol or other similar criterion is relied upon in making the adverse determination, either the specific rule, guideline, protocol or other similar criterion; or a statement that such rule, guideline, protocol or other similar criterion was relied upon in making the decision and that a copy of such rule, guideline, protocol or other similar criterion will be provided free of charge upon request; and     (f)   in the case of a claim for benefits due to the Executive’s Disability, if a denial of the claim is based on a medical necessity or experimental treatment or similar exclusion or limit, an explanation of the scientific or clinical judgment for the denial, an explanation applying the terms of the Agreement to the claimant’s medical circumstances or a statement that such explanation will be provided free of charge upon request.   6.5.3   Right to Review. After receiving written notice of the denial of a claim, a claimant or his representative shall be entitled to:   (a)   request a full and fair review of the denial of the claim by written application to the Plan Administrator (or Appeals Fiduciary in the case of a claim for benefits payable due to the Executive’s Disability);     (b)   request, free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the claim;     (c)   submit written comments, documents, records, and other information relating to the denied claim to the Plan Administrator or Appeals Fiduciary, as applicable; and     (d)   a review that takes into account all comments, documents, records, and other information submitted by the claimant relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination.     For purposes of this Article 6, the term “Appeals Fiduciary” means an individual or group of individuals appointed to review appeals of claims for benefits payable due to the Executive’s Disability.   6.5.4   Application for Review.   (a)   If a claimant wishes a review of the decision denying his claim to benefits under the Agreement, other than a claim described in clause (b) of this Section 6.1.4, he must submit the written application to the Plan Administrator within sixty (60) days after receiving written notice of the denial.     (b)   If the claimant wishes a review of the decision denying his claim to benefits under the Agreement due to the Executive’s Disability, he   --------------------------------------------------------------------------------         must submit the written application to the Appeals Fiduciary within one hundred eighty (180) days after receiving written notice of the denial. With respect to any such claim, in deciding an appeal of any denial based in whole or in part on a medical judgment (including determinations with regard to whether a particular treatment, drug, or other item is experimental, investigational, or not medically necessary or appropriate), the Appeals Fiduciary shall:   (i)   consult with a health care professional who has appropriate training and experience in the field of medicine involved in the medical judgment; and     (ii)   identify the medical and vocational experts whose advice was obtained on behalf of the Agreement in connection with the denial without regard to whether the advice was relied upon in making the determination to deny the claim.       Notwithstanding the foregoing, the health care professional consulted pursuant to this clause (b) shall be an individual who was not consulted with respect to the initial denial of the claim that is the subject of the appeal or a subordinate of such individual.   6.5.5   Hearing. Upon receiving such written application for review, the Plan Administrator or Appeals Fiduciary, as applicable, may schedule a hearing for purposes of reviewing the claimant’s claim, which hearing shall take place not more than thirty (30) days from the date on which the Plan Administrator or Appeals Fiduciary received such written application for review.     6.5.6   Notice of Hearing. At least ten (10) days prior to the scheduled hearing, the claimant and his representative designated in writing by him, if any, shall receive written notice of the date, time, and place of such scheduled hearing. The claimant or his representative, if any, may request that the hearing be rescheduled, for his convenience, on another reasonable date or at another reasonable time or place.     6.5.7   Counsel. All claimants requesting a review of the decision denying their claim for benefits may employ counsel for purposes of the hearing.     6.5.8   Decision on Review. No later than sixty (60) days (forty-five (45) days with respect to a claim for benefits due to the Executive’s Disability) following the receipt of the written application for review, the Plan Administrator or the Appeals Fiduciary, as applicable, shall submit its decision on the review in writing to the claimant involved and to his representative, if any, unless the Plan Administrator or Appeals Fiduciary determines that special circumstances (such as the need to hold a hearing) require an extension of time, to a day no later than one hundred twenty (120) days (ninety (90) days   --------------------------------------------------------------------------------   with respect to a claim for benefits due to the Executive’s Disability) after the date of receipt of the written application for review. If the Plan Administrator or Appeals Fiduciary determines that the extension of time is required, the Plan Administrator or Appeals Fiduciary shall furnish to the claimant written notice of the extension before the expiration of the initial sixty (60) day (forty-five (45) days with respect to a claim for benefits due to the Executive’s Disability) period. The extension notice shall indicate the special circumstances requiring an extension of time and the date by which the Plan Administrator or Appeals Fiduciary expects to render its decision on review. In the case of a decision adverse to the claimant, the Plan Administrator or Appeals Fiduciary shall provide to the claimant written notice of the denial which shall include:   (a)   the specific reasons for the decision;     (b)   specific references to the pertinent provisions of the Agreement on which the decision is based;     (c)   a statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the claimant’s claim for benefits;     (d)   an explanation of the Agreement’s claim review procedures, and the time limits applicable to such procedures, including a statement of the claimant’s right to bring an action under Section 502(a) of ERISA following the denial of the claim upon review;     (e)   in the case of a claim for benefits due to the Executive’s Disability, if an internal rule, guideline, protocol or other similar criterion is relied upon in making the adverse determination, either the specific rule, guideline, protocol or other similar criterion; or a statement that such rule, guideline, protocol or other similar criterion was relied upon in making the decision and that a copy of such rule, guideline, protocol or other similar criterion will be provided free of charge upon request;     (f)   in the case of a claim for benefits due to the Executive’s Disability, if a denial of the claim is based on a medical necessity or experimental treatment or similar exclusion or limit, an explanation of the scientific or clinical judgment for the denial, an explanation applying the terms of the Agreement to the claimant’s medical circumstances or a statement that such explanation will be provided free of charge upon request; and     (g)   in the case of a claim for benefits due to the Executive’s Disability, a statement regarding the availability of other voluntary alternative dispute resolution options.      Article 7 of the Agreement shall be deleted in its entirety and replaced by the following:   --------------------------------------------------------------------------------   Article 7 Amendments and Termination 7.1   Amendments. This Agreement may be amended only by a written agreement signed by the Bank and the Executive. However, the Bank may unilaterally amend this Agreement to conform with written directives to the Bank from its auditors or banking regulators or to comply with legislative changes or tax law, including without limitation Section 409A of the Code and any and all Treasury regulations and guidance promulgated thereunder.       No amendment shall provide for or otherwise permit any acceleration of the time or schedule of any payment under the Agreement in a manner that would be prohibited under Code Section 409A(a)(3).   7.2   Plan Termination Generally. The Bank and Executive may terminate this Agreement at any time. The benefit payable hereunder shall be the amount the Bank has accrued with respect to the Bank’s obligations hereunder as of the date the Agreement is terminated. Except as provided in Section 7.3, the termination of this Agreement shall not cause a distribution of benefits under this Agreement. Rather, after such termination, benefit distributions will be made at the earliest distribution event permitted under Article 2 or Article 3.   7.3   Plan Terminations Under Section 409A. Notwithstanding anything to the contrary in Section 7.2, this Agreement terminates in the following circumstances:   (a)   Within thirty (30) days before or twelve (12) months after a Change in Control, provided that all distributions are made no later than twelve (12) months following such termination of the Agreement and further provided that all the Bank’s arrangements which are substantially similar to the Agreement are terminated so the Executive and all participants in the similar arrangements are required to receive all amounts of compensation deferred under the terminated arrangements within twelve (12) months of the termination of the arrangements;     (b)   Upon the Bank’s dissolution or with the approval of a bankruptcy court provided that the amounts deferred under the Agreement are included in the Executive’s gross income in the latest of (i) the calendar year in which the Agreement terminates; (ii) the calendar year in which the amount is no longer subject to a substantial risk of forfeiture; or (iii) the first calendar year in which the distribution is administratively practical; or     (c)   Upon the Bank’s termination of this and all other non-account balance plans (as referenced in Section 409A of the Code or the regulations thereunder), provided that all distributions are made no earlier than twelve (12) months and no later than twenty-four (24) months following such termination, and the Bank does not adopt any new non-account balance plans for a minimum of five (5) years following the date of such termination;     the Bank may distribute the amount the Bank has accrued with respect to the Bank’s obligations hereunder, determined as of the date of the termination of the Agreement,   --------------------------------------------------------------------------------         to the Executive in a lump sum subject to the above terms.         Section 8.12 shall be deleted in its entirety and replaced by the following:     8.12   Tax Withholding and Reporting. The Bank shall withhold any taxes that, in its reasonable judgment, are required to be withheld, including but not limited to taxes owed under Section 409A of the Code and regulations thereunder and employment (e.g. FICA) taxes due to be paid by the Bank pursuant to Code Section 3121(v) (i.e., FICA taxes on the present value of payments hereunder which are no longer subject to vesting). The Executive acknowledges that the Bank’s sole liability regarding taxes is to forward any amounts withheld to the appropriate taxing authority(ies). Further, the Bank shall satisfy all applicable reporting requirements including those under Section 409A of the Code and regulations thereunder. Executive agrees that appropriate amounts for withholding may be deducted from the cash salary, bonus or other payments due to the Executive by the Bank to satisfy the employee-portion of such obligations. If insufficient cash wages are available or if the Executive so desires, Executive shall remit payment in cash for the withholding amounts. The following Section 8.18 shall be added to the Agreement immediately following Section 8.17:   8.18   Compliance with Section 409A. This Agreement shall at all times be administered and the provisions of this Agreement shall be interpreted consistent with the requirements of Section 409A of the Code and any and all regulations thereunder, including such regulations as may be promulgated after the effective date of this Agreement.           IN WITNESS OF THE ABOVE, the Bank, the Corporation and the Executive hereby consent to this First Amendment.                                     EXECUTIVE:       BANK:             CAPITAL BANK & TRUST COMPANY                       /s/ Sally P Kimble       By   /s/ Albert J. Dale, III                       Sally P. Kimble       Title Chairman Compensation Committee       --------------------------------------------------------------------------------                     CORPORATION:         CAPITAL BANCORP, INC.                       By   /s/ Albert J. Dale III           Title Chairman Compensation Committee      

Exhibit 10.74   PURCHASE AND SALE AGREEMENT     by and between     EPOCH SL VI, INC. as Seller   and   AMERICAN RETIREMENT CORPORATION as Buyer     Dated as of September 8, 2005     --------------------------------------------------------------------------------   PURCHASE AGREEMENT   TABLE OF CONTENTS       Page SECTION 1. PURCHASE AND SALE. 1 1.1. Subject Assets 1 1.2. Excluded Assets 2 1.3. Assumed Liabilities 3 1.4. Excluded Liabilities 3     SECTION 2. PURCHASE PRICE. 3 2.1. Purchase Price and Payment 3 2.2. Prorations. 4 2.3. Fees and Expenses. 5     SECTION 3. REPRESENTATIONS AND WARRANTIES OF SELLER. 6 3.1. Organization and Power 6 3.2. Authority of Seller; Non-Contravention; Consents 6 3.3. Real Property 7 3.4. Personal Property. 7 3.5. Taxes 7 3.6. Residents 7 3.7. Litigation 7 3.8. Compliance with Laws 8 3.9. Facility Employees 8 3.10. Employee Benefit Programs 8 3.11. Environmental Matters 8 3.12. Finders Fees 8 3.13. Financial Statements 8     SECTION 4. REPRESENTATIONS AND WARRANTIES OF BUYER. 8 4.1. Organization of Buyer 8 4.2. Authority of Buyer; Non-Contravention; Consents 9 4.3. Litigation 9 4.4. Financial Ability 9 4.5. Finders Fees 9   SECTION 5. COVENANTS. 10 5.1. Conduct of Business 10 5.2. Authorization from Others 10 5.3. Notice of Default 10 5.4. Matters Relating to Facility Employees. 10 5.5. Access to Book and Records 11 5.6. Buyer Approvals 11 5.7. Consummation of Agreement; Cooperation 11 5.8. Further Assurances 11     --------------------------------------------------------------------------------     5.9. Tanglewood Matter 11 5.10. Non-Solicitation Agreement 12     SECTION 6. BUYER’S DUE DILIGENCE. 12 6.1. Inspections 12 6.2. Due Diligence Materials 12 6.3. Review of Materials 13 6.4. Inspection Period 13 6.5. Title and Survey Review 13 6.6. Required State of Title 14 6.7. Property Sold “AS IS”. 15     SECTION 7. CONDITIONS TO CLOSING. 16 7.1. Conditions to the Obligations of the Parties 16 7.2. Conditions to the Obligations of Buyer 16 7.3. Conditions to Obligations of Seller 16     SECTION 8. CLOSING. 17 8.1. Time and Place of Closing 17 8.2. Seller’s Closing Deliveries 17 8.3. Buyer’s Closing Deliveries 18 8.4. Delivery of Deposit Escrow Amount 19     SECTION 9. TERMINATION OF AGREEMENT; RIGHT TO PROCEED; DEFAULT. 19 9.1. Termination 19 9.2. Effect of Termination 19 9.3. Right to Proceed 20 9.4. Buyer Default 20 9.5. Seller Default 20 9.6. Casualty 20 9.7. Condemnation 21     SECTION 10. SURVIVAL. 21 10.1. Survival of Representations and Warranties 21 10.2. Survival of Covenants 21     SECTION 11. INDEMNIFICATION. 21 11.1. Indemnification by Seller 21 11.2. Indemnification by Buyer 21 11.3. Limitations on Indemnification 22 11.4. Notice; Defense of Claims. 22     SECTION 12. MISCELLANEOUS. 24 12.1. Governing Law; Consent to Jurisdiction; Waiver of Jury Trial 24 12.2. Bulk Sales Laws 24 12.3. Notices 24 12.4. Entire Agreement 25 12.5. Assignability; Binding Effect 26 12.6. Construction 26 12.7. Execution in Counterparts 26     --------------------------------------------------------------------------------     12.8. Amendments and Waivers; Effect 26 12.9. Third Party Beneficiaries 26 12.10. Time of the Essence 27 12.11. Use of Proceeds to Clear Title 27 12.12. Submission not an Offer or Option 27 12.13. Designee 27 12.14. Severability 27 12.15. Other Remedies 27 12.16. Specific Performance 27 12.17. Certain Defined Terms 28       Exhibits Exhibit A List of Facilities Exhibit B Legal Description of Land Exhibit C Form of Deposit Escrow Agreement Exhibit D Form of Bill of Sale Exhibit E Form of Assignment and Assumption Agreement Exhibit F Form of Indemnification Escrow Agreement Exhibit G Form of FIRPTA Affidavit Schedules Schedule 1.1(d) Vehicles Schedule 1.1(e) Resident Agreements Schedule 1.1(f) Service Contracts Schedule 1.1(g) Permits Schedule 1.2(i) Excluded Software Schedule 1.2(k) Specified Excluded Assets Schedule 1.3(b) Specified Assumed Liabilities Schedule 3.6 Residents Schedule 3.7 Litigation Schedule 3.9 Facility Employees Schedule 3.10 Employee Benefit Plans Schedule 5.4(a) Amounts Relating to Certain Facility Employees Schedule 6.2(b) Preliminary Title Evidence     --------------------------------------------------------------------------------   PURCHASE AND SALE AGREEMENT   THIS PURCHASE AND SALE AGREEMENT (the “Agreement”), entered into as of September 8, 2005, is by and between EPOCH SL VI, Inc., a Delaware corporation (“Seller”), and American Retirement Corporation, a Tennessee corporation (“Buyer”). Capitalized terms used in this Agreement without definition shall have the meanings given to such terms in Section 12.17 hereof.     W I T N E S S E T H   WHEREAS, subject to the terms and conditions hereof, Seller desires to sell the facilities listed on Exhibit A attached hereto (each a “Facility” and collectively, the “Facilities”) and the other Subject Assets (as defined below) related thereto; and   WHEREAS, subject to the terms and conditions hereof, Buyer desires to purchase the Facilities and the other Subject Assets for the consideration specified herein;   NOW, THEREFORE, in order to consummate said purchase and sale and in consideration of the mutual agreements set forth herein, the parties hereto agree as follows:     SECTION 1.   PURCHASE AND SALE.   1.1.  Subject Assets. Subject to the provisions of this Agreement, Buyer agrees to purchase from Seller and Seller agrees to sell, convey, transfer, assign and deliver to Buyer, at the Closing (as defined in Section 8.1 hereof), all of Seller’s right, title and interest to the properties, assets and businesses located at each of the Facilities of every kind and description, tangible and intangible, real, personal or mixed, and wherever located, including, without limitation, the following assets, but excluding all Excluded Assets (collectively, the “Subject Assets”):   (a)  The land described in Exhibit B attached hereto (the “Land”) together with (i) all rights, privileges and easements appurtenant to the Land owned by Seller, including, without limitation, all minerals, oil, gas, and other hydrocarbon substances on and under the Land, as well as all development rights, air rights, water and water rights relating to the Land, any rights to any land lying in the bed of any existing dedicated street, road or alley adjoining the Land and to all strips and gores adjoining the Land, and any other easements, rights-of-way, or appurtenances used in connection with the beneficial use and enjoyment of the Land (collectively referred to as the “Appurtenances”); and (ii) all improvements and fixtures located on the Land (collectively, the “Improvements”; the Land, Appurtenances and Improvements are collectively referred to herein as the “Real Property”);   (b)  All fixed assets located at each Facility;   (c)  All personal property and interests owned by Seller including furniture, office equipment, computers and commercially available computer software programs (but not the Excluded Software) that are loaded on such computers located at the Facilities, communications equipment, storage tanks, spare and replacement parts, fuel, inventory, and all other tangible property, in each, case located at each Facility (collectively, the “Personal Property”);     -------------------------------------------------------------------------------- Purchase and Sale Agreement - Page 2     (d)  The vehicles listed on Schedule 1.1(d) (collectively, the “Vehicles”);   (e)  The residency agreements, leases, supervisory care agreements or other occupancy agreements relating to the Facilities listed on Schedule 1.1(e) (collectively, the “Resident Agreements”);   (f)  The service contracts and maintenance agreements or other contracts relating to the use, operation or maintenance of the Facilities, to the extent assignable, in each case, as listed on Schedule 1.1(f) (collectively, the “Service Contracts”; the Resident Agreements and the Service Contracts are collectively referred to as the “Purchased Contracts”);   (g)  All licenses and permits issued by Governmental Authorities relating to the ownership and operation of the Facilities, to the extent assignable, listed on Schedule 1.1(g) (collectively, the “Permits”);   (h)  With respect to each Facility, all bills and receipts, supplier information, rent rolls, resident lists, applications, records and resident files; and   (i)  To the extent assignable, each Facility’s telephone numbers and telephone directory listings.   1.2.  Excluded Assets. Notwithstanding the foregoing and anything to the contrary contained in this Agreement, the following assets are expressly excluded from the purchase and sale contemplated hereby and from the Subject Assets (collectively, the “Excluded Assets”) and, as such, are not included in the assets conveyed hereby:   (a)  Seller’s cash and cash equivalents;   (b)  Seller’s bank deposits and bank accounts;   (c)  Seller’s prepaid expenses;   (d)  Seller’s accounts receivable;   (e)  Seller’s corporate franchise, general ledger, accounting records, Tax records, corporate seals, minute books, stock record books and such other records as have to do with the organization, maintenance and existence of Seller as a corporation;   (f)  All books, records, files and papers, whether in hard copy or computer format, used by Seller in connection with the Facilities, including, without limitation, employee handbooks, business forms, sales and promotional literature, manuals and data, sales and purchase correspondence;   (g)  Seller’s right, title and interest in and to each of (1) the name “EPOCH” or any derivation thereof; (2) all trade names, trademarks, service marks, symbols, logos and copyrights relating thereto, including, without limitation, all applications, registrations and renewals of any of the foregoing; and (3) all other proprietary and/or intellectual property rights relating to any of the foregoing (all of the items described in this clause (g) are collectively referred to as the “Brand”);     -------------------------------------------------------------------------------- Purchase and Sale Agreement - Page 3     (h)  Any items or materials, whether tangible or intangible, that contain, include, display or otherwise reference the Brand, including, without limitation, photographs, posters, pictures, representations, signs and promotional materials;   (i)  Any of the computer software programs set forth on Schedule 1.2(i) (collectively, the “Excluded Software”);   (j)  Any right of Seller under this Agreement or any other agreement, instrument or document executed in connection with this Agreement to which Seller is a party; and   (k)  The items set forth on Schedule 1.2(k).   1.3.  Assumed Liabilities. Subject to the provisions of this Agreement, from and after the Closing Date (as hereinafter defined), Buyer hereby assumes and agrees to pay, defend, discharge and perform as and when due and performable all of the following Liabilities (collectively, the “Assumed Liabilities”):   (a)  All Liabilities under each Purchased Contract that first arise after the Closing Date or for which Buyer received a credit against the Purchase Price pursuant to Section 2.2 ; and   (b)  All Liabilities specified on Schedule 1.3(b).   1.4.  Excluded Liabilities. Notwithstanding the foregoing and anything to the contrary contained in this Agreement, except for the Assumed Liabilities, Buyer will not assume or be liable for any Liability of Seller resulting from, arising out of or otherwise relating to the Subject Assets, including any of the following (collectively, the “Excluded Liabilities”):   (a)  Any Liability of Seller, or with respect to the Facilities, that is not specifically enumerated as an Assumed Liability;   (b)  Any Liability of Seller under this Agreement or any other agreement, instrument or document executed in connection with this Agreement to which Seller is a party; and   (c)  Any Liability relating to the Excluded Assets.     SECTION 2.   PURCHASE PRICE.   2.1.  Purchase Price and Payment. The purchase price for the Subject Assets (the “Purchase Price”) shall be the sum of: (i) US$138,000,000.00 (the “Cash Consideration”), as such amount is adjusted at the Closing as provided in Section 2.2; and (ii) the assumption by Buyer of the Assumed Liabilities. Buyer shall cause the Cash Consideration to be paid as follows:   (a)  Deposit. Simultaneously with the execution of this Agreement, Buyer shall deposit with Chicago Title Insurance Company (the “Deposit Escrow Agent”) the sum of US$5,000,000.00 of the Cash Consideration (such amount of the Cash Consideration is referred to as the “Deposit”) to secure Buyer’s obligations under this Agreement. The Deposit Escrow Agent shall maintain the Deposit in an interest bearing money market account with an FDIC insured bank and the Deposit and all interest thereon (collectively, the “Deposit Escrow Amount”) shall be maintained by the Deposit Escrow Agent in such account and shall be disbursed pursuant to the terms and conditions of this Agreement and the Deposit Escrow Agreement attached hereto as Exhibit C (the “Deposit Escrow Agreement”).     -------------------------------------------------------------------------------- Purchase and Sale Agreement - Page 4     (b)  Payment at Closing. On the Closing Date, the Cash Consideration shall be paid as follows: (i) Buyer shall pay the Cash Consideration (other than the Deposit Escrow Amount and the Closing Escrow Amount (as defined below)) by wire transfer of immediately available federal funds to an account maintained by or on behalf of Seller, such account to be designated by written notice to Buyer not later than two (2) Business Days prior to the Closing Date (the “Designated Account”); (ii) Buyer shall pay the sum of US$1,380,000.00 of the Cash Consideration (the “Closing Escrow Amount”) by wire transfer of immediately available federal funds into the account described in the Indemnification Escrow Agreement (as defined below) (such account, the “Closing Escrow Account”); and (iii) the Deposit Escrow Agent shall pay the Deposit Escrow Amount by wire transfer of immediately available federal funds to the Designated Account. The Closing Escrow Amount will be available to satisfy only those amounts, if any, owed by Seller to the Buyer Indemnified Parties under Section 11 and in accordance with the terms of this Agreement and the Indemnification Escrow Agreement substantially in the form of Exhibit F attached hereto (the “Indemnification Escrow Agreement”).   2.2.  Prorations.   (a)  Prorations of Real Estate and Personal Property Taxes. All real and personal property Taxes attributable to the calendar year in which the Closing occurs shall be prorated and adjusted as of 11:59 p.m. Eastern Time on the day before the Closing Date as an adjustment at the Closing (regardless of whether such Taxes and special assessments are then due and payable or delinquent). If the real estate or personal property Tax statements for the fiscal year during which the Closing Date occurs are not finally determined, then the real estate or personal property Tax figures for the immediately prior fiscal year shall be used for the purposes of prorating real estate and personal property Taxes on the Closing Date, with a further adjustment to be made after the Closing Date as soon as such real estate or personal property Tax figures are finalized. All real estate special assessments shall be paid in full prior to Closing or out of Closing proceeds. Any real estate or personal property Tax refunds or proceeds (including interest thereon) on account of a favorable determination resulting from a challenge, protest, appeal or similar proceeding relating to real estate or personal property Taxes and assessments relating to the Real Property (i) for all Tax periods occurring prior to the applicable Tax period in which the Closing occurs shall be retained by and paid exclusively to Seller and (ii) for the applicable Tax period in which the Closing occurs shall be prorated as of the Closing Date after reimbursement to Seller and Buyer, as applicable, for all fees, costs and expenses (including reasonable attorneys’ and consultants’ fees) incurred by Seller or Buyer, as applicable, in connection with such proceedings such that Seller shall retain and be paid that portion of such real estate or personal property Tax refunds or proceeds as is applicable to the portion of the applicable Tax period prior to the Closing Date and Buyer shall retain and be paid that portion of such real estate or personal property Tax refunds or proceeds as is applicable to the portion of the applicable Tax period from and after the Closing Date. Seller shall not settle any real estate or personal property Tax protests or proceedings relating to a time period subsequent to Closing without the consent of Buyer, which consent shall not be unreasonably withheld, conditioned or delayed. After the Closing, Buyer shall be responsible for and control any real estate or personal property Tax protests or proceedings for any period for which such Taxes are adjusted between the parties under this Agreement and for any later period. Buyer and Seller shall use commercially reasonable efforts to cooperate in pursuit of any such proceedings and in responding to reasonable requests of the other for information concerning the status of and otherwise relating to such proceedings; provided, however, that neither party shall be obligated to incur any out-of-pocket fees, costs or expenses in responding to the requests of the other.     -------------------------------------------------------------------------------- Purchase and Sale Agreement - Page 5     (b)  Prorations of Service Contracts. Prepaid or unpaid amounts under any Service Contract shall be prorated and adjusted as of the Closing Date.   (c)  Utilities. Seller shall cause all meters for electricity, gas, water, sewer or other utility usage at each Facility to be read on the Closing Date, and Seller shall pay all charges for such utility charges which have accrued on or prior to the Closing Date. If the utility companies are unable or refuse to read the meters on the Closing Date, all charges for such utility charges to the extent unpaid shall be prorated and adjusted as of the Closing Date based on the most recent bills therefor. If the meters cannot be read as of the Closing Date and, therefore, the most recent bill is used to prorate and adjust as of the Closing Date as an adjustment at the Closing, then to the extent that the amount of such prior bill proves to be more or less than the actual utility charges for the period in question, a further adjustment shall be made after the Closing Date as soon as the actual charges for such utilities are available.   (d)  Prorations of Income and Expenses. Collected rents and other charges for the then current and any future period and security or other forms of deposits (the full amount thereof and other charges with interest earned thereon, if any), service charges, and all other incidental expenses and charges paid by tenants of the Facilities under the Resident Agreements, in each case to the extent collected for the current period and any future periods, shall be apportioned, adjusted and prorated as of the Closing Date.   (e)  Estimates. In the event, on the Closing Date, the precise figures necessary for any of the foregoing adjustments are not capable of determination, then, those adjustments shall be made on the basis of good faith estimates of Seller and Buyer using currently available information, and final adjustments shall be made within 90 days after the Closing Date to the extent precise figures are determined or become available.   (f)  Adjustment Payments. The net amount of all adjustments to be made under this Section 2.2 shall be paid on the Closing Date in immediately available funds. All post-closing adjustments shall be made in immediately available funds.   (g)  Calculation of Prorations. All apportionments and prorations made hereunder shall be made based on the number of days of ownership of each Facility in the period applicable to the apportionment, with (1) Seller entitled to income and responsible for expenses for the period ending on the day immediately preceding the Closing Date and (2) Buyer entitled to income and responsible for expenses for the period beginning on the Closing Date and thereafter. Prorations of annual payments shall be made based on the number of days of ownership in the applicable annual period.   2.3.  Fees and Expenses.   (a)  Each of the parties will bear its own expenses in connection with the negotiation and the consummation of the transactions contemplated by this Agreement.   (b)  Buyer and Seller shall split equally (i) all sales, use, excise, real property and other transfer Taxes and charges applicable to the transfer of the Subject Assets to Buyer as contemplated by this Agreement, and all costs of obtaining or transferring permits, registrations, applications and other tangible and intangible properties incurred in connection with the transfer of the Subject Assets to Buyer; and (ii) all recording charges and fees applicable to the recordation of deeds and other instruments of transfer relating to the sale of the Facilities.     -------------------------------------------------------------------------------- Purchase and Sale Agreement - Page 6     (c)  Buyer and Seller shall each pay fifty percent (50%) of any escrow fees in connection with the transactions contemplated by this Agreement.   (d)  Buyer and Seller shall split equally the title insurance premiums for the title policies to be issued at Closing pursuant to the title commitments obtained by Buyer pursuant to Section 6.2; provided, that Buyer shall pay for any endorsements that it elects to obtain and for any title policies in favor of Buyer’s lenders.   (e)  Buyer shall pay for any surveys it obtains in connection with the transactions contemplated by this Agreement.   (f)  Buyer shall pay any mortgages or other similar Taxes in connection with the transactions contemplated by this Agreement.     SECTION 3.   REPRESENTATIONS AND WARRANTIES OF SELLER.   For purposes of this Section 3, the terms “Knowledge”, “to Seller’s Knowledge” and words of similar import means the actual knowledge of each Laurence Gerber, President and Chief Executive Officer of Seller, Joanna Cormac Burt, the Chief Operating Officer and Senior Vice President of Seller, Beth Anderson, Director of Acquisitions of Seller, and Debora Pfaff, Senior Vice President and Chief Financial Officer of Seller. Seller hereby represents and warrants to Buyer as follows:   3.1.  Organization and Power   . Seller is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, and has all corporate power and authority to own or lease its properties and to carry on its business as currently conducted. Seller is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction where the character of the property owned or leased by it or the nature of its activities makes such qualification necessary, except for those jurisdictions where the failure to be so qualified would not, individually or in the aggregate, have a Material Adverse Effect.   3.2.  Authority of Seller; Non-Contravention; Consents   (a)  Seller has the full corporate power and authority to enter into this Agreement and each agreement, document and instrument to be executed and delivered by Seller pursuant to this Agreement and to perform the transactions contemplated hereby and thereby. The execution, delivery and performance by Seller of this Agreement and each such other agreement, document and instrument to which Seller is a party have been duly authorized by all necessary corporate action of Seller, and no other corporate action on the part of Seller is required in connection therewith. This Agreement and each agreement, document and instrument executed and delivered by Seller pursuant to this Agreement constitutes, or when executed and delivered will constitute, valid and binding agreements of Seller, enforceable against Seller in accordance with their terms, except to the extent such enforceability may be limited by applicable bankruptcy, insolvency, or similar Laws affecting creditors’ rights generally or is subject to general principles of equity.     -------------------------------------------------------------------------------- Purchase and Sale Agreement - Page 7     (b)  The execution, delivery and performance by Seller of this Agreement:   (i)  does not violate any provision of the organizational documents of Seller;   (ii)  does not violate any Laws applicable to Seller, or require Seller to obtain any approval, consent, or make any filing with, any Governmental Authority that has not been obtained or made; and   (iii)  does not and will not result in (1) a breach of, constitute a default under, accelerate any obligation under, or give rise to a right of termination of, any indenture or loan or credit agreement or any other agreement, contract, instrument, mortgage, lien, lease, permit, authorization, order, writ, judgment, injunction, decree, determination or arbitration award to which Seller is a party or by which its properties are bound other than where any of the foregoing (either individually or in the aggregate) do not have a Material Adverse Effect, or (2) the creation or imposition of any Lien on any of the Subject Assets that will not be removed or discharged (or authorized for discharge) at the Closing.   3.3.  Real Property (a)  All of the Real Property owned by Seller relating to the Facilities is described on Exhibit B.   (b)  Seller has not received any written notice from any Governmental Authority of any violation of any Law issued with respect to any of the Facilities that has not been corrected heretofore. Seller has not received any written notice of any pending or threatened condemnation of all or any portion of any of the Real Property.   3.4.  Personal Property.    (a)  Seller has good and marketable title to, or in the case of leased personal property has valid leasehold interests in, all Personal Property. None of the Personal Property is subject to any Liens other than (i) Permitted Liens and (ii) Liens to be released or otherwise discharged at or before Closing.   (b)  All leases of Personal Property are in good standing and are valid, binding and enforceable in accordance with their respective terms.   3.5.  Taxes. Seller is not a “foreign person” within the meaning of Section 1445 of the Code and Treasury Regulations Section 1.1445-2.   3.6.  Residents.  Schedule 3.6 sets forth a complete and accurate list of all residents of the Facilities as of the date specified in such schedule.   3.7.  Litigation. Except as set forth in Schedule 3.7, there is no litigation or governmental or administrative proceeding or investigation pending or, to Seller’s Knowledge, threatened against Seller which may have a Material Adverse Effect or which would prevent or hinder the consummation of the transactions contemplated by this Agreement.     -------------------------------------------------------------------------------- Purchase and Sale Agreement - Page 8     3.8.  Compliance with Laws. Seller has not received any written notice of (i) a violation by Seller of any Law to which Seller is subject or (ii) any alleged violation by Seller of any Law to which Seller is subject, which, in either case, would have a Material Adverse Effect. Seller has delivered or otherwise made available to Buyer and/or its representatives true and accurate copies of the most recent health service agency surveys or inspection reports for each Facility.   3.9.  Facility Employees.  Schedule 3.9 sets forth a list of all employees (both full- and part-time) of Seller working at the Facilities and includes the following information with respect to each such employee: (i) the name of such employee and the date as of which such employee was originally hired by Seller, and whether the employee is on an active or inactive status; (ii) an indication of which Facility such employee works; (iii) such employee’s title; and (iv) such employee’s annualized compensation as of the date of this Agreement, including base salary, vacation and/or paid time off accrual amounts, bonus potential (if any), severance pay potential, and any other compensation forms. The employees set forth on Schedule 3.9 are collectively referred to as the “Facility Employees”. Except for any employee handbook or policy maintained by or behalf of Seller, no Facility Employee is subject to a written employment agreement.   3.10.  Employee Benefit Programs.  Schedule 3.10 lists all stock or cash option plans, restricted stock plans, bonus or incentive award plans, severance pay policies or agreements, deferred compensation agreements, supplemental income arrangements, vacation plans, and all other employee benefit plans, agreements, and arrangements maintained by Seller for the benefit of the Facility Employees.   3.11.  Environmental Matters.  Seller has provided or otherwise made available to Buyer or its representatives copies of the most recent environmental site assessments commissioned by Seller regarding each of the Facilities.   3.12.  Finders Fees.  Seller has not incurred or become liable for any broker’s commission, finder’s fee or advisor’s fee relating to or in connection with the transactions contemplated by this Agreement other than a broker’s fee due to CLW Health Care Services Group pursuant to a separate agreement with Seller, which shall be paid by Seller.   3.13.  Financial Statements. Seller has made available to Buyer (i) the unaudited statements of income for each Facility for the fiscal years ended December 31, 2003 and December 31, 2004 (the “Annual Financial Statements”), and (ii) the unaudited statements of income for each Facility for the seven-month period ended July 31, 2005 (the “Interim Financial Statements,” and together with the Annual Financial Statements, the “Financial Statements”). The Financial Statements (i) present fairly in all material respects the financial condition and results of operations of the Facilities for the periods covered thereby; (ii) have been prepared in accordance with generally accepted accounting principles in the United States of America consistently applied, except that (A) the Interim Financial Statements are subject to normal recurring year-end adjustments (which will not be material in the aggregate); (B) the Financial Statements do not contain footnotes; and (C) the Financial Statements have been adjusted for market-rate management fees and terms.   SECTION 4.   REPRESENTATIONS AND WARRANTIES OF BUYER.   Buyer hereby represents and warrants to Seller as follows:   4.1.  Organization of Buyer.  Buyer is a corporation, duly organized, validly existing and in good standing under the laws of the State of Tennessee, and has all power and authority to own or lease its properties and to carry on its business as currently conducted. Buyer is duly qualified to do business as a foreign entity and is in good standing in each jurisdiction where the character of the property owned or leased by it or the nature of its activities makes such qualification necessary, except for those jurisdictions where the failure to be so qualified would not, individually or in the aggregate, have a material adverse effect on Buyer.     -------------------------------------------------------------------------------- Purchase and Sale Agreement - Page 9     4.2.  Authority of Buyer; Non-Contravention; Consents   (a)  Buyer has the full power and authority to enter into this Agreement and each agreement, document and instrument to be executed and delivered by Buyer pursuant to this Agreement and to perform the transactions contemplated hereby and thereby. The execution, delivery and performance by Buyer of this Agreement and each such other agreement, document and instrument to which Buyer is a party have been duly authorized by all necessary action of Buyer, and no other action on the part of Buyer is required in connection therewith. This Agreement and each agreement, document and instrument executed and delivered by Buyer pursuant to this Agreement constitutes, or when executed and delivered will constitute, valid and binding agreements of Buyer, enforceable against Buyer in accordance with their terms, except to the extent such enforceability may be limited by applicable bankruptcy, insolvency, or similar Laws affecting creditors’ rights generally or is subject to general principles of equity.   (b)  The execution, delivery and performance by Buyer of this Agreement:   (i)  does not violate any provision of the organizational documents of Buyer;   (ii)  does not violate any Laws applicable to Buyer, or require Buyer to obtain any approval, consent, or make any filing with, any Governmental Authority that has not been obtained or made; and   (iii)  does not and will not result in a breach of, constitute a default under, accelerate any obligation under, or give rise to a right of termination of, any indenture or loan or credit agreement or any other agreement, contract, instrument, mortgage, Lien, lease, permit, authorization, order, writ, judgment, injunction, decree, determination or arbitration award to which Buyer is a party or by which its properties are bound other than where any of the foregoing (either individually or in the aggregate) do not have a material adverse effect on Buyer.   4.3.  Litigation. There is no litigation or governmental or administrative proceeding or investigation pending or, to its knowledge, threatened against Buyer which would prevent or hinder the consummation of the transactions contemplated by this Agreement.   4.4.  Financial Ability. Buyer has unencumbered cash funds and other available financing in an amount equal to the sum of the Cash Consideration plus amounts sufficient to satisfy any other monetary obligations of Buyer under this Agreement. The consummation of the transactions contemplated by this Agreement are not subject, to or otherwise conditioned upon, Buyer and/or any Affiliate of Buyer obtaining financing of any kind from any source.   4.5.  Finders Fees. Buyer has not incurred or become liable for any broker’s commission, finder’s fee or advisor’s fee relating to or in connection with the transactions contemplated by this Agreement other than a fee due to Cohen & Steers Capital Advisors LLC, which shall be paid by Buyer.     -------------------------------------------------------------------------------- Purchase and Sale Agreement - Page 10     SECTION 5.   COVENANTS.   5.1.  Conduct of Business. From the date hereof until the earlier of the Closing Date or the date on which this Agreement is terminated (or deemed terminated) in accordance with Section 9 hereof, except as otherwise contemplated by this Agreement or with the prior written consent of Buyer, such consent not to be unreasonably withheld, delayed or conditioned, Seller shall, with respect to each Facility:   (a)  Conduct the business of such Facility in the ordinary course consistent with past practices;   (b)  Use commercially reasonable efforts to preserve intact the business organization and goodwill associated with such Facility;   (c)  Refrain from making any change in the compensation payable or to become payable to any employees, agents or independent contractors of such Facility other than compensation changes made by Seller in the ordinary course of business; and   (d)  Refrain from entering into any additional Service Agreements after the date hereof that are not terminable upon no more than 60 days notice without penalty.   5.2.  Authorization from Others. From the date hereof until the earlier of the Closing Date or the date on which this Agreement is terminated (or deemed terminated) in accordance with Section 9 hereof, except as otherwise expressly set forth in this Agreement, each party hereto shall use its commercially reasonable efforts to obtain all authorizations, consents and permits of others required to permit the consummation of the transactions contemplated by this Agreement.   5.3.  Notice of Default. From the date hereof until the earlier of the Closing Date or the date on which this Agreement is terminated (or deemed terminated) in accordance with Section 9 hereof, each party shall give written notice to the other party promptly after the occurrence of any event which would cause or constitute a material breach or material default of any of the representations, warranties or covenants set forth in this Agreement.   5.4.  Matters Relating to Facility Employees.    (a)  On or immediately prior to the Closing Date, (i) Seller shall terminate all Facility Employees and (ii) Buyer shall offer employment on an at-will basis to all such terminated Facility Employees. The parties hereto agree that Seller shall be responsible for making any applicable severance payments to such employees in respect of such terminations of employment in accordance with Seller’s employment policies and plans. Such terminations and offers may be conditioned upon consummation of the transactions contemplated hereby. Buyer shall assume all accrued (vested or unvested) vacation, personal time-off, and sick leave for those Facility Employees accepting employment with Buyer, and shall receive a corresponding credit therefor against the Cash Consideration in an amount equal to the amounts set forth on Schedule 5.4(a), which Seller shall deliver to Buyer within three (3) Business Days prior to the Closing Date and which shall set forth, with respect to each Facility Employee that is being hired by Buyer on or after the Closing Date, the amount of accrued (vested or unvested) vacation, personal time-off and sick leave for such Facility Employee.   (b)  Seller agrees that, for a period of one (1) year after the Closing Date, it shall not solicit for employment any Facility Employee or employ any Facility Employee, in each case, which accepted an offer of employment with Buyer (as contemplated by Section 5.4(a) above) and was actually employed by Buyer on or after the Closing Date.     -------------------------------------------------------------------------------- Purchase and Sale Agreement - Page 11     (c)  If within 90 days after the Closing Date, Buyer terminates the employment of any Facility Employee that Buyer employs, a Facility Employee resigns from his employment with Buyer or the employment of any Facility Employee otherwise ceases, and in connection with such termination, resignation or cessation, as the case may be, Buyer pays to such Facility Employee an amount less than the amount which Buyer is assuming hereunder with respect to such Facility Employee (as set forth on Schedule 5.4(a)), then Buyer shall pay to Seller the difference of such amounts.   5.5.  Access to Book and Records. For a period of six (6) years following the Closing Date, each party hereto shall afford the other party hereto (and such other party’s officers, directors, employees, attorneys, accountants and other authorized representatives of such party and its Affiliates) access, in a manner reasonably designed to minimize disruption to the operations of such party, upon reasonable notice and during normal business hours, to each party’s general ledger, accounting and financial records and minute books, whether in hard copy or computer format, and each party, its Affiliates and their respective officers, directors, employees, attorneys, accountants and other authorized representatives shall be permitted to make abstracts from, or copies of, all such items.   5.6.  Buyer Approvals. Within ten (10) Business Days after the date hereof, Buyer shall file complete applications with the applicable Governmental Authorities to receive all approvals, permits, licenses, certificates and consents required by applicable Law for Buyer’s acquisition and operation of the Facilities from and after the Closing Date (collectively, the “Buyer Approvals”). Buyer shall diligently seek to obtain and maintain all Buyer Approvals. Buyer shall keep Seller apprised of the status of the application process for all Buyer Approvals. Buyer hereby acknowledges and agrees that Seller has the right to contact such Governmental Authorities to discuss the status of such applications.   5.7.  Consummation of Agreement; Cooperation.   (a)  From the date hereof until the earlier of the Closing Date or the date on which this Agreement is terminated (or deemed terminated) in accordance with Section 9 hereof, each of Seller and Buyer shall use their respective best efforts to perform and fulfill all conditions and obligations on its parts to be performed and fulfilled under this Agreement, to the end that the transactions contemplated by this Agreement shall be fully carried out.   (b)  From the date hereof until the earlier of the Closing Date or the date on which this Agreement is terminated (or deemed terminated) in accordance with Section 9 hereof, each party hereto shall cooperate with all reasonable requests of the other party and such other party’s counsel in connection with the consummation of the transaction contemplated hereby.   5.8.  Further Assurances. Each of the parties hereto agrees to, after the Closing, execute and deliver such other documents, certificates, agreements and other writings and to take such other actions as may be reasonably necessary or desirable in order to consummate or implement expeditiously the transactions contemplated by this Agreement and to vest in Buyer the Subject Assets.   5.9.  Tanglewood Matter. From the date hereof until the earlier of the Closing Date or the date on which this Agreement is terminated (or deemed terminated) in accordance with Section 9 hereof, the following shall occur: (i) as soon as it is made available to Seller, Seller shall deliver to Buyer a copy the final written report of Stone Glazing Consulting regarding certain rain water infiltration matters relating to the Facility located in Houston, Texas (the “Tanglewood Report”); (ii) to the extent the Tanglewood Report expressly recommends that repairs are necessary at the Facility located in Houston, Texas solely on account of rain water infiltration at such Facility (the “Tanglewood Matter”), Seller shall solicit bids for such repair work indicated in the Tanglewood Report; (iii) to the extent practicable, Seller shall commence making such repairs; (iv) if such repairs have been completed prior to Closing, the Cash Consideration shall be increased dollar-for-dollar for the amounts of such repairs in excess of US$500,000.00; and (v) if such repairs have not been completed prior to Closing, Seller shall pay for up to US$500,000.00 of such repairs (less any amounts that Seller has actually paid or has been otherwise invoiced on account of such repairs on or to the Closing Date). In connection with the payment for such post-Closing repairs, Buyer shall provide Seller with written notice of such repairs and written information providing reasonable detail regarding the nature and substance of such repairs. The obligation to make payments for such post-Closing repairs set forth in this Section 5.9 shall be null and void and shall be of no further force or effect from and after the date that is one year after the Closing Date. Seller shall keep Buyer informed as to the status of such repairs relating to the Tanglewood Matter, and Seller and Buyer shall reasonably cooperate with each other regarding matters relating to the Tanglewood Matter.     -------------------------------------------------------------------------------- Purchase and Sale Agreement - Page 12     5.10.  Non-Solicitation Agreement. From the date hereof until the earliest to occur of (1) the Closing Date, (2) the date on which this Agreement is terminated (or deemed terminated) in accordance with Section 9 hereof or (3) the date that is 30 days after the date hereof, Seller will not (and will not permit any Affiliate or any other person acting for or on behalf of Seller or of any Affiliate thereof): (i) offer for sale the Facilities or the Subject Assets (or any portion thereof) or any ownership interest of Seller; (ii) solicit offers to buy all or any portion of the Facilities or the Subject Assets or any ownership interest of Seller; (iii) hold discussions with any party (other than Buyer) looking toward such an offer or solicitation or looking toward a merger, business combination or consolidation of Seller; or (iv) enter into any agreement with any party (other than Buyer) with respect to the sale or other disposition of the Facilities or the Subject Assets (or any portion thereof) or any ownership interest in Seller or with respect to any merger, consolidation, business combination or similar transaction involving Seller.   SECTION 6.   BUYER’S DUE DILIGENCE.   6.1.  Inspections. Seller agrees that between, the date of this Agreement and the Closing Date, Buyer and its authorized agents or representatives shall be entitled to enter the Facilities during normal business hours upon reasonable advance notice to Seller (which may be oral) to make such physical, structural and mechanical investigations, studies and tests including, without limitation, surveys and engineering studies, as Buyer deems necessary or advisable. Notwithstanding anything contained in this Agreement, Buyer shall not conduct or allow any so-called Phase II Environmental Testing or other invasive testing of soil or groundwater on or under the Facilities without first obtaining Seller’s written consent. Buyer acknowledges that it has performed its business assessment (the “Business Assessment”) of the Facilities with respect to the locale of the Facilities, the leasing market for the Facilities and the financial status and operating revenues with respect to each Facility in connection with its determination of the Purchase Price (including but not limited to rental rates, leasing costs, vacancy and absorptions rates, land values, replacement costs, maintenance and operating costs, financing costs, etc.) and has satisfied itself with respect to such Business Assessment prior to the date of this Agreement.   6.2.  Due Diligence Materials.   (a)  Seller also agrees to provide or make available to Buyer information and materials reasonably requested by Buyer in the possession of Seller within five (5) Business Days of Buyer’s written request of same. Seller shall, during normal business hours, upon reasonable advance notice to Seller (which may be oral) make all books, records, plans, building specifications, contracts, agreements or other instruments or documents contained in Seller’s files relating to the operation and maintenance of the Facilities available to Buyer.     -------------------------------------------------------------------------------- Purchase and Sale Agreement - Page 13     (b)  Seller has delivered or otherwise made available to Buyer and/or its representatives the title insurance policies described in Schedule 6.2(b), together with copies of the recorded documents referenced therein (collectively, the “Existing Title Policies”), and the surveys described in Schedule 6.2(b) (the “Existing Surveys”; the Existing Title Policies and the Existing Surveys being collectively referred to herein as the “Preliminary Title Evidence”). The Preliminary Title Evidence represents the most recent title policies and surveys of the Facilities available to Seller.   6.3.  Review of Materials. Buyer shall have the right to commence and actively pursue such due diligence as it may deem prudent, including, without limitation, the following due diligence items with respect to the Facilities:   (a)  Obtain and review engineering reports on structural condition of the mechanical systems;   (b)  Obtain and review environmental reports on oil, hazardous waste, and asbestos;   (c)  Review of applicable zoning and other land use controls, and other permits, licenses, permissions, approvals and consents;   (d)  A physical examination of the Facilities and each and every component thereof; and   (e)  An examination of title and survey matters.   6.4.  Inspection Period. Buyer shall notify Seller no later than 5:00 p.m. Eastern Time on the date that is five (5) Business Days after the date hereof (such date is referred to as the “Inspection Period Expiration”) of the results of its physical diligence. In the event that Buyer’s physical due diligence shall reveal any material physical, mechanical or structural defects at a single Facility (other than any physical, mechanical or structural defects arising from or otherwise relating to the Tanglewood Matter) which are estimated to exceed an amount equal to 1% of the Cash Consideration to repair or replace, Buyer may elect, by written notice to Seller and the Deposit Escrow Agent (which notice shall state the nature of the physical, mechanical or structural defect), on or before the Inspection Period Expiration, and, if Seller has failed to cure or otherwise remedy such physical, mechanical or structural defect within 10 Business Days after the date on which Seller received such notice, not to proceed with the transaction described herein, in which event the Deposit Escrow Agent is hereby required to return the Deposit Escrow Amount in accordance with the Deposit Escrow Agreement and this Agreement shall be null and void without recourse to either party hereto except for any provisions that expressly survive termination of this Agreement. Buyer shall have no right to terminate this Agreement for reasons related to its Business Assessment of the Facilities, including but not limited to a change in the market assumptions utilized by Buyer in its analysis of the Facilities.   6.5.  Title and Survey Review   (a)  Buyer shall, prior to the Inspection Period Expiration, review the Preliminary Title Evidence. Prior to the Inspection Period Expiration Buyer will make such written objections to Seller (“Initial Title Objections”) to the form and/or contents of the Preliminary Title Evidence (other than objections to any Permitted Liens, which Buyer shall not have the right to object to) as Buyer may wish. Buyer’s failure to make Initial Title Objections with respect to a particular matter within such time period will constitute a waiver of any right to object with respect to a particular matter of Preliminary Title Evidence. Any matter shown on the Preliminary Title Evidence and not so objected to by Buyer shall be a “Permitted Exception” hereunder.     -------------------------------------------------------------------------------- Purchase and Sale Agreement - Page 14     (b)  Prior to the earlier of (i) the day that is five (5) Business Days after Buyer’s receipt of the Final Title Evidence (as hereinafter defined) or (ii) the date that is 21 days after the date hereof (the “Final Title Inspection Date”), Buyer shall also cause to be prepared for its behalf title insurance commitments relating to the Facilities, including such affirmative insurance and endorsements as Buyer may desire. Buyer may also cause to be prepared an ALTA/ACSM as built survey of the Real Property, certified to Buyer, the title insurance company, and any lender of Buyer. Such title commitments and surveys being referred to as the “Final Title Evidence”. Prior to the Final Title Inspection Date, Buyer will make such written objections to Seller (the “Final Title Objections”; the Final Title Objections and the Initial Title Objections being referred to collectively as the “Title Objections”) to the form and content of the Final Title Evidence as Buyer may wish, provided, however, that, except for the Initial Title Objections, Buyer shall not have the right to object with respect to matters shown on the Preliminary Title Evidence or with respect to any Permitted Liens. Buyer’s failure to make Final Title Objections with respect to a particular matter within such time period will constitute a waiver of any right to object with respect to particular matter of Final Title Evidence. Any matter shown on the Final Title Evidence and not so objected to by Buyer shall also be a “Permitted Exception” hereunder.   (c)  Seller will have until the Closing to cure the Title Objections, and shall use reasonable efforts to cure any and all Title Objections, other than Liens of an ascertainable amount created by Seller and mechanic’s or materialman’s Liens arising on or after Seller acquired title to the respective Facility (“Monetary Liens”) which Seller shall remove or cure by payment of funds from Closing or, with respect to mechanic’s Liens or materialman’s Liens by bonding off. At Seller’s election, the Closing shall be extended for a period of up to thirty (30) days to permit Seller to cure any such Title Objections (the “Cure Period”). Seller shall remove any encumbrances or exceptions to title which are created by, through or under Seller after the effective date of each title insurance commitments obtained by Buyer and which are not consented to by Buyer under the terms hereof. Buyer shall have the right to a dollar-for-dollar adjustment under Section 2.1(i) in favor of Buyer in the amount of any Monetary Liens which are unsatisfied and which have not been bonded over on the Closing Date. If the Title Objections are not cured prior to Closing, Buyer will have the option as its sole and exclusive remedy to (i) terminate this Agreement and receive a refund of the Deposit Escrow Amount in accordance with the Deposit Escrow Agreement or (ii) proceed to close without a reduction in the Purchase Price for any Title Objections uncured by Seller.   6.6.  Required State of Title. At the Closing, Seller shall convey to Buyer (or to Buyer’s nominee) fee simple title to all of the Real Property free and clear of any and all tenancies and other occupancies, Liens, encumbrances, conditions, easements, assessments, restrictions and other conditions, except for the following:   (a)  The Lien, if any, for real estate Taxes not yet due and payable or for any municipal betterments assessed after the date hereof;   (b)  The Resident Agreements;     -------------------------------------------------------------------------------- Purchase and Sale Agreement - Page 15     (c)  The Permitted Exceptions and Permitted Liens; and   (d)  Provisions of existing building zoning Laws.   6.7.  Property Sold “AS IS”.   (a)  Buyer acknowledges, represents and warrants that, except as expressly provided in this Agreement, (i) any information (“Information”) supplied or made available by or on behalf of Seller, whether written or oral, including, by way of example only and not limitation, in the form of maps, surveys, plats, soil reports, engineering studies, environmental studies, market studies, valuation reports, inspection reports, plans, specifications, or any other information whatsoever, without exception, pertaining to the Facilities and the other Subject Assets, any and all records, rent rolls, and other documents pertaining to the use and occupancy of the Facilities, income thereof, the cost and expenses of maintenance thereof, and any and all other matters concerning the condition, suitability, integrity, marketability, compliance with law, or other attributes or aspects of the Facilities, or a part thereof, is furnished to Buyer solely as a courtesy; (ii) THE INFORMATION IS PROVIDED, AND THE FACILITIES AND THE OTHER SUBJECT ASSETS ARE PURCHASED, ON AN AS-IS-WHERE-IS BASIS, AND SELLER MAKES NO REPRESENTATION, EXPRESS OR IMPLIED, OR ARISING BY OPERATION OF LAW OR OTHERWISE, INCLUDING, BUT IN NO WAY LIMITED TO, ANY WARRANTY OF CONDITION, MERCHANTABILITY, OR FITNESS FOR A PARTICULAR PURPOSE AS TO THE INFORMATION OR ANY FACILITY; and (iii) no representations, whether written or oral, have been made by or on behalf of Seller, or its agents, employees or representatives in order to induce Buyer to enter into this Agreement. Without limiting the generality of the foregoing, Buyer acknowledges, warrants and represents to Seller that neither Seller nor its agents, employees or representatives have made any representations or statements, whether written or oral, to Buyer concerning the investment potential, operation or resale of the Facilities at any future date, at a profit or otherwise, nor has Seller or its agents, employees or representatives rendered any advice or expressed any opinion to Buyer regarding any Tax consequences of ownership of the Facilities or the other Subject Assets.   (b)  Buyer acknowledges, represents and warrants that as of the Closing Date, Buyer will be familiar with the Facilities and the other Subject Assets and will have made such independent investigations as Buyer deems necessary or appropriate concerning the Facilities and the other Subject Assets. If Buyer elects to proceed with the purchase of the Facilities and the other Subject Assets, any objections which Buyer may have with respect to the Facilities and the other Subject Assets shall be waived by Buyer. Except as expressly provided in this Agreement, Seller makes no representations or warranties and specifically disclaims any representation, warranty, or guaranty, oral or written, past, present or future with respect to the physical condition or any other aspect of the Facilities and the other Subject Assets, including, without limitation, the structural integrity of any Improvements, the manner, construction, condition, and state of repair or lack of repair of any of any Improvements, the conformity of any Improvements to any plans or specifications for the Facilities, including, but not limited to, any plans and specifications that may have been or which may be provided or otherwise made available to Buyer, the conformity of the Facilities to past, current or future applicable zoning or building code requirements or the compliance with any other Laws, the financial earning capacity or history or expense history of the operation of the Facilities and the other Subject Assets, the nature and extent of any right-of-way, lease, possession, Lien, license, reservation, condition, or otherwise, the existence of soil instability, past soil repairs, soil additions or conditions of soil fill, susceptibility to landslides, sufficiency of undershoring, sufficiency of drainage, whether a Facility is located wholly or partially in a flood plain or a flood hazard boundary or similar area, the existence or non-existence of hazardous waste or other toxic materials of any kind (including, without limitation, asbestos) or any other matter affecting the stability or integrity of the Land and/or the Improvements.     -------------------------------------------------------------------------------- Purchase and Sale Agreement - Page 16     SECTION 7.   CONDITIONS TO CLOSING.   7.1.  Conditions to the Obligations of the Parties. The obligations of each party hereto to consummate the Closing are subject to the satisfaction that no judgment, injunction, order, ruling or decree issued by any Governmental Authority restraining, enjoining or otherwise prohibiting the consummation of the transactions contemplated by this Agreement shall have been issued and then be in effect (provided that the parties hereto shall use commercially reasonable efforts to have any such judgment, order, injunction, decree or ruling vacated or lifted), nor shall there have been any Law enacted, enforced or deemed applicable to the transactions contemplated by this Agreement which makes the consummation thereof illegal.   7.2.  Conditions to the Obligations of Buyer. The obligation of Buyer to consummate this Agreement and the transactions contemplated hereby are subject to the fulfillment, prior to or at the Closing, of the following further conditions precedent, any of which may be waived by Buyer in its sole and absolute discretion:   (a)  Representations; Warranties; Covenants. Each of the representations and warranties of Seller contained in Section 3 hereof shall be true and correct in all material respects as though made on and as of the Closing; Seller shall, on or before the Closing, have performed in all material respects all of its obligations hereunder which by the terms hereof are to be performed on or before the Closing; and Seller shall have delivered to Buyer a certificate of the President of Seller dated as of the Closing to such effect   (b)  Deliveries. Seller shall have delivered (or caused to be delivered) the items described in Section 8.2 hereof.   (c)  Buyer Approvals. Buyer shall have obtained all Buyer Approvals, or reasonably satisfactory evidence that all Buyer Approvals will be obtained in the future with an effective date as of the Closing Date in accordance with local custom or practice, all of which shall be in form and substance reasonably satisfactory to Buyer.   7.3.  Conditions to Obligations of Seller. The obligation of Seller to consummate this Agreement and the transactions contemplated hereby are subject to the fulfillment, prior to or at the Closing, of the following further conditions precedent, any of which may be waived by Seller in its sole and absolute discretion:   (a)  Representations; Warranties; Covenants. Each of the representations and warranties of Buyer contained in Section 4 hereof shall be true and correct in all material respects as though made on and as of the Closing; Buyer shall, on or before the Closing, have performed in all material respects all of its obligations hereunder which by the terms hereof are to be performed on or before the Closing; and Buyer shall have delivered to Seller a certificate of the President of Buyer dated as of the Closing to such effect.   (b)  Buyer Approvals. Buyer shall have obtained all Buyer Approvals, or reasonably satisfactory evidence that all Buyer Approvals will be obtained in the future with an effective date as of the Closing Date in accordance with local custom or practice, all of which shall be in form and substance reasonably satisfactory to Seller.     -------------------------------------------------------------------------------- Purchase and Sale Agreement - Page 17     (c)  Deliveries. Buyer shall have delivered (or caused to be delivered) the items described in Section 8.3 hereof.     SECTION 8.   CLOSING.   8.1.  Time and Place of Closing. The closing of the purchase and sale provided for in this Agreement (the “Closing”) shall be held at the offices of Goodwin Procter LLP at Exchange Place, Boston, Massachusetts at a date and time fixed by mutual agreement of Buyer and Seller provided that such date shall be not later than the later of (a) the date that is 60 days after the date hereof, or (b) within five (5) Business Days after the date on which the conditions set forth in Section 7 have been satisfied or otherwise waived (the “Closing Date”). The Closing shall be effective as of 12:01 a.m. Eastern Time on the Closing Date.   8.2.  Seller’s Closing Deliveries. On the Closing Date, Seller shall deliver, or cause to be delivered, at its expense each of the following items to Buyer or its counsel:   (a)  Deeds. A deed in the customary form required for each jurisdiction in which each Facility is located (with covenants of title against grantor’s acts (e.g., special warranty)), executed and acknowledged by Seller, conveying to Buyer fee-simple title to the Real Property, as provided in Section 6.6 (individually and collectively, the “Deed”);   (b)  Bill of Sale. A bill of sale substantially in the form of Exhibit D attached hereto (the “Bill of Sale”), executed and acknowledged by Seller;   (c)  Assignment and Assumption Agreement. An assignment and assumption agreement substantially in the form of Exhibit E attached hereto (the “Assignment and Assumption Agreement”), executed and acknowledged by Seller;   (d)  Indemnification Escrow Agreement. The Indemnification Escrow Agreement, duly executed by each of Seller and the Closing Escrow Agent;   (e)  Certificates of Title; Leases. Certificates of title and leases (if applicable) for the Vehicles;   (f)  FIRPTA. An affidavit of Seller substantially in the form of Exhibit G attached hereto;   (g)  Termination of Management Agreements. Terminations, effective as of the Closing Date, of any existing management agreements with respect to any Facility;   (h)  Title Affidavits. Customary affidavits sufficient for the title company to delete any exceptions for parties in possession, mechanic’s or materialmen’s Liens from Buyer’s title policy and such other affidavits relating to such title policy as the title company may reasonably request;   (i)  Authority. A certificate by the Secretary of Seller certifying as to (i) the incumbency of the signatories authorized to execute the closing documents required to be executed by Seller on behalf of Seller and (ii) the resolutions adopted by the board of directors and stockholders of Seller approving of the sale of the Subject Assets as contemplated hereby;     -------------------------------------------------------------------------------- Purchase and Sale Agreement - Page 18     (j)  Closing Statement. A counterpart original closing statement duly executed by Seller setting forth the Cash Consideration, the closing adjustments (determined as provided in Section 2.2 hereof) and the application of the Cash Consideration as adjusted (the “Closing Statement”);   (k)  Rent Roll. A rent roll, certified by Seller as of a date that is within five (5) Business Days of the Closing Date, containing the following information with respect to each Facility: (i) the name of each resident at such Facility; (ii) the date rent has been paid through with respect to such resident; (iii) monthly minimum rent for such resident; (iv) estimated additional charges, if any with respect to such resident; and (v) the amount of any security deposit held on behalf of such resident;   (l)  Tenant Notices. Notices to residents of each Facility regarding the purchase and sale of the such Facility as contemplated by this Agreement;   (m)  Keys. Keys to all locks on Facilities in Seller’s possession or control, if any;   (n)  Tax Forms. Any and all transfer Tax returns, declarations of value or other documents required under applicable Law or necessary for recordation of the Deed; and   (o)  Other. Such other instruments as Buyer may reasonably request to effectuate the transaction contemplated by this Agreement without additional Liability or expense to Seller, provided that all such requests are received by Seller no later than two (2) Business Days before the Closing Date.   8.3.  Buyer’s Closing Deliveries. On the Closing Date, Buyer shall deliver, or cause to be delivered, at its expense each of the following to Seller or its counsel:   (a)  Assignment and Assumption Agreement. The Assignment and Assumption Agreement, executed and acknowledged by Buyer;   (b)  Indemnification Escrow Agreement. The Indemnification Escrow Agreement, duly executed by each of Buyer and the Closing Escrow Agent.   (c)  Closing Statement. The Closing Statement, executed by Buyer;   (d)  Cash Consideration. The Cash Consideration (other than the Deposit Escrow Amount and the Closing Escrow Amount) has been delivered into the Designated Account;   (e)  Closing Escrow Amount. The Closing Escrow Amount has been delivered into the Closing Escrow Account.   (f)  Other. Such other instruments as Seller may reasonably request to effectuate the transaction contemplated by this Agreement without additional Liability or expense to Buyer, provided that all such requests are received by Buyer no later than two (2) Business Days before the Closing Date.     -------------------------------------------------------------------------------- Purchase and Sale Agreement - Page 19     8.4.  Delivery of Deposit Escrow Amount. On the Closing Date, the Deposit Escrow Agent shall deliver or cause to be delivered the Deposit Escrow Amount to Seller pursuant to the terms of the Deposit Escrow Agreement.     SECTION 9.   TERMINATION OF AGREEMENT; RIGHT TO PROCEED; DEFAULT.   9.1.  Termination. This Agreement may be terminated as follows:   (a)  at any time before Closing, by written agreement of Buyer and Seller;   (b)  by Seller, if the Closing shall not have been consummated on or before December 15, 2005, by means of a written notice to Buyer, provided that such termination right shall not be available to Seller if Seller has failed to fulfill its obligations under this Agreement or if Seller’s actions or omissions have been a significant cause of the Closing not occurring on or before such date;   (c)  by Seller, on the one hand, or Buyer, on the other hand, by means of a written notice to the non-terminating party, if there shall be any Law that makes consummation of the transactions contemplated hereby illegal or otherwise prohibited, or if consummation of the transactions contemplated hereby would violate any nonappealable final order, decree or judgment of any Governmental Authority having competent jurisdiction, provided that such termination right shall not be available to any party unless such party shall have used its commercially reasonable efforts to oppose any such order, decree or judgment;   (d)  by Buyer (provided that it is not then in material breach of any representation, warranty, covenant or agreement contained in this Agreement) by means of a written notice to Seller if there has been a material breach by Seller of any representation, warranty, covenant or agreement set forth in this Agreement, which breach (1) would result in a failure to satisfy the closing conditions contained in Section 7.2(a) and (2) has not been cured within ten (10) Business Days following receipt by Seller of notice of such breach;   (e)  by Seller (provided that it is not then in material breach of any representation, warranty, covenant or agreement contained in this Agreement) by means of written notice to Buyer if there has been a material breach by Buyer of any representation, warranty, covenant or agreement set forth in the Agreement, which breach (1) would result in a failure to satisfy the closing conditions contained in Section 7.3(a) and (2) has not been cured within ten (10) Business Days following receipt by Buyer of notice of such breach;   (f)  by Seller pursuant to Section 9.4 hereof by means of a written notice to Buyer; or   (g)  by Buyer pursuant to Section 9.5 hereby by means of a written notice to Seller.   9.2.  Effect of Termination. Except as otherwise expressly provided herein, if this Agreement is terminated as permitted by Section 9.1, such termination shall be without Liability of any party hereto (or any stockholder, director, officer, employee, agent, consultant or representative of such party) to the other party hereto, provided that, subject to the provisions of Section 9.4, nothing herein shall relieve any party from any Liability for any willful material breach of this Agreement. The provisions of Sections 2.3 (Fees and Expenses), 9.2 (Effect of Termination), 12.1 (Governing Law; Consent to Jurisdiction; Waiver of Jury Trial), Section 12.6 (Construction) and Section 12.16 (Specific Performance) shall survive any termination hereof pursuant to Section 9.1. In the event that this Agreement is terminated pursuant to Sections 9.1(a), (b), (c), (d) or (g), the Deposit Escrow Agent shall return the Deposit Escrow Amount to Buyer pursuant to the terms of the Deposit Escrow Agreement.     -------------------------------------------------------------------------------- Purchase and Sale Agreement - Page 20     9.3.  Right to Proceed.   (a)  Anything in this Agreement to the contrary notwithstanding, if any of the conditions specified in Section 7.2 hereof have not been satisfied, Buyer shall have the right to proceed with the transactions contemplated hereby, provided, that, if Buyer proceeds with the transactions contemplated hereby, then Seller shall have no Liability to Buyer or any other Person on account of Seller’s failure to satisfy such conditions in Section 7.2 and the failure to satisfy such conditions shall be irrevocably waived.   (b)  Anything in this Agreement to the contrary notwithstanding, if any of the conditions specified in Section 7.3 hereof have not been satisfied, Seller shall have the right to proceed with the transactions contemplated hereby, provided, that, if Seller proceeds with the transactions contemplated hereby, then Buyer shall have no Liability to Seller or any other Person on account of Buyer’s failure to satisfy such conditions in Section 7.3 and the failure to satisfy such conditions shall be irrevocably waived.   9.4.  Buyer Default. Anything in this Agreement to the contrary notwithstanding, if all of the conditions set forth in Section 7.2 have been satisfied and Buyer defaults in its obligation to close hereunder, then Seller shall have the right, in its sole discretion, to (i) terminate this Agreement and (ii) receive the Deposit Escrow Amount as liquidated damages, in lieu of all other remedies available to Seller at Law or in equity for such default. Seller and Buyer agree that the damages resulting to Seller as a result of such default by Buyer as of the date of this Agreement are difficult or impossible to ascertain and the liquidated damages set forth in the preceding sentence constitute Buyer’s and Seller’s reasonable estimate of such damages.   9.5.  Seller Default. Anything in this Agreement to the contrary notwithstanding, if all of the conditions set forth in Section 7.3 have been satisfied and Seller defaults in its obligations to close hereunder, then, within 90 days after the date of such default, Buyer shall have the right, in its sole discretion, to take any and all legal actions necessary to compel Seller’s specific performance hereunder (it being acknowledged that damages at Law would be an inadequate remedy), and to consummate the transaction contemplated by this Agreement in accordance with the provisions of this Agreement.   9.6.  Casualty. If any of the Facilities is damaged by fire or any other casualty (the cost for repair of which is reasonably estimated to exceed an amount equal to 5% of the Cash Consideration) and are not substantially restored to the condition immediately prior to such casualty before the Closing Date, Buyer shall have the following elections:   (a)  to acquire the Facilities in their then condition and pay the Purchase Price without regard to the casualty, in which event Seller shall pay over or assign to Buyer, at Closing, (i) all amounts recovered or recoverable by Seller on account of any insurance as a result of such casualty, less amounts reasonably expended by Seller for partial restoration; and (ii) an amount of money equal to Seller’s deductible; or   (b)  to terminate this Agreement in which event the Deposit Escrow Agent shall return the Deposit Escrow Amount to Buyer pursuant to the terms of the Deposit Escrow Agreement, this Agreement shall terminate and neither Seller nor Buyer shall have any recourse against the other.     -------------------------------------------------------------------------------- Purchase and Sale Agreement - Page 21     9.7.  Condemnation. If any portion of or interest in a Facility shall be taken or is in the process of being taken by exercise of the power of eminent domain or if any governmental authority notifies Seller prior to the Closing Date of its intent to take or acquire any portion of or interest in a Facility (each an “Eminent Domain Taking”), Seller shall give notice promptly to Buyer of such event and Buyer shall purchase the Subject Assets (including any Facility which is the subject of an Eminent Domain Taking) and pay the Cash Consideration without deduction or credit on account of such Eminent Domain Taking, and Seller shall pay over or assign to Buyer on delivery of the deed all awards recovered or recoverable by Seller on account of such Eminent Domain Taking, less any amounts reasonably expended by Seller in obtaining such award.   SECTION 10.   SURVIVAL.   10.1.  Survival of Representations and Warranties. Each of the representations and warranties set forth in Sections 3 and 4 hereof are material, shall be deemed to have been relied upon by the applicable party, shall survive the execution and delivery of this Agreement and the Closing for a period of 180 days after the Closing Date, regardless of any investigation and shall not merge in the performance of any obligation by either party hereto.   10.2.  Survival of Covenants. The respective covenants, agreements and obligations of the parties hereto (exclusive of their respective representations and warranties which shall survive as indicated in Section 10.1 above) set forth in this Agreement are material, shall be deemed to have been relied upon by the other party and shall, except as otherwise expressly set forth herein, survive the execution and delivery of this Agreement and the Closing regardless of any investigation and shall not merge in the performance of any obligation by either party hereto.     SECTION 11.   INDEMNIFICATION.   11.1.  Indemnification by Seller. Seller shall indemnify and hold harmless Buyer, its Affiliates and their respective officers, directors, members, partners and employees (individually, a “Buyer Indemnified Party” and collectively, the “Buyer Indemnified Parties”) from and against and in respect of any damages, liabilities, losses, Taxes, fines, penalties, costs, and expenses (including, without limitation, reasonable fees of attorneys, accountants and consultants), whether or not arising out of third-party claims and including all amounts paid in investigation, defense or settlement of the foregoing (“Losses”), which may be sustained or suffered by any Buyer Indemnified Party arising out of or based upon any of the following matters:   (a)  any breach of any representation, warranty or covenant made by Seller in this Agreement, or by reason of any claim, action or proceeding asserted or instituted growing out of any matter or thing constituting such a breach; and   (b)  any Excluded Liability.   11.2.  Indemnification by Buyer. Buyer shall indemnify and hold harmless Seller, its Affiliates and their respective officers, directors, members, partners and employees (individually a “Seller Indemnified Party” and collectively the “Seller Indemnified Parties”) from and against any Losses which may be sustained or suffered by any Seller Indemnified Party arising out of or based upon any of the following matters:     -------------------------------------------------------------------------------- Purchase and Sale Agreement - Page 22     (a)  any breach of any representation, warranty or covenant made by Buyer in this Agreement, or by reason of any claim, action or proceeding asserted or instituted growing out of any matter or thing constituting such a breach; and   (b)  any Assumed Liability.   11.3.  Limitations on Indemnification.   (a)  Notwithstanding the provisions of Sections 11.1 and 11.2: (i) Seller shall not be liable for Losses under Section 11.1(a) hereof unless the aggregate amount of such losses for which the Buyer Indemnified Parties are entitled to be indemnified pursuant to such Section 11.1(a) exceeds US$500,000.00 (the “Seller Deductible”), at which time Seller shall be liable for all Losses sustained by the Buyer Indemnified Parties in excess of the Seller Deductible, subject to the other limitations set forth in this Section 11.3; (ii) Buyer shall not be liable for Losses under Section 11.2(a) hereof unless the aggregate amount of such Losses for which the Seller Indemnified Parties are entitled to be indemnified pursuant to such Section 11.2(a) exceeds US$500,000.00 (the “Buyer Deductible”), at which time Buyer shall be liable for all Losses sustained by the Seller Indemnified Parties in excess of the Buyer Deductible, subject to the other limitations set forth in this Section 11.3; (iii) the aggregate maximum liability of Seller for Losses under Section 11.1 shall not exceed the Closing Escrow Amount; and (iv) the aggregate maximum liability of Buyer for Losses under Section 11.2 shall not exceed US$1,380,000.00. Nothing contained in this Agreement shall (x) prevent any Person from pursuing remedies as may be available to it under applicable Law in the event of (A) any party’s failure to comply with its indemnification obligations hereunder or (B) a case of fraud, or (y) limit the ability of a party to seek injunctive or similar relief pursuant to Section 12.16. The amount of Losses shall be reduced by any Tax benefit actually realized and any insurance proceeds received, in each case, by a party (or its Affiliates) seeking indemnification under this Section 11.   (b)  Except in the case of fraud or as otherwise expressly provided in this Agreement, from and after the Closing, the sole and exclusive remedy with respect to any and all Losses relating to the subject matter of this Agreement shall be pursuant to the indemnification provisions set forth in this Section 11 and the provisions of the Indemnification Escrow Agreement. Following the Closing, except in the case of fraud, the Liability of Seller under this Section 11 for any Losses and the right of the Buyer Indemnified Parties to seek indemnification for Losses under this Section 11 shall, in each case, be limited solely and exclusively to the Closing Escrow Amount.   (c)  Payment of the Closing Escrow Amount out of the Closing Escrow Account shall be governed by the terms and conditions of the Indemnification Escrow Agreement.   11.4.  Notice; Defense of Claims.   (a)  Any party seeking indemnification under Sections 11.1 or 11.2 hereof (the “Indemnified Party”) shall give prompt written notice to the party against whom indemnity is sought (the “Indemnifying Party”) of (i) the assertion of any claim by the Indemnified Party or (ii) the assertion by any Person of any claim, action, suit or proceeding alleging facts that, if proven true, would constitute a misrepresentation or breach of warranty by a party hereto; provided, that, the omission to so notify the Indemnifying Party promptly will not relieve the Indemnifying Party from any liability or obligation hereunder except to the extent that the Indemnifying Party shall have been actually prejudiced as a result of the failure or delay in giving such notice. Such notice shall state the information then available regarding the amount and nature of such claim, liability or expense and shall specify the provision or provisions of this Agreement under which the liability or obligation is asserted.     -------------------------------------------------------------------------------- Purchase and Sale Agreement - Page 23     (b)  With respect to third party claims, if within 20 days after receiving the notice described in clause (a) above, the Indemnifying Party gives written notice to the Indemnified Party stating that it disputes and intends to defend against such claim, liability or expense at its own cost and expense, then counsel for the defense shall be selected by the Indemnifying Party (subject to the consent of the Indemnified Party which consent shall not be unreasonably withheld, delayed or conditioned), and the Indemnified Party shall not be required to make any payment with respect to such claim, liability or expense as long as the Indemnifying Party is conducting a good faith and diligent defense at its own expense; provided, however, that the assumption of defense of any such matters by the Indemnifying Party shall relate solely to the claim, liability or expense that is subject or potentially subject to indemnification hereunder. The Indemnifying Party shall have the right, with the consent of the Indemnified Party, which consent shall not be unreasonably withheld, delayed or conditioned, to settle all indemnifiable matters related to claims by third parties which are susceptible to being settled provided the Indemnifying Party’s obligation to indemnify the Indemnified Party therefor will be fully satisfied. The Indemnifying Party shall keep the Indemnified Party apprised of the status of the claim, liability or expense and any resulting suit, proceeding or enforcement action, shall furnish the Indemnified Party with all documents and information that the Indemnified Party shall reasonably request and shall consult with the Indemnified Party prior to acting on major matters, including settlement discussions. Notwithstanding anything herein stated, the Indemnified Party shall at all times have the right to fully participate in such defense at its own expense directly or through counsel; provided, however, if the named parties to the action or proceeding include both the Indemnifying Party and the Indemnified Party and representation of both parties by the same counsel would be inappropriate under applicable standards of professional conduct, the expense of separate counsel for the Indemnified Party (selected by the Indemnified Party) shall be paid by the Indemnifying Party. If no such notice of intent to dispute and defend is given by the Indemnifying Party, or if such diligent good faith defense is not being or ceases to be conducted, the Indemnified Party shall, at the expense of the Indemnifying Party, undertake the defense of (with counsel selected by the Indemnified Party), and shall have the right to compromise or settle (exercising reasonable business judgment), such claim, liability or expense. If such claim, liability or expense is one that by its nature cannot be defended solely by the Indemnifying Party, then the Indemnified Party shall make available all information and assistance that the Indemnifying Party may reasonably request and shall cooperate with the Indemnifying Party in such defense.   (c)  With respect to non-third party claims, if within 20 days after receiving the notice described in clause (a) above, the Indemnifying Party does not give written notice to the Indemnified Party that it contests such indemnity claim, the amount of indemnity payable for such claim shall be as set forth in the Indemnified Party’s written notice. If the Indemnifying Party provides written notice to the Indemnified Party within such 20-day period that it contests such indemnity, the Indemnified Party and the Indemnifying Party shall attempt in good faith to reach an agreement with regard thereto within 30 days after delivery of the Indemnifying Party’s written notice. If the Indemnified Party and the Indemnifying Party cannot reach agreement within such 30-day period, the matter shall be submitted to a mutually agreeable third party for binding arbitration. If the parties cannot reach agreement with respect to the selection of such third party, the matter shall be submitted to J.A.M.S./ENDISPUTE for binding arbitration in Boston, Massachusetts under the rules of practice and procedure of such organization in such city. In any event, the costs of such arbitration shall be split equally between the Indemnified Party and the Indemnifying Party.     -------------------------------------------------------------------------------- Purchase and Sale Agreement - Page 24     SECTION 12.   MISCELLANEOUS.   12.1.  Governing Law; Consent to Jurisdiction; Waiver of Jury Trial.   (a)  This Agreement shall be construed under and governed by the internal laws of The Commonwealth of Massachusetts without regard to its conflict of Laws provisions.   (b)  For the purposes of establishing the parties’ rights hereunder, each party hereto hereby irrevocably and unconditionally consents to submit to the exclusive jurisdiction of the courts of the Commonwealth of Massachusetts located in the City of Boston and of the courts of the United States of America located in the City of Boston, and each party hereto agrees not to commence any action, suit, proceeding or appeal relating thereto except in such courts. Each party hereto hereby irrevocably and unconditionally waives any objection to the laying of venue of any action, suit or proceeding arising out of this Agreement or the transactions contemplated hereby in accordance with the foregoing sentence, and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum.   (c)  EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED IN CONTRACT, TORT OR OTHERWISE) ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER RELATED DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENT OR ACTION RELATED HERETO OR THERETO.   12.2.  Bulk Sales Laws. Buyer waives compliance by Seller with the provisions of any applicable bulk sales with the transfer of the Subject Assets under this Agreement.   12.3.  Notices. Any notice, request, demand or other communication required or permitted hereunder shall be in writing and shall be deemed to have been duly given: (i) on the date of delivery, if personally delivered by hand; (ii) upon the third day after such notice is deposited in the United States mail, if mailed by registered or certified mail, postage prepaid, return receipt requested; (iii) upon the date scheduled for delivery if such notice is sent by a nationally recognized overnight express courier; or (iv) on the date of transmission, if such notice is sent by facsimile transmission, provided that the sender receives written confirmation of receipt (which may be the automatic confirmation printed by the sender’s fax machine). All notices to a party will be sent to the addresses set forth below or to such other address or person as such party may designate by notice to each other party hereunder:     TO SELLER:                   Epoch Senior Living 51 Sawyer Road Suite 500 Waltham, MA 02453 Attn: Laurence Gerber and Beth Anderson Fax: (781) 398-7669     -------------------------------------------------------------------------------- Purchase and Sale Agreement - Page 25     with a copies to:   Goodwin Procter LLP Exchange Place Boston, MA 02109 Attn: Andrew C. Sucoff, Esq. Fax: (617) 227-8591   New World Realty Management, LLC 60 Cuttermill Road Suite 612 Great Neck, NY 11021 Attn: Seth Lipsay and Frank Adipietro Fax: (516) 465-2801 Paul, Hastings, Janofsky & Walker LLP Park Avenue Tower 75 East 55th Street New York, NY 10022 Attn: Gregg Miller, Esq. Fax: (212) 230-7667   TO BUYER:                    American Retirement Corporation 111 Westwood Place Suite 200 Brentwood, TN 37027 Attn: W.E. Sheriff Fax: (615) 221-2269   with a copy to:   Bass, Berry & Sims 315 Deaderick Street AmSouth Center, Suite 2700 Nashville, TN 37238 Attn: T. Andrew Smith Fax: (616) 742-2766   Any notice given hereunder may be given on behalf of any party by such party’s counsel or other authorized representatives.   12.4.  Entire Agreement. This Agreement, including the Schedules and Exhibits referred to herein and the other writings specifically identified herein or contemplated hereby, is complete, reflects the entire agreement of the parties with respect to its subject matter, and supersedes all previous written or oral negotiations, commitments and writings. No promises, representations, understandings, warranties and agreements have been made by any of the parties hereto except as referred to herein or in such Schedules and Exhibits or in such other writings; and all inducements to the making of this Agreement relied upon by either party hereto have been expressed herein or in such Schedules or Exhibits or in such other writings.     -------------------------------------------------------------------------------- Purchase and Sale Agreement - Page 26     12.5.  Assignability; Binding Effect. Buyer shall not assign this Agreement or its rights hereunder to any individual or entity without the prior written consent of Seller, which consent Seller may grant or withhold in its sole and absolute discretion, and any such assignment shall be null and void ab initio. Subject to the foregoing, this Agreement shall be binding upon and enforceable by, and shall inure to the benefit of, the parties hereto and their respective successors and assigns.   12.6.  Construction. The parties hereto agree that they have been represented by counsel during the negotiation and execution of this Agreement and the other documents and instruments contemplated thereby and, therefore, waive the application of any Law or rule of construction providing that ambiguities in an agreement or other document will be construed against the party drafting such agreement or document. Unless the context of this Agreement otherwise requires, (i) words of any gender include each other gender; (ii) words using the singular or plural number also include the plural or singular number, respectively; (iii) the terms “hereof,” “herein,” “hereby” and derivative or similar words refer to this entire Agreement; (iv) the terms “Section” refers to the Section of this Agreement; (v) the word “including” shall mean “including, without limitation;” (vi) the word “or” shall be disjunctive but not exclusive; and (vii) the word “agreement” shall mean any contract, commitment or other agreement, whether oral or written, that is legally binding. The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. References to agreements and other documents shall be deemed to include all subsequent amendments and other modifications thereto. References to statutes shall include all regulations promulgated thereunder and references to statutes or regulations shall be construed as including all statutory and regulatory provisions consolidating, amending or replacing the statute or regulation. The Schedules and Exhibits to this Agreement are a material part hereof and shall be treated as if fully incorporated into the body of the Agreement. Whenever this Agreement refers to a number of days, such number shall refer to calendar days unless Business Days are specified, and shall be counted from the day immediately following the date from which such number of days are to be counted.   12.7.  Execution in Counterparts. For the convenience of the parties and to facilitate execution, this Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same document. For the purposes of executing this Agreement, (a) a document signed and transmitted by facsimile machine or telecopier shall be treated as an original document; (b) the signature of any party on such document shall be considered as an original signature; (c) the document transmitted (or the document of which the page containing the signature or signatures of one of more parties is transmitted) shall have the same effect as a counterpart thereof containing original signatures; and (d) at the request of a party, each party who executed a document and transmitted such document by facsimile machine or telecopier, shall provide such original document to the other party. No party may raise as a defense to the enforcement of this Agreement or any other document required to be delivered in accordance with its terms, including any amendment thereof, that a facsimile machine or telecopier was used to transmit a signature of that party or another party on the Agreement, other document, or amendment.   12.8.  Amendments and Waivers; Effect. This Agreement may not be amended or modified, nor may compliance with any condition or covenant set forth herein be waived, except by a writing duly and validly executed by each party hereto, or in the case of a waiver, the party waiving compliance. No failure or delay by any party hereto in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege.   12.9.  Third Party Beneficiaries. Except as otherwise expressly provided in this Agreement, this Agreement is for the sole benefit of the parties hereto and their permitted successors and assigns and nothing herein, express or implied, is intended to or shall confer upon any other Person any legal or equitable right, benefit or remedy of any nature whatsoever under or by reason of this Agreement. The Buyer Indemnified Parties and the Seller Indemnified Parties are express third party beneficiaries of this Agreement.     -------------------------------------------------------------------------------- Purchase and Sale Agreement - Page 27     12.10.  Time of the Essence. Time is of the essence of this Agreement.   12.11.  Use of Proceeds to Clear Title. To enable Seller to make conveyance as herein provided, Seller may, at the time of Closing, use the Purchase Price or any portion thereof to clear the title of any or all encumbrances or interests, provided that provision reasonably satisfactory to Buyer’s attorney is made for prompt recording of all instruments so procured in accordance with conveyancing practice in the jurisdiction in which a Facility is located.   12.12.  Submission not an Offer or Option. The submission of this Agreement or a summary of some or all of its provisions for examination or negotiation by Buyer or Seller does not constitute an offer by Seller or Buyer to enter into an agreement to sell or purchase the Facilities, and neither party shall be bound to the other with respect to any such purchase and sale until a definitive agreement satisfactory to Buyer and Seller in their sole discretion is executed and delivered by both Seller and Buyer.   12.13.  Designee. In order to comply with information reporting requirements of Section 6045(e) of the Code and the Treasury Regulations, the parties agree (i) to execute an IRS Form 1099-S Designation Agreement at or prior to the Closing to designate the Title Company (the “Designee”) as the party who shall be responsible for reporting the contemplated sale of the Subject Assets to the Internal Revenue Service (the “IRS”) on IRS Form 1099-S; (ii) to provide the Designee with the information necessary to complete Form 1099-S; (iii) that the Designee shall not be liable for the actions taken under this Agreement, or for the consequences of those actions, except as they may be the result of gross negligence or willful misconduct on the part of the Designee; and (iv) that the Designee shall be indemnified by the parties for any costs or expenses incurred as a result of the actions taken hereunder, except as they may be the result of gross negligence or willful misconduct on the part of the Designee. The Designee shall provide all parties to this transaction with copies of the IRS Forms 1099-S filed with the IRS and with any other documents used to complete IRS Form 1099-S.   12.14.  Severability. In the event that any provision of this Agreement, or the application thereof, becomes or is declared by a court of competent jurisdiction to be illegal, void or unenforceable, the remainder of this Agreement will continue in full force and effect and the application of such provision to other Persons or circumstances will be interpreted so as reasonably to effect the intent of the parties hereto. The parties further agree to replace such void or unenforceable provision of this Agreement with a valid and enforceable provision that will achieve, to the extent possible, the economic, business and other purposes of such void or unenforceable provision.   12.15.  Other Remedies. Except as otherwise provided herein, any and all remedies herein expressly conferred upon a party will be deemed cumulative with and not exclusive of any other remedy conferred hereby, or by Law or equity upon such party, and the exercise by a party of any one remedy will not preclude the exercise of any other remedy.   12.16.  Specific Performance. The parties hereto agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to seek an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof in any court of the United States of America or any state having jurisdiction, this being in addition to any other remedy to which they are entitled at Law or in equity. Notwithstanding the foregoing to the contrary, the provisions of Section 9.4 shall control over any inconsistent provisions of this Section 12.16.     -------------------------------------------------------------------------------- Purchase and Sale Agreement - Page 28     12.17.  Certain Defined Terms. For purposes of the Agreement, the following terms have the following meanings:   “Affiliate” means, with respect to any Person, any other Person that directly, or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with, the Person specified, where “control” means the possession, directly or indirectly, of the power to direct the management and policies of a Person whether through the ownership of voting securities or otherwise. For all purposes of this Agreement, East-West HR LLC and its members, directors and officers shall all be deemed Affiliates of Seller. “Business Day” means any day of the year on which national banking institutions in The Commonwealth of Massachusetts are open to the public for conducting business and are not required to close. “Closing Escrow Agent” means Chicago Title Insurance Company. “Code” means the Internal Revenue Code of 1986, as amended. “Governmental Authority” means any government, any governmental entity, department, commission, agency, board, authority, official, and any regulatory, administrative or other body or instrumentality, and any court, tribunal, or judicial or arbitral body, whether multinational, national, United States federal, state or local. “Law” or “Laws” means all laws, statutes, ordinances, rules, regulations, orders, decrees, common law and other requirements having the force of law promulgated by any Governmental Authority, including, without limitation, treaty provisions (including, without limitation, all directives and regulations thereunder), which are applicable to a specified Person, in each case, whether multinational, national, United States federal, state or local, or arising out of or under international treaty or compact (including, without limitation, all directives and regulations thereunder). “Liability” or “Liabilities” mean any liability, debt, obligation, deficiency, Tax, penalty, assessment, fine, claim, cause of action or other loss, fee, cost or expense of any kind or nature whatsoever, whether asserted or unasserted, absolute or contingent, known or unknown, accrued or unaccrued, liquidated or unliquidated, and whether due or to become due and regardless of when asserted. “Lien” means, with respect to any asset, any mortgage, lien, license, pledge, charge, security interest, restriction or encumbrance of any kind in respect of such asset. “Material Adverse Effect” means a material adverse effect on (a) the business, condition (financial or other), assets, liabilities or results of operations of Seller or (b) the ability of the Seller to perform its obligations pursuant to this Agreement and to consummate the transactions contemplated hereby in a timely manner. “Permitted Liens” means (i) Liens for Taxes or other governmental charges, assessments or levies which are not delinquent, (ii) landlord’s, mechanic’s, carrier’s, workmen’s, repairmen’s or other similar Liens arising or incurred in the ordinary course of business consistent with past practice which do not materially detract from the value of the property encumbered thereby, (iii) minor imperfections of title, conditions, easements and reservations of rights, including easements and reservations of, or rights of others for, rights of way, sewers, electric lines, telegraph and telephone lines and other similar purposes, encroachments, covenants and restrictions including such matters disclosed on the existing owner’s title policies (not including Monetary Liens); and (iv) subject to the provisions of Section 2.2(a) hereof, any inchoate Liens for ad valorem Taxes. Notwithstanding the foregoing, as of the Closing Date, no Monetary Lien shall be considered to be a Permitted Lien.     -------------------------------------------------------------------------------- Purchase and Sale Agreement - Page 29   “Person” means an individual, corporation, partnership, association, trust or other entity or organization, including, without limitation, any Governmental Authority. “Tax”, “Taxes” and “Taxation” means all multinational, national, United States federal, state and local net income, alternative or add-on minimum, estimated, gross income, gross receipts, sales, use, ad valorem, value added, transfer, franchise, capital profits, lease, service, license, withholding, payroll, employment, excise, severance, stamp, occupation, premium, property, environmental, business or windfall profit taxes, customs duties and other taxes, governmental fees and other like assessments and charges of any kind whatsoever (including Tax liabilities incurred or borne as a transferee or successor, or by contract or otherwise), together with all interest, penalties, additions to tax and additional amounts with respect thereto.   “Treasury Regulations” means the regulations, including proposed regulations and temporary regulations, promulgated by the U.S. Department of the Treasury under the Code, as amended.       [Remainder of Page Intentionally Left Blank]   -------------------------------------------------------------------------------- Signature Page to Purchase and Sale Agreement IN WITNESS WHEREOF the parties hereto have caused this Agreement to be executed as of the date set forth above by their duly authorized representatives.         SELLER:          EPOCH SL VI, INC.          By:       Name:     Title:               BUYER:          AMERICAN RETIREMENT CORPORATION          By:       Name:     Title:     --------------------------------------------------------------------------------   EXHIBIT A   List of Facilities   Facility   1. Denver Project located in Denver, Colorado   2. Tucson Project located in Tucson, Arizona   3. Roswell Project located in Roswell, Georgia   4. Houston Project located in Houston, Texas   5. Sun City Project located in Sun City, Arizona   6. Overland Park Project located in Overland Park, Kansas   7. Las Vegas Project located in Las Vegas, Nevada   8. Minnetonka Project located in Minnetonka, Minnesota     Exhibit A --------------------------------------------------------------------------------   EXHIBIT B   Legal Description of Land   (attached)       Exhibit B --------------------------------------------------------------------------------   EXHIBIT C   Form of Deposit Escrow Agreement   Escrow Officer: Escrow No.: Phone No.: Facsimile No.: Date:   TO: Chicago Title Insurance Company (“Title Company”) Suite 805   75 Federal Street   Boston, MA 02110   The amount of US$5,000,000.00 (such amount, together with interest, if any, earned thereon is collectively referred to as the “Escrow Deposit”) is being deposited in escrow with the Title Company by American Retirement Corporation (the “Buyer”) under that certain Purchase and Sale Agreement (as the same may be amended from time to time, the “Agreement”) dated September 8, 2005, by and between Buyer and Epoch SL VI, Inc. (the “Seller”).   As escrowee, you are hereby directed to hold, deal with and dispose of the Escrow Deposit in accordance with the following terms and conditions (the “Escrow Instructions”):   1. You are to hold the Escrow Deposit until: (i) you are in receipt of a joint order by the undersigned Seller and Buyer as to the disposition of the Escrow Deposit; or (ii) you are in receipt of a written demand (the “Demand”) from either Seller or Buyer for the payment of the Escrow Deposit or any portion thereof. Upon receipt of any Demand (other than a Demand from Buyer as provided in Section 6.4 of the Agreement prior to the Inspection Period Expiration), you are directed to so notify the other party, enclosing a copy of the Demand. If within five (5) days after the non-demanding party has received or is deemed to have received your notice of your receipt of the Demand, you have not received from the non-demanding party its notice of objection to the Demand, then you are to disburse the Escrow Deposit as requested by the Demand. If within said five-day period you receive from the non-demanding party its notice of objection to the Demand, then you are to continue to hold the Escrow Deposit until you are in receipt of a joint order as aforesaid, but after sixty (60) days you may deposit the Escrow Deposit with a court of competent jurisdiction.   2. Notwithstanding the foregoing, as escrowee, you are hereby expressly authorized and directed to regard and to comply with and obey any and all orders, judgments or decrees entered or issued by any court having jurisdiction over the subject matter hereof, and provided you obey or comply with any such order, judgment or decree of any court, you shall not be liable to either of the parties hereto or any other person or entity by reason of such compliance, notwithstanding any such order, judgment or decree be entered without jurisdiction or be subsequently reversed, modified, annulled, set aside or vacated. In case of any suit or proceeding regarding the Escrow Instructions, to which you are or may at any time be a party, the undersigned Seller and Buyer agree that the non-prevailing party shall pay to you upon demand all reasonable costs and expenses incurred by you in connection herewith.     Exhibit C - Page 1 --------------------------------------------------------------------------------     3. Any escrow fee to be charged by you is to be borne equally by the undersigned Seller and Buyer.   4. As escrowee, you shall invest the Escrow Deposit in an interest-bearing savings or money market account or short term U.S. Treasury Bills or similar cash equivalent securities, as the undersigned Buyer may direct. Any interest earned on the Escrow Deposit, after you deduct your customary investment charges, shall in all events be for Buyer’s benefit.   5. All notices or other communications hereunder shall be in writing and shall be personally delivered or sent by overnight courier (such as Federal Express), by facsimile transmission or by first class United States Mail, postage prepaid, registered or certified (return receipt requested) to the respective addresses for Seller and Buyer as provided for in the Agreement and for escrowee as provided herein. A notice is given on the date it is personally delivered, sent by overnight courier or facsimile transmission, or deposited with the United States Mail for delivery as aforesaid. A notice is received on the date it is personally delivered, the day after sent if sent by overnight courier or facsimile transmission or, if sent by mail as aforesaid, on the date noted on the return receipt.   6. The Escrow Instructions are being entered into to implement the Agreement and shall not (nor be deemed to.) amend, modify or supersede the Agreement or act as a waiver of any rights, obligations or remedies set forth therein; provided, however, that you may rely solely upon the Escrow Instructions.   7. The duties of the Title Company shall be determined solely by the express provisions of the Escrow Instructions and are purely ministerial in nature. If there is any dispute between the parties hereto as to whether or not the Title Company is obligated to disburse or release the funds held under and pursuant to the Escrow Instructions, the Title Company shall not be obligated to make such disbursement or delivery, but in such event shall hold the funds until receipt by the Title Company of an authorization in writing signed by all persons having an interest in said dispute, directing the disposition of the funds, or in the absence of such authorization, the Title Company shall hold the funds until a final determination of the rights of the parties in an appropriate proceeding (a “Final Determination”). If such written authorization is not given, or proceedings for such determination are not begun and diligently continued, the Title Company may, but is not required to, retain counsel and bring an appropriate action or proceeding for leave to deposit the funds pending such determination. The Title Company shall be reimbursed for all costs and expenses incurred by it in connection with such action or proceeding, including reasonable attorneys’ fees and disbursements, by the parties hereto. Upon delivery of the funds as provided herein, the Title Company shall have no further liability hereunder. If threatened with litigation, the Title Company is hereby authorized by the undersigned to interplead all interested parties in any court of competent jurisdiction and to deposit the funds with the clerk of the court, and thereupon the Title Company shall be fully relieved and discharged of any further responsibility under the Escrow Instructions. 8.  The Title Company shall not be liable for any mistake of fact or error of judgment or any acts or omissions of any kind unless caused by its willful misconduct or gross negligence. The parties hereto each release the Title Company from liability for any act done or omitted to be done by the Title Company in good faith (and without gross negligence or willful misconduct) in the performance of its obligations and duties hereunder. The Title Company shall be entitled to rely on any instrument or signature believed by it to be genuine and may assume that any person purporting to give any writing, notice, or instruction in connection with the Escrow Instructions is duly authorized to do so by the party on whose behalf such writing, notice, or instruction is given.     Exhibit C - Page 2 --------------------------------------------------------------------------------     9.  The undersigned hereby jointly and severally indemnify the Title Company for and hold it harmless against any loss, liability, or expense incurred without negligence or bad faith on the part of the Title Company arising out of or in connection with the acceptance of or the performance of its duties under the Escrow Instructions, as well as the costs and expenses, including reasonable attorneys' fees and disbursements, of defending against any claim or liability arising under the Escrow Instructions. 10.  The Escrow Instructions may be executed in any number of counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. 11.  The Escrow Instructions may not be changed or modified except as agreed in a writing signed by each of the parties hereto. The Escrow Instructions shall be binding upon and inure to the benefit of the parties and their respective heirs, successors and assigns.     [Remainder of Page Intentionally Left Blank]   Exhibit C - Page 3 --------------------------------------------------------------------------------   Agreed and Acknowledged this ____ day of September, 2005.       SELLER:          EPOCH SL VI, INC.          By:       Name:     Title:               BUYER:          AMERICAN RETIREMENT CORPORATION          By:                     ESCROW AGENT:   CHICAGO TITLE INSURANCE COMPANY         By:       David J. Buczkowski     Assistant Vice President and Commercial     Underwriting Counsel     Exhibit C - Page 4 --------------------------------------------------------------------------------     EXHIBIT D   Form of Bill of Sale   EPOCH SL VI, Inc., a Delaware corporation (“Seller”), for good and valuable consideration paid to it, receipt and sufficiency of which is hereby acknowledged, and notwithstanding that the following property may be conveyed by separate and specific transfer documents, by these presents, does hereby sell, convey, transfer, assign and deliver unto American Retirement Corporation, a Tennessee corporation (“Buyer”), pursuant to the Purchase and Sale Agreement by and between Seller and Buyer dated as September __, 2005 (as the same may have been amended from time to time, the “Purchase Agreement”), all of its rights, title and interest in and to the Subject Assets (as defined in the Purchase Agreement).   TO HAVE AN TO HOLD, the Subject Assets unto Buyer and its successors and assigns, to and for its or their use forever,   If requested, Seller shall execute and deliver such other documents, certificates, agreements and other writings and take such other actions as may be reasonably necessary or desirable in order to consummate or implement expeditiously the transactions contemplated by the Purchase Agreement and to vest in Buyer the Subject Assets.   IN WITNESS WHEREOF, Seller has caused this Bill of Sale to be signed by its duly authorized officer as of ____________, 2005.         SELLER:          EPOCH SL VI, INC.          By:       Name:     Title:     [Remainder of Page Intentionally Left Blank]   Exhibit D - Page 1 --------------------------------------------------------------------------------   STATE OF   )   ) SS. COUNTY OF   )     I, _____________________, a notary public in and for said County, in the State aforesaid, DO HEREBY CERTIFY that ______________________ personally known to me to be the __________________ of _______________________________________, a _________, and personally known to me to be the same person whose name is subscribed to the foregoing instrument, appeared before me this day in person and acknowledged that as such _____________, he/she signed and delivered the said instrument, pursuant to authority, given by the Board of Directors of said corporation as his/her free and voluntary act, and as the free and voluntary act of said corporation, for the uses and purposes herein set forth.   GIVEN under my hand and official seal this _____ day of ___________,2005.       Notary Public             My Commission Expires:             Exhibit D - Page 2 --------------------------------------------------------------------------------     EXHIBIT E Form of Assignment and Assumption Agreement This Assignment and Assumption Agreement (the “Agreement”) is entered into as of the ___ day of _________, 2005, by and between EPOCH SL VI, Inc., a Delaware corporation (“Assignor”), and American Retirement Corporation, a Tennessee corporation (“Assignee”). W I T N E S S E T H: WHEREAS, this Agreement is being delivered pursuant to a Purchase and Sale Agreement by and between Assignor and Assignee dated as of September __, 2005 (as the same may have been amended from time to time, the “Purchase Agreement”) by which Assignor is selling to Assignee substantially all of the assets of Assignor’s business; and WHEREAS, Assignee has agreed to assume certain specified liabilities and obligations of Assignor as described below. NOW, THEREFORE, in consideration of the mutual representations, warranties, covenants and agreements contained in the Purchase Agreement and for other good and valuable consideration set forth in the Purchase Agreement, the receipt and sufficiency of which are hereby acknowledged and accepted, and upon the terms and subject to the conditions set forth in the Purchase Agreement, Assignor does hereby sell, convey, transfer, assign and deliver to Assignee all of the Subject Assets and Assignee does hereby assume the Assumed Liabilities. Capitalized terms used in this Agreement without definition shall have the meanings given to such terms in the Purchase Agreement. This Agreement is subject to all of the terms and conditions of the Purchase Agreement, as such Purchase Agreement may be amended from time to time. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument. [Remainder of Page Intentionally Left Blank]     Exhibit E - Page 1 --------------------------------------------------------------------------------     IN WITNESS WHEREOF the parties hereto have caused this Agreement to be executed as of the date set forth above by their duly authorized representatives.       SELLER:          EPOCH SL VI, INC.          By:       Name:     Title:               BUYER:          AMERICAN RETIREMENT CORPORATION          By:       Name:     Title:     Exhibit E - Page 2 --------------------------------------------------------------------------------     EXHIBIT F   Form of Indemnification Escrow Agreement   (Attached)   Exhibit F --------------------------------------------------------------------------------     EXHIBIT G   Form of FIRPTA Affidavit   Section 1445 of the Internal Revenue Code of 1986, as amended, provides that a transferee of a United States real property interest must withhold tax if the transferor is a foreign person. To inform the Transferee (hereinafter defined) that withholding of tax is not required upon the disposition of a United States real property interest by Epoch SL VI, Inc., a Delaware corporation (the “Transferor”), to American Retirement Corporation, a Tennessee corporation (the “Transferee”), the undersigned, being first duly sworn upon oath, does hereby depose and say, and does hereby certify the following on behalf of the Transferor:   1.  The undersigned is the ____________________ of the Transferor and is familiar with the business of the Transferor;   2.  The Transferor is not a foreign person; that is, the Transferor is not a nonresident alien, a foreign corporation, foreign partnership, foreign trust or foreign estate (as all such terms are defined in the Internal Revenue Code of 1986, as amended, and United States Treasury Department Income Tax Regulations in effect as of the date hereof);   3.  The Transferor is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware;   4.  The Transferor’s United States employer identification number is __________;   5.  The Transferor’s office address and principal place of business is ___________________; and   6.  This certificate and affidavit is made to induce the Transferee to consummate the transactions contemplated by the Transferor and Transferee.   The Transferor understands that this affidavit and certification may be disclosed to the United States Internal Revenue Service by the Transferee and that any false statement contained herein could be punished by fine, imprisonment, or both.   Under penalties of perjury, the undersigned declares that he has examined this affidavit and certificate, and to the best of the undersigned’s knowledge and belief, it is true, correct and complete. The undersigned further declares that he has authority to sign this affidavit and certificate on behalf of the Transferor.   Exhibit G - Page 1 --------------------------------------------------------------------------------     This affidavit and certificate is executed and delivered as of the ___ day of _______________, 2005.           a             By:         Name:       Title:       STATE OF   )   ) SS. COUNTY OF   )     I, _____________________, a notary public in and for said County, in the State aforesaid, DO HEREBY CERTIFY that ______________________ personally known to me to be the __________________ of _______________________________________, a _________, and personally known to me to be the same person whose name is subscribed to the foregoing instrument, appeared before me this day in person and acknowledged that as such _____________, he/she signed and delivered the said instrument, pursuant to authority, given by the Board of Directors of said corporation as his/her free and voluntary act, and as the free and voluntary act of said corporation, for the uses and purposes herein set forth.   GIVEN under my hand and official seal this _____ day of ___________,2005.       Notary Public                       My Commission Expires:           Exhibit G - Page 2 --------------------------------------------------------------------------------  

THE SECURITIES REPRESENTED HEREBY HAVE BEEN OFFERED IN AN OFFSHORE TRANSACTION TO A PERSON WHO IS NOT A U.S. PERSON (AS DEFINED HEREIN) PURSUANT TO REGULATION S UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"). NONE OF THE SECURITIES REPRESENTED HEREBY HAVE BEEN REGISTERED UNDER THE 1933 ACT, OR ANY U.S. STATE SECURITIES LAWS, AND, UNLESS SO REGISTERED, MAY NOT BE OFFERED OR SOLD, DIRECTLY OR INDIRECTLY, IN THE UNITED STATES (AS DEFINED HEREIN) OR TO U.S. PERSONS EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S UNDER THE 1933 ACT, PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933 ACT, OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE 1933 ACT AND IN EACH CASE ONLY IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. IN ADDITION, HEDGING TRANSACTIONS INVOLVING THE SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE 1933 ACT. "UNITED STATES" AND "U.S. PERSON" ARE AS DEFINED BY REGULATION S UNDER THE 1933 ACT.   THESE WARRANTS WILL EXPIRE AND BECOME NULL AND VOID AT 5:00 P.M. (VANCOUVER TIME) ON MAY 17, 2008. SHARE PURCHASE WARRANTS TO PURCHASE COMMON SHARES OF CALIFORNIA OIL & GAS CORPORATION THIS IS TO CERTIFY THAT _______________________, (the "Holder") of _________________________________________, has the right to purchase, upon and subject to the terms and conditions hereinafter referred to, up to _______________ fully paid and non-assessable common shares (the "Shares") in the capital of California Oil & Gas Corporation (hereinafter called the "Company") on or before 5:00 p.m. (Vancouver time) on May 17, 2008 (the "Expiry Date") at a price per Share of US$1.00 (the "Exercise Price") on the terms and conditions attached hereto as Appendix A (the "Terms and Conditions").   1. ONE (1) WARRANT AND THE EXERCISE PRICE ARE REQUIRED TO PURCHASE ONE SHARE. THIS CERTIFICATE REPRESENTS ________________ WARRANTS.   2. These Warrants are issued subject to the Terms and Conditions, and the Warrant Holder may exercise the right to purchase Shares only in accordance with those Terms and Conditions.   3. Nothing contained herein or in the Terms and Conditions will confer any right upon the Holder hereof or any other person to subscribe for or purchase any Shares at any time subsequent to the Expiry Date, and from and after such time, this Warrant and all rights hereunder will be void and of no value. IN WITNESS WHEREOF the Company has executed this Warrant Certificate this 17th day of November, 2006. CALIFORNIA OIL & GAS CORPORATION     Per:                                                                             Authorized Signatory       CW932472.1   --------------------------------------------------------------------------------     APPENDIX A   TERMS AND CONDITIONS dated November 17, 2006, attached to the Warrants issued by California Oil & Gas Corporation.   1. INTERPRETATION 1.1 Definitions In these Terms and Conditions, unless there is something in the subject matter or context inconsistent therewith:   (a) "Company" means California Oil & Gas Corporation until a successor corporation will have become such as a result of consolidation, amalgamation or merger with or into any other corporation or corporations, or as a result of the conveyance or transfer of all or substantially all of the properties and estates of the Company as an entirety to any other corporation and thereafter "Company" will mean such successor corporation;   (b) "Company's Auditors" means an independent firm of accountants duly appointed as auditors of the Company;   (c) "Director" means a director of the Company for the time being, and reference, without more, to action by the directors means action by the directors of the Company as a Board, or whenever duly empowered, action by an executive committee of the Board;   (d) "herein", "hereby" and similar expressions refer to these Terms and Conditions as the same may be amended or modified from time to time; and the expression "Article" and "Section," followed by a number refer to the specified Article or Section of these Terms and Conditions;   (e) "person" means an individual, corporation, partnership, trustee or any unincorporated organization and words importing persons have a similar meaning;   (f) "shares" means the common shares in the capital of the Company as constituted at the date hereof and any shares resulting from any subdivision or consolidation of the shares;   (g) "Warrant Holders" or "Holders" means the holders of the Warrants; and   (h) "Warrants" means the warrants of the Company issued and presently authorized and for the time being outstanding. 1.2 Gender Words importing the singular number include the plural and vice versa and words importing the masculine gender include the feminine and neuter genders. 1.3 Interpretation not affected by Headings The division of these Terms and Conditions into Articles and Sections, and the insertion of headings are for convenience of reference only and will not affect the construction or interpretation thereof. 1.4 Applicable Law The Warrant and the terms hereof are governed by the laws of the Province of British Columbia. The Holder, in its personal or corporate capacity and, if applicable, on behalf of each beneficial purchaser for whom it is acting, irrevocably attorns to the jurisdiction of the courts of the Province of British Columbia.   CW932472.1   -------------------------------------------------------------------------------- - 2 -     2. ISSUE OF WARRANTS 2.1 Additional Warrants The Company may at any time and from time to time issue additional warrants or grant options or similar rights to purchase shares of its capital stock. 2.2 Warrants to Rank Pari Passu All Warrants and additional warrants, options or similar rights to purchase shares from time to time issued or granted by the Company, will rank pari passu whatever may be the actual dates of issue or grant thereof, or of the dates of the certificates by which they are evidenced. 2.3 Issue in substitution for Lost Warrants   (a) In case a Warrant becomes mutilated, lost, destroyed or stolen, the Company, at its discretion, may issue and deliver a new Warrant of like date and tenor as the one mutilated, lost, destroyed or stolen, in exchange for and in place of and upon cancellation of such mutilated Warrant, or in lieu of, and in substitution for such lost, destroyed or stolen Warrant and the substituted Warrant will be entitled to the benefit hereof and rank equally in accordance with its terms with all other Warrants issued or to be issued by the Company.   (b) The applicant for the issue of a new Warrant pursuant hereto will bear the cost of the issue thereof and in case of loss, destruction or theft furnish to the Company such evidence of ownership and of loss, destruction, or theft of the Warrant so lost, destroyed or stolen as will be satisfactory to the Company in its discretion and such applicant may also be required to furnish indemnity in amount and form satisfactory to the Company in its discretion, and will pay the reasonable charges of the Company in connection therewith. 2.4 Warrant Holder Not a Shareholder The holding of a Warrant will not constitute the Holder thereof as a shareholder of the Company, nor entitle him to any right or interest in respect thereof except as in the Warrant expressly provided. 3. NOTICE 3.1 Notice to Warrant Holders Any notice required or permitted to be given to the Holders will be in writing and may be given by prepaid registered post, electronic facsimile transmission or other means of electronic communication capable of producing a printed copy to the address of the Holder appearing on the Holder's Warrant or to such other address as any Holder may specify by notice in writing to the Company, and any such notice will be deemed to have been given and received by the Holder to whom it was addressed if mailed, on the third day following the mailing thereof, if by facsimile or other electronic communication, on successful transmission, or, if delivered, on delivery; but if at the time or mailing or between the time of mailing and the third business day thereafter there is a strike, lockout, or other labour disturbance affecting postal service, then the notice will not be effectively given until actually delivered. 3.2 Notice to the Company Any notice required or permitted to be given to the Company will be in writing and may be given by prepaid registered post, electronic facsimile transmission or other means of electronic communication capable of producing a printed copy to the address of the Company set forth below or such other address as the Company may specify by notice in writing to the Holder, and any such notice will be deemed to have been given and received by the Company to whom it was addressed if mailed, on the third day following the mailing thereof, if by facsimile or other   CW932472.1   -------------------------------------------------------------------------------- - 3 -   electronic communication, on successful transmission, or, if delivered, on delivery; but if at the time or mailing or between the time of mailing and the third business day thereafter there is a strike, lockout, or other labour disturbance affecting postal service, then the notice will not be effectively given until actually delivered: California Oil & Gas Corporation. Suite 312, 407 - 2nd Street SW Calgary, AB T2P 2Y3 Attention: President Fax No.: (403) 261-1941 with a copy, which shall not constitute notice, to: Clark Wilson LLP Barristers and Solicitors 800 – 885 West Georgia Street Vancouver, British Columbia Canada V6C 3H1   Attention: Ethan P. Minsky Fax: 604.687.6314 4. EXERCISE OF WARRANTS 4.1 Method of Exercise of Warrants The right to purchase shares conferred by the Warrants may be exercised by the Holder surrendering the Warrant Certificate representing same, with a duly completed and executed subscription in the form attached hereto and a bank draft or certified cheque payable to the Company for the purchase price applicable at the time of surrender in respect of the shares subscribed for in lawful money of the United States of America, to the Company at the address set forth in, or from time to time specified by the Company pursuant to, Section 3.2. 4.2 Effect of Exercise of Warrants   (a) Upon surrender and payment as aforesaid the shares so subscribed for will be deemed to have been issued and such person or persons will be deemed to have become the Holder or Holders of record of such shares on the date of such surrender and payment, and such shares will be issued at the subscription price in effect on the date of such surrender and payment.   (b) Within ten business days after surrender and payment as aforesaid, the Company will forthwith cause to be delivered to the person or persons in whose name or names the shares so subscribed for are to be issued as specified in such subscription or mailed to him or them at his or their respective addresses specified in such subscription, a certificate or certificates for the appropriate number of shares not exceeding those which the Warrant Holder is entitled to purchase pursuant to the Warrant surrendered. 4.3 Subscription for Less Than Entitlement The Holder of any Warrant may subscribe for and purchase a number of shares less than the number which he is entitled to purchase pursuant to the surrendered Warrant. In the event of any purchase of a number of shares less than the number which can be purchased pursuant to a Warrant, the Holder thereof upon exercise thereof will in addition be entitled to receive a new Warrant in respect of the balance of the shares which he was entitled to purchase pursuant to the surrendered Warrant and which were not then purchased.   CW932472.1   -------------------------------------------------------------------------------- - 4 -     4.4 Warrants for Fractions of Shares To the extent that the Holder of any Warrant is entitled to receive on the exercise or partial exercise thereof a fraction of a share, such right may be exercised in respect of such fraction only in combination with another Warrant or other Warrants which in the aggregate entitle the Holder to receive a whole number of such shares. 4.5 Expiration of Warrants After the expiration of the period within which a Warrant is exercisable, all rights thereunder will wholly cease and terminate and such Warrant will be void and of no effect. 4.6 Time of Essence Time will be of the essence hereof. 4.7 Subscription Price Each Warrant is exercisable at a price per share (the "Exercise Price") of US$1.00. One (1) Warrant and the Exercise Price are required to subscribe for each share during the term of the Warrants. 4.8 Adjustment of Exercise Price   (a) The Exercise Price and the number of shares deliverable upon the exercise of the Warrants will be subject to adjustment in the event and in the manner following:   (i) If and whenever the shares at any time outstanding are subdivided into a greater or consolidated into a lesser number of shares the Exercise Price will be decreased or increased proportionately as the case may be; upon any such subdivision or consolidation the number of shares deliverable upon the exercise of the Warrants will be increased or decreased proportionately as the case may be.   (ii) In case of any capital reorganization or of any reclassification of the capital of the Company or in the case of the consolidation, merger or amalgamation of the Company with or into any other Company (hereinafter collectively referred to as a "Reorganization"), each Warrant will after such Reorganization confer the right to purchase the number of shares or other securities of the Company (or of the Company's resulting from such Reorganization) which the Warrant Holder would have been entitled to upon Reorganization if the Warrant Holder had been a shareholder at the time of such Reorganization. In any such case, if necessary, appropriate adjustments will be made in the application of the provisions of this Article Four relating to the rights and interest thereafter of the Holders of the Warrants so that the provisions of this Article Four will be made applicable as nearly as reasonably possible to any shares or other securities deliverable after the Reorganization on the exercise of the Warrants. The subdivision or consolidation of shares at any time outstanding into a greater or lesser number of shares (whether with or without par value) will not be deemed to be a Reorganization for the purposes of this clause 4.8(a)(ii).   (b) The adjustments provided for in this Section 4.8 are cumulative and will become effective immediately after the record date or, if no record date is fixed, the effective date of the event which results in such adjustments.   CW932472.1   -------------------------------------------------------------------------------- - 5 -     4.9 Determination of Adjustments If any questions will at any time arise with respect to the Exercise Price or any adjustment provided for in Section 4.8, such questions will be conclusively determined by the Company's Auditors, or, if they decline to so act any other firm of certified public accountants in the United States of America that the Company may designate and who will have access to all appropriate records and such determination will be binding upon the Company and the Holders of the Warrants. 5. WAIVER OF CERTAIN RIGHTS 5.1 Immunity of Shareholders, etc. The Warrant Holder, as part of the consideration for the issue of the Warrants, waives and will not have any right, cause of action or remedy now or hereafter existing in any jurisdiction against any past, present or future incorporator, shareholder, Director or officer (as such) of the Company for the issue of shares pursuant to any Warrant or on any covenant, agreement, representation or warranty by the Company herein contained or in the Warrant. 6. MODIFICATION OF TERMS, ETC. 6.1 Modification of Terms and Conditions for Certain Purposes From time to time the Company may, subject to the provisions of these presents, modify the Terms and Conditions hereof, for the purpose of correction or rectification of any ambiguities, defective provisions, errors or omissions herein. 6.2 Warrants Not Transferable The Warrant and all rights attached to it are not transferable. DATED as of the date first above written in these Terms and Conditions. CALIFORNIA OIL & GAS CORPORATION   Per:                                                                                   Authorized Signatory     CW932472.1   -------------------------------------------------------------------------------- - 6 -     EXERCISE FORM   TO: California Oil & Gas Corporation   The undersigned holder of Warrants hereby exercises the right to acquire __________________ Common Shares without nominal or par value of California Oil & Gas Corporation (the "Company") (or such number of other securities or property to which such Warrants entitle the undersigned in lieu thereof or in addition thereto under the provisions set forth in the Warrant Certificate) according to the terms set forth in the Warrant Certificate.   Such securities or property are to be issued as follows:   Name:   Address in Full:           The undersigned acknowledges that the certificates representing the Common Shares issuable hereunder shall bear such legends as may be required under applicable securities law. DATED this _______ day of ____________________, 200__.                                                                                   Signature                                                                                   (Print full name)                                                                                   (Print full address)     Instructions:   The registered holder may exercise his right to acquire Common Shares by completing the above form, surrendering this Warrant Certificate and providing payment by bank draft, money order or certified check to the Company at its principal office in Vancouver, British Columbia. For the protection of the holder, it would be prudent to register if forwarding by mail. Certificates for Common Shares will be delivered or mailed as soon as practicable after the exercise of the Warrants. The rights of the registered holder cease if the Warrants are not exercised prior to 5:00 p.m. (Vancouver time) on the Expiry Date.     CW932472.1      

Exhibit 10.2 MELLON FINANCIAL CORPORATION LONG-TERM PROFIT INCENTIVE PLAN (2004) (as amended September 2006) I. Purposes The purposes of this Long-Term Profit Incentive Plan (2004), as amended and restated, are to promote the growth and profitability of Mellon Financial Corporation (“Corporation”) and its Affiliates, to provide officers and other employees of the Corporation and its Affiliates with the incentive to achieve long-term corporate objectives, to attract and retain officers and other employees of outstanding competence, and to provide such officers and employees with an equity interest in the Corporation. II. Definitions The following terms shall have the meanings shown: 2.1 “Affiliate” shall mean any corporation, limited partnership or other organization in which the Corporation owns, directly or indirectly, 50% or more of the voting power. 2.2 “Award” shall mean Options, SARs, Performance Units, Restricted Stock, Deferred Share Awards, Deferred Cash Incentive Awards and Other Stock-Based Awards, as defined in and granted under the Plan.   2.3 “Board of Directors” shall mean the Board of Directors of the Corporation.   2.4 “Change in Control Event” shall mean any of the following events: (a) The occurrence with respect to the Corporation of a “control transaction”, as such term is defined in Section 2542 of the Pennsylvania Business Corporation Law of 1988, as of August 15, 1989; or (b) Approval by the stockholders of the Corporation of (i) any consolidation or merger of the Corporation where either (x) the holders of voting stock of the Corporation immediately before the merger or consolidation will not own more than 50% of the voting shares of the continuing or surviving corporation immediately after such merger or consolidation or (y) the Incumbent Directors immediately before the merger or consolidation will not hold more than 50% (rounded to the next whole person) of the seats on the board of directors of the continuing or surviving corporation, or (ii) any sale, lease or exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all the assets of the Corporation; or (c) A change of 25% (rounded to the next whole person) in the membership of the Board of Directors within a 12-month period, unless the election or nomination for election by stockholders of each new director within such period (i) was approved by the vote of 85% (rounded to the next whole person) of the directors then still in office who were in office at the -------------------------------------------------------------------------------- beginning of the 12-month period and (ii) was not as a result of an actual or threatened election with respect to directors or any other actual or threatened solicitation of proxies by or on behalf of any person other than the Board of Directors. As used in this Section 2.4, the term “Incumbent Director” means as of any time a director of the Corporation (x) who has been a member of the Board of Directors continuously for at least 12 months or (y) whose election or nomination as a director within such period met the requirements of clauses (i) and (ii) of the preceding sentence. 2.5 “Code” shall mean the Internal Revenue Code of 1986, as amended, and any successor statute of similar import, and regulations thereunder, in each case as in effect from time to time. References to sections of the Code shall be construed also to refer to any successor sections.   2.6 “Committee” shall mean the Human Resources Committee of the Board of Directors, or any successor committee.   2.7 “Common Stock” shall mean Common Stock of the Corporation.   2.8 “Corporation” shall mean Mellon Financial Corporation and any successor.   2.9 “Deferred Cash Incentive Award” shall mean an Award granted pursuant to Article VII of the Plan.   2.10 “Deferred Share Award” shall mean an Award granted pursuant to Article VIII, Section 8.7, of the Plan. 2.11 “Fair Market Value” shall mean the closing price of a share of Common Stock in the New York Stock Exchange Composite Transactions on the relevant date, or, if no sale shall have been made on such exchange on that date, the closing price in the New York Stock Exchange Composite Transactions on the last preceding day on which there was a sale.   2.12 “Incentive Stock Option” shall mean an option qualifying under Section 422 of the Code granted by the Corporation.   2.13 “Options” shall mean rights to purchase shares of Common Stock granted pursuant to Article IV of the Plan.   2.14 “Other Stock-Based Award” means an Award granted pursuant to Article IX of the Plan.   2.15 “Participant” shall mean an eligible employee who is granted an Award under the Plan. 2.16 “Performance Goals” shall mean goals established by the Committee in compliance with Section 162(m) of the Code covering a performance period set by the Committee and based on the attainment or maintenance of, or changes in, levels of performance with respect to one or more of the following objective business criteria: earnings or earnings per share; total return to shareholders; return on equity, assets or investment; pre-tax margins; revenues; expenses; stock price; investment performance of funds or accounts under management; market share; charge-offs; or non-performing assets. Performance Goals based on such business criteria may be based   2 -------------------------------------------------------------------------------- on absolute levels of performance or on performance as compared to an index, peer group or other benchmark. Performance Goals shall be established by the Committee in connection with the grant of Performance Units and Deferred Cash Incentive Awards and may be established in connection with the grant of Restricted Stock, Deferred Share Awards or Other Stock-Based Awards. Performance Goals may be applicable to an individual, a business unit or to the Corporation as a whole and need not be the same for each of the foregoing types of Awards or for each individual receiving the same type of Award. The Committee may retain the discretion to reduce (but not to increase) the portion of any Award which will be earned based on achieving Performance Goals.   2.17 “Performance Units” shall mean units granted pursuant to Article VI of the Plan. 2.18 “Plan” shall mean the Mellon Financial Corporation Long-Term Profit Incentive Plan (2004), as amended and restated, formerly known as the Long-Term Profit Incentive Plan (1996) and prior to that the Long-Term Profit Incentive Plan (1981).   2.19 “Reload Option Rights” and “Reload Options” shall have the meanings set forth in Article IV of the Plan.   2.20 “Restricted Stock” shall mean any share of Common Stock granted pursuant to Article VIII of the Plan. 2.21 “Rule 16b-3” shall mean Rule 16b-3 promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended from time to time, or any successor rule.   2.22 “SAR” shall mean any stock appreciation right granted pursuant to Article V of the Plan. III General   3.1 Administration. (a) The Plan shall be administered by the Committee, each member of which shall at the time of any action under the Plan be (i) a “non-employee director” as then defined under Rule 16b-3 and (ii) an “outside director” as then defined under Section 162(m) of the Code. (b) The Committee shall have the authority in its sole discretion from time to time: (i) to designate the employees eligible to participate in the Plan; (ii) to grant Awards under the Plan; (iii) to prescribe such limitations, restrictions and conditions upon any such Award as the Committee shall deem appropriate; and (iv) to interpret the Plan, to adopt, amend and rescind rules and regulations relating to the Plan, and to make all other determinations and take all other action necessary or advisable for the implementation and administration of the Plan. A majority of the Committee shall constitute a quorum, and the action of a majority of members of the Committee present at any meeting at which a quorum is present, or acts unanimously adopted in writing without the holding of a meeting, shall be the acts of the Committee.   3 -------------------------------------------------------------------------------- (c) All actions of the Committee shall be final, conclusive and binding upon the Participant. No member of the Committee shall be liable for any action taken or decision made in good faith relating to the Plan or any Award thereunder. (d) The Committee may delegate to the Chairman of the Board of Directors or another member of the Board of Directors the authority to grant Awards of Options and/or Restricted Stock to newly hired or newly promoted employees or where the grant of the Award is to a current employee in response to an offer of employment by a competing employer. No Award may be granted pursuant to such delegated authority to any employee who is, or upon hiring or the contemplated promotion would be, an executive officer of the Corporation or an officer subject to Section 16(b) of the Securities Exchange Act of 1934, as amended. The aggregate number of shares subject to Awards granted pursuant to such delegated authority in any calendar year may not exceed 260,000 shares of Common Stock, of which no more than 160,000 shares may be granted as Restricted Stock. The aggregate number of shares subject to Awards granted to any one individual pursuant to such delegated authority may not exceed 50,000 shares. 3.2 Eligibility. The Committee may grant Awards under the Plan to any employee of the Corporation or any of its Affiliates. In granting such Awards and determining their form and amount, the Committee shall give consideration to the functions and responsibilities of the employee, his or her potential contributions to profitability and to the sound growth of the Corporation and such other factors as the Committee may deem relevant. 3.3 Effective and Expiration Dates of Plan. The amended and restated Plan shall become effective on the date approved by the holders of a majority of the shares present or represented and entitled to vote at the 2004 Annual Meeting of Shareholders of the Corporation. No Award shall be granted after December 31, 2013, except that Reload Options may be granted pursuant to Reload Option Rights then outstanding. 3.4 Aggregate and Individual Limitations on Awards. (a) The aggregate number of shares of Common Stock reserved for issue under the Plan on and after April 20, 2004 shall not exceed 52,973,082 shares, subject to adjustments pursuant to Section 10.7. No more than 4,276,057 shares of Common Stock may be issued as Restricted Stock, Deferred Share Awards, Performance Units or Other Stock-Based Awards on and after April 20, 2004. Shares of Common Stock which may satisfy Awards granted under the Plan may be either authorized and unissued shares of Common Stock or authorized and issued shares of Common Stock held in the Corporation’s treasury or issued and outstanding shares of Common Stock held by any employee stock benefit trust established by the Corporation. (b) For purposes of paragraph (a) of this Section 3.4, shares of Common Stock that are actually issued upon exercise of an Option shall be counted against the total number of shares reserved for issuance, except that when Options are exercised by the delivery of shares of Common Stock the charge against the shares reserved for issuance shall be limited to the net new shares of Common Stock issued. In addition to shares of Common Stock actually issued   4 -------------------------------------------------------------------------------- pursuant to the exercise of Options, there shall be deemed to have been issued under the Plan a number of shares of Common Stock equal to (i) the number of shares issued pursuant to SARs which shall have been exercised pursuant to the Plan, (ii) the number of Performance Units which shall have been paid in shares of Common Stock pursuant to the Plan, (iii) the number of shares subject to Restricted Stock and Deferred Share Awards which shall have been granted pursuant to the Plan and (iv) the number of shares actually issued pursuant to an Other Stock-Based Award. For purposes of paragraph (a) of this Section 3.4, the payment of a Deferred Cash Incentive Award shall not be deemed to result in the issuance of any shares of Common Stock in addition to those issued pursuant to the exercise of the related Option. (c) For purposes of paragraph (a) of this Section 3.4, any shares of Common Stock subject to an Option which for any reason either terminates unexercised or expires, except by reason of the exercise of a related SAR, shall again be available for issuance under the Plan. In addition to the shares authorized by Section 3.4(a), any shares of Restricted Stock granted under this Plan or any shares of Common Stock covered by a Deferred Share Award or Other Stock-Based Award which are surrendered or forfeited to the Corporation (including shares subject to Awards outstanding as of April 20, 2004), shall again be available for issuance under the Plan. (d) The maximum number of shares of Common Stock available for grants of Options or SARs to any one Participant under the Plan during a calendar year shall not exceed 4,000,000 shares. The limitation in the preceding sentence shall be interpreted and applied in a manner consistent with Section 162(m) of the Code. To the extent consistent with Section 162(m) of the Code, a Reload Option (A) shall be deemed to have been granted at the same time as the original underlying Option grant and (B) shall not be deemed to increase the number of shares covered by the original underlying Option. 3.5 Cancellation and Reissuance of Options. The Committee will not permit the repricing of Options by any method, including by cancellation and reissuance. IV. Options 4.1 Grant. The Committee may from time to time, subject to the provisions of the Plan, in its discretion grant Options to Participants to purchase for cash or shares of Common Stock the number of shares of Common Stock allotted by the Committee. In the discretion of the Committee, any Options or portions thereof granted pursuant to this Plan may be designated as Incentive Stock Options. The aggregate Fair Market Value (determined as of the time the Incentive Stock Option is granted) of Common Stock and any other stock of the Corporation or any parent, subsidiary or affiliate corporation with respect to which such Incentive Stock Options are exercisable for the first time by a Participant in any calendar year under all plans of the Corporation, its subsidiaries and affiliates shall not exceed $100,000 or such sum as may from time to time be permitted under Section 422 of the Code. The Committee shall also have the authority, in its discretion, to award reload option rights (“Reload Option Rights”) in conjunction with the grant of Options with the effect described in Section 4.7. Reload Option Rights may be awarded either at the time an Option is granted or, except in the case of Incentive Stock Options, at any time thereafter during the term of the Option.   5 -------------------------------------------------------------------------------- 4.2 Option Agreements. The grant of any Option shall be evidenced by a written “Stock Option Agreement” executed by the Corporation, stating the number of shares of Common Stock subject to the Option evidenced thereby and such other terms and conditions of the Option as the Committee may from time to time determine. 4.3 Option Price. The option price for the Common Stock covered by any Option granted under the Plan shall in no case be less than 100% of the Fair Market Value of said Common Stock on the date of grant. Except as otherwise provided in the Stock Option Agreement, the option price of an Option may be paid in whole or in part by delivery to the Corporation of a number of shares of Common Stock having a Fair Market Value on the date of exercise equal to the option price or portion thereof to be paid; provided, however, that no shares may be delivered in payment of the option price of an Option unless such shares, or an equivalent number of shares, shall have been held by the Participant (or other person entitled to exercise the Option) for at least six months prior to such delivery. If permitted by the Committee, delivery of shares in payment of the option price of an Option may be accomplished by the Participant’s certification of ownership of the shares to be delivered, or the withholding of such shares by the Corporation from the shares issuable on exercise, in which case the number of shares issuable on exercise of the Option shall be reduced by the number of shares certified but not actually delivered or withheld. 4.4 Term of Options. The term of each Option granted under the Plan shall be for such period as the Committee shall determine, but for not more than 10 years from the date of grant thereof. Each Option shall be subject to earlier termination as provided in Sections 4.6 and 5.4 hereof. 4.5 Exercise of Options. Each Option granted under the Plan shall be exercisable on such date or dates during the term thereof and for such number of shares of Common Stock as may be provided in the Stock Option Agreement evidencing its grant. Pursuant to the terms of the Stock Option Agreement or otherwise, the Committee may change the date on which an outstanding Option becomes exercisable; provided, however, that an exercise date designated in a Stock Option Agreement may not be changed to a later date without the consent of the holder of the Option. Notwithstanding any other provision of this Plan, unless expressly provided to the contrary in the applicable Stock Option Agreement, all Options granted under the Plan shall become fully exercisable immediately and automatically upon the occurrence of a Change in Control Event. 4.6 Termination of Employment. Except as otherwise provided in the Stock Option Agreement: (a) If termination of employment of a Participant occurs on or after age 55 and the Participant is credited with at least five years of employment with the Corporation or an Affiliate, the Participant shall have the right to exercise his or her Options within the period of two years after such termination, to the extent such Options were exercisable at the time of such termination; provided, however, that such post-termination exercise period may be extended by action of the Committee for up to the full term of such Options.   6 -------------------------------------------------------------------------------- (b) If a Participant shall die while employed by the Corporation or an Affiliate or within a period following termination of employment during which the Option remains exercisable under paragraphs (a), (c) or (d) of this Section 4.6, his or her Options may be exercised to the extent exercisable by the Participant at the time of his or her death within a period of two years from the date of death by the executor or administrator of the Participant’s estate or by the person or persons to whom the Participant shall have transferred such right by will or by the laws of descent and distribution. (c) If termination of employment of a Participant is by reason of the disability of the Participant covered by a long-term disability plan of the Corporation or an Affiliate then in effect, the Participant shall have the right to exercise his or her Options within the period of two years after the date of termination of employment, to the extent such Options were exercisable at the time of termination of employment. (d) In the event the employment of a Participant is terminated by the Corporation or an Affiliate without cause within two years after the occurrence of a Change in Control Event, the Participant shall have the right to exercise his or her Options within one year after the date such termination occurred, to the extent such Options were exercisable at the time of such termination of employment. For purposes of this paragraph, “without cause” shall mean any termination of employment where it cannot be shown that the employee has (i) willfully failed to perform his or her employment duties for the Corporation or an Affiliate, (ii) willfully engaged in conduct that is materially injurious to the Corporation or an Affiliate, monetarily or otherwise, or (iii) committed acts that constitute a felony under applicable federal or state law or constitute common law fraud. For purposes of this paragraph, no act or failure to act on the Participant’s part shall be considered “willful” unless done, or omitted to be done, by him or her not in good faith and without reasonable belief that his or her action or omission was in the best interest of the Corporation or Affiliate. (e) In the event all employment of a Participant with the Corporation or an Affiliate is terminated for any reason other than as stated in the preceding paragraphs (a) - (d), his or her Options shall terminate upon such termination of employment. (f) Notwithstanding the foregoing, in no event shall an Option granted hereunder be exercisable after the expiration of its term. 4.7 Reload Option Rights. Reload Option Rights if awarded with respect to an Option shall entitle the original grantee of the Option (and unless otherwise determined by the Committee, in its discretion, only such original grantee), upon exercise of the Option or any portion thereof through delivery, withholding or certification of ownership of shares of Common Stock, automatically to be granted on the date of such exercise an additional Option (a “Reload Option”) (i) for that number of shares of Common Stock not greater than the number of shares delivered or certified by the Participant or withheld by the Corporation in payment of the option   7 -------------------------------------------------------------------------------- price of the original Option and any withholding taxes related thereto, (ii) having an option price not less than 100% of the Fair Market Value of the Common Stock covered by the Reload Option on the date of grant of such Reload Option, (iii) having an expiration date not later than the expiration date of the original Option so exercised and (iv) otherwise having terms permissible for the grant of an Option under the Plan. Subject to the preceding sentence and the other provisions of the Plan, Reload Option Rights and Reload Options shall have such terms and be subject to such restrictions and conditions, if any, as shall be determined, in its discretion, by the Committee. In granting Reload Option Rights, the Committee, may, in its discretion, provide for successive Reload Option grants upon the exercise of Reload Options granted hereunder. Unless otherwise determined by the Committee, in its discretion, Reload Option Rights shall entitle the Participant to be granted Reload Options only if the underlying Option to which they relate is exercised by the Participant during employment with the Corporation or any of its Affiliates. Except as otherwise specifically provided herein or required by the context, the term Option as used in this Plan shall include Reload Options granted hereunder. V. SARs 5.1 Grant. SARs may be granted by the Committee as stand-alone SARs or in tandem with all or any part of any Option granted under the Plan. SARs which are granted in tandem with an Option may be granted either at the time of the grant of such Option or, except in the case of an Incentive Stock Option, at any time thereafter during the term of such Option. 5.2 SAR Agreements. The grant of any SAR shall be evidenced by the related Stock Option Agreement or by a written “Stock Appreciation Rights Agreement” executed by the Corporation, stating the number of shares of Common Stock covered by the SAR, the base price of a stand-alone SAR and such other terms and conditions of the SAR as the Committee may from time to time determine. The base price for stand-alone SARs (the “base price”) shall be such price as the Committee, in its sole discretion, shall determine but shall not be less than 100% of the Fair Market Value per share of the Common Stock covered by the stand-alone SAR on the date of grant. 5.3 Payment. SARs shall entitle the Participant upon exercise to receive the amount by which the Fair Market Value of a share of Common Stock on the date of exercise exceeds the option price of any tandem Option or the base price of a stand-alone SAR, multiplied by the number of shares in respect of which the SAR shall have been exercised. In the sole discretion of the Committee, the Corporation may pay all or any part of its obligation arising out of a SAR exercise in (i) cash, (ii) shares of Common Stock or (iii) cash and shares of Common Stock. Payment shall be made by the Corporation as soon as practicable after the date of exercise. 5.4 Exercise of Tandem Award. If SARs are granted in tandem with an Option (i) the SARs shall be exercisable at such time or times and to such extent, but only to such extent, that the related Option shall be exercisable, (ii) the exercise of the related Option shall cause a share for share reduction in the number of SARs which were granted in tandem with the Option; and (iii) the payment of SARs shall cause a share for share reduction in the number of shares covered by such Option.   8 -------------------------------------------------------------------------------- 5.5 Term and Exercise of Stand-Alone SARs. The term of any stand-alone SAR granted under the Plan shall be for such period as the Committee shall determine, but for not more than 10 years from the date of grant thereof. Each stand-alone SAR shall be subject to earlier termination as provided in Section 5.6 hereof. Each stand-alone SAR granted under the Plan shall be exercisable on such date or dates during the term thereof and for such number of shares of Common Stock as may be provided in the Stock Appreciation Rights Agreement evidencing its grant. Pursuant to the terms of the Stock Appreciation Rights Agreement or otherwise, the Committee may change the date on which an outstanding stand-alone SAR becomes exercisable; provided, however, that an exercise date designated in a Stock Appreciation Rights Agreement may not be changed to a later date without the consent of the Participant. Notwithstanding any other provision of this Plan, unless expressly provided to the contrary in the applicable Stock Appreciation Rights Agreement, all stand-alone SARs granted under the Plan shall become fully exercisable immediately and automatically upon the occurrence of a Change in Control Event. 5.6 Termination of Employment. Except as otherwise provided in the Stock Appreciation Rights Agreement: (a) If termination of employment of a Participant occurs on or after age 55 and the Participant is credited with at least five years of employment with the Corporation or an Affiliate, the Participant shall have the right to exercise his or her stand-alone SARs within the period of two years after such termination, to the extent such SARs were exercisable at the time of termination; provided, however, that such post-termination exercise period may be extended by action of the Committee for up to the full term of such SARs. (b) If a Participant shall die while employed by the Corporation or an Affiliate thereof or within a period following termination of employment during which the SARs remain exercisable under paragraphs (a), (c) or (d) of this Section 5.6, his or her stand-alone SARs may be exercised to the extent exercisable by the Participant at the time of his or her death within a period of two years from the date of death by the executor or administrator of the Participant’s estate or by the person or persons to whom the Participant shall have transferred such right by will or by the laws of descent and distribution. (c) If termination of employment of a Participant is by reason of the disability of the Participant covered by a long-term disability plan of the Corporation or an Affiliate then in effect, the Participant shall have the right to exercise his or her stand-alone SARs within the period of two years after the date of termination of employment, to the extent such SARs were exercisable at the time of termination of employment. (d) In the event all employment of a Participant with the Corporation or an Affiliate is terminated without cause within two years after the occurrence of a Change in Control Event, the Participant shall have the right to exercise his or her stand-alone SARs within one year after the date such termination occurred, to the extent such stand-alone SARs were exercisable at the time of such termination of employment. For purposes of this paragraph, “without cause” shall have the meaning provided in Section 4.6(d).   9 -------------------------------------------------------------------------------- (e) In the event all employment of a Participant with the Corporation or an Affiliate is terminated for any reason other than as stated in the preceding paragraphs (a) - (d), his or her stand-alone SARs shall terminate upon such termination of employment. (f) Notwithstanding the foregoing, in no event shall a stand-alone SAR granted hereunder be exercisable after the expiration of its term. VI. Performance Units 6.1 Grant. The Committee may from time to time grant one or more Performance Units to eligible employees. Performance Units shall represent the right of a Participant to receive shares of Common Stock or cash at a future date upon the achievement of Performance Goals which are established by the Committee. 6.2 Performance Unit Agreements. The grant of any Performance Unit shall be evidenced by a written “Performance Unit Agreement”, executed by the Corporation stating the amount of cash and/or number of shares of Common Stock covered by the Performance Unit and such other terms and conditions of the Performance Unit as the Committee may determine, including the performance period to be covered by the award and the Performance Goals to be achieved. 6.3 Payment. After the completion of a performance period, performance during such period shall be measured against the Performance Goals set by the Committee. If the Performance Goals are met or exceeded, the Committee shall certify that fact in writing in the Committee minutes or elsewhere and certify the amount to be paid to the Participant under the Performance Unit. In the sole discretion of the Committee, the Corporation may pay all or any part of its obligation under the Performance Unit in (i) cash, (ii) shares of Common Stock or (iii) cash and shares of Common Stock. Payment shall be made by the Corporation as soon as practicable after the certification of achievement of the Performance Goals. 6.4 Termination of Employment. To be entitled to receive payment under a Performance Unit, a Participant must remain in the employment of the Corporation or an Affiliate through the end of the applicable performance period; except that this limitation shall not apply where a Participant’s employment is terminated by the Corporation or an Affiliate without cause (as defined in Section 4.6(d)) following the occurrence of a Change in Control Event. 6.5 Maximum Cash Payment. The maximum amount that may be paid in cash or in Fair Market Value of Common Stock (to be valued no later than three days after the date the Committee certifies the achievement of the Performance Goals) under all Performance Units paid to any one Participant during a calendar year shall in no event exceed $1,000,000. VII. Deferred Cash Incentive Awards 7.1 Granting of Deferred Cash Incentive Awards. Deferred Cash Incentive Awards, as hereafter described, may be granted in conjunction with all or any part of any Option (other than an Incentive Stock Option) granted under the Plan, either at the time of the grant of such Option or at any time thereafter during the term of such Option.   10 -------------------------------------------------------------------------------- 7.2 Deferred Cash Incentive Agreements. Deferred Cash Incentive Awards shall entitle the holder of an Option to receive from the Corporation an amount of cash equal to the aggregate exercise price of all Options exercised by such Participant in accordance with the terms of a written “Deferred Cash Incentive Agreement” executed by the Corporation. Deferred Cash Incentive Agreements shall specify the conditions under which Deferred Cash Incentive Awards become payable, the conditions under which Deferred Cash Incentive Awards are forfeited and any other terms and conditions as the Committee may from time to time determine. Under no circumstances may a Deferred Cash Incentive Award be applied to any purpose other than the payment of the exercise price of a properly exercised related Option. 7.3 Pre-established Performance Goals. (a) Except in the event of (i) death, (ii) disability of the Participant covered by a long-term disability plan of the Corporation or an Affiliate then in effect or (iii) the occurrence of a Change in Control Event, any Deferred Cash Incentive Award shall only be earned and become payable if the Corporation achieves Performance Goals which are established for a calendar year or longer period by the Committee. After the completion of a performance period, performance during such period shall be measured against the Performance Goals set by the Committee. If the Performance Goals are met or exceeded, the Committee shall certify that fact in writing in the Committee minutes or elsewhere. (b) The amount payable to a Participant upon achieving the Performance Goals set by the Committee for the Deferred Cash Incentive Award shall be equal to the option price of the related Option, which shall be the Fair Market Value of the shares of Common Stock subject to the Option on the date the Option is granted. No individual may in any calendar year receive payment of Deferred Cash Incentive Awards with respect to Options for more than 3,000,000 shares of Common Stock. VIII. Restricted Stock 8.1 Award of Restricted Stock. The Committee may from time to time, subject to the provisions of the Plan and such other terms and conditions as it may prescribe, grant one or more shares of Restricted Stock to eligible employees. In the discretion of the Committee, shares of Restricted Stock may be granted alone, in addition to or in tandem with other Awards granted under the Plan and/or cash awards made outside of the Plan. 8.2 Restricted Stock Agreements. Each award of Restricted Stock under the Plan shall be evidenced by a written Restricted Stock Agreement executed by the Corporation in such form as the Committee shall prescribe from time to time in accordance with the Plan. 8.3 Restrictions. Shares of Restricted Stock issued to a Participant may not be sold, assigned, transferred, pledged, hypothecated or otherwise disposed of, except by will or the laws of   11 -------------------------------------------------------------------------------- descent and distribution, for such period as the Committee shall determine, beginning on the date on which the Award is granted (the “Restricted Period”). The Committee may also impose such other restrictions and conditions on the shares or the release of the restrictions thereon as it deems appropriate, including the achievement of Performance Goals established by the Committee. In determining the Restricted Period of an Award, the Committee may provide that the foregoing restrictions shall lapse with respect to specified percentages of the awarded shares on specified dates following the date of such Award or all at once. 8.4 Stock Certificate. As soon as practicable following the making of an award, the Restricted Stock shall be registered in the Participant’s name in certificate or book-entry form. If a certificate is issued, it shall bear an appropriate legend referring to the restrictions and it shall be held by the Corporation on behalf of the Participant until the restrictions are satisfied. If the shares are registered in book-entry form, the restrictions shall be placed on the book-entry registration. Except for the transfer restrictions, and subject to such other restrictions, if any, as determined by the Committee, the Participant shall have all other rights of a holder of shares of Common Stock, including the right to receive dividends paid with respect to the Restricted Stock and the right to vote such shares. As soon as is practicable following the date on which transfer restrictions on any shares lapse, the Corporation shall deliver to the Participant the certificates for such shares or shall cause the shares to be registered in the Participant’s name in book-entry form, in either case with the restrictions removed, provided that the Participant shall have complied with all conditions for delivery of such shares contained in the Restricted Stock Agreement or otherwise reasonably required by the Corporation. 8.5 Termination of Employment. (a) Unless expressly provided to the contrary in the applicable Restricted Stock Agreement, all restrictions placed upon Restricted Stock shall lapse immediately upon (i) termination of the Participant’s employment with the Corporation or an Affiliate if, and only if, such termination is by reason of the Participant’s death, the disability of the Participant covered by a long-term disability plan of the Corporation or an Affiliate then in effect or (except where Performance Goals have been set for the Award) if such termination occurs on or after age 55 and the Participant is credited with at least five years of employment with the Corporation or an Affiliate or (ii) the occurrence of a Change in Control Event. In addition, the Committee may in its discretion allow restrictions on Restricted Stock to lapse prior to the date specified in a Restricted Stock Agreement. (b) Except as otherwise provided in the Restricted Stock Agreement, upon the effective date of a termination for any reason not specified in paragraph (a) of this Section 8.5, all shares then subject to restrictions immediately shall be forfeited to the Corporation without consideration or further action being required of the Corporation. For purposes of this paragraph (b), the effective date of a Participant’s termination shall be the date upon which such Participant ceases to be on the payroll of the Corporation or an Affiliate, and employment shall extend through the end of any salary continuance period pursuant to displacement or severance arrangements with the Corporation or an Affiliate. A Participant will not be considered to be on the payroll of the Corporation or an Affiliate for time periods during which the Participant is receiving retirement or pension plan payments from the Corporation or an Affiliate.   12 -------------------------------------------------------------------------------- 8.6 Maximum Award. No individual Participant may in any one calendar year receive payment of Restricted Stock and/or Deferred Share Awards (where Performance Goals have been set for the Award) covering more than 400,000 shares of Common Stock. 8.7 Deferred Share Awards. (a) A Deferred Share Award shall entitle the Participant to receive from the Corporation a number of shares of Common Stock on a deferred payment date specified by the Participant. Participants shall be entitled to elect a Deferred Share Award as permitted by the Committee (a “Deferred Share Award Election”). (b) Except as otherwise provided by the Committee, a Deferred Share Award Election (i) may be offered only with respect to a potential Restricted Stock Award or an outstanding Restricted Stock Award with at least one year to derestriction, (ii) shall have derestriction conditions identical as nearly as practicable to those of the Restricted Stock Award, (iii) shall specify a payment commencement date and form, which may occur no earlier than January 1 of the year following termination of employment on or after age 55 with five credited years of employment with the Corporation or an Affiliate and no later than January 1 of the year following age 70, in one lump sum payment or in equal annual payments over 5 or 10 years; provided, however, that payment following derestriction of the Award upon a termination of employment prior to age 55 or on or after age 55 with less than five years of credited employment with the Corporation or an Affiliate shall be made in a lump sum payment no later than March 1 of the year following such termination of employment. (c) Except as otherwise provided by the Committee, a Deferred Share Award shall entitle the Participant to receive dividend equivalents payable no earlier than the date payment is elected for the Deferred Share Award. Dividend equivalents shall be calculated on the number of shares covered by the Deferred Share Award as soon as practicable after the date dividends are payable on the Common Stock. (d) A Deferred Share Award shall be evidenced by a written Deferred Share Award Agreement executed by the Corporation in such form as the Committee shall prescribe from time to time in accordance with the Plan. IX. Other Stock-Based Awards. 9.1 Terms of Other Stock-Based Awards. The Committee shall have the authority in its discretion to grant to eligible employees such other Awards that are denominated or payable in, valued in whole or in part by reference to, or otherwise based on or related to, shares of Common Stock as deemed by the Committee to be consistent with the purposes of the Plan, including, without limitation, purchase rights, shares awarded without restrictions or conditions, or securities or other rights convertible or exchangeable into shares of Common Stock. The Committee shall determine the terms and conditions, if any, of any Other Stock-Based Awards   13 -------------------------------------------------------------------------------- made under the Plan. In the discretion of the Committee, such Other Stock-Based Awards, including shares of Common Stock, or other types of Awards authorized under the Plan, may be used in connection with, or to satisfy obligations of the Corporation or an Affiliate to eligible employees under, other compensation or incentive plans, programs or arrangements of the Corporation or an Affiliate. Other Stock-Based Awards may be granted alone, in addition to or in tandem with other Awards granted under the Plan and/or awards made outside of the Plan. 9.2 Maximum Award Performance-Based Award. The compensation payable to a Participant upon achieving any Performance Goals set by the Committee for an Other Stock-Based Award shall be equal to the dollar amount of any cash and the Fair Market Value on the date of payment of each share of Common Stock payable pursuant to the Award. No individual Participant may receive payment of Other Stock-Based Awards (where Performance Goals have been set for the Award) exceeding $5,000,000 in any one calendar year. X. Miscellaneous 10.1 General Restriction. Each Award under the Plan shall be subject to the requirement that, if at any time the Committee shall determine that any listing or registration of the shares of Common Stock or any consent or approval of any governmental body, or any other agreement or consent is necessary or desirable as a condition of the granting of an Award or issuance of Common Stock or cash in satisfaction thereof, such Award may not be consummated unless such requirement is satisfied in a manner acceptable to the Committee. 10.2 Non-Assignability. No Award under the Plan shall be assignable or transferable by a Participant, except by will or by the laws of descent and distribution or by such other means as the Committee may approve from time to time. During the life of the Participant, such Award shall be exercisable only by such Participant or by such other persons as the Committee may approve from time to time. 10.3 Withholding Taxes. Whenever the Corporation proposes or is required to issue or transfer shares of Common Stock under the Plan, the Corporation shall have the right to require the Participant to remit to the Corporation an amount sufficient to satisfy any federal, state, local or other withholding tax requirements prior to the delivery of any certificate or book-entry registration for such shares. If authorized by the Committee, a Participant may elect to have any such withholding obligation satisfied in whole or in part by the Corporation withholding full shares of Common Stock from the shares the Participant would otherwise receive and crediting them against the withholding obligation at their Fair Market Value on the date that the amount of tax to be withheld is determined. Any additional amount required to be withheld shall be paid by the Participant to the Corporation in cash. The Corporation may require that the Participant have owned an equivalent number of shares of Common Stock for a reasonable period of time. Whenever under the Plan payments are to be made in cash, such payments shall be net of an amount sufficient to satisfy any federal, state, local or other withholding tax requirements. 10.4 No Right to Employment. Nothing in the Plan or in any agreement entered into pursuant to it shall confer upon any Participant the right to continue in the employment of the Corporation or an Affiliate or affect any right which the Corporation or an Affiliate may have to terminate the employment of such Participant.   14 -------------------------------------------------------------------------------- 10.5 Non-Uniform Determinations. The Committee’s determinations under the Plan (including without limitation its determinations of the employees to receive Awards, the form, amount and timing of such Awards, the terms and provisions of such Awards and the establishment of Performance Goals and performance periods) need not be uniform and may be made by it selectively among employees who receive, or are eligible to receive, Awards under the Plan, whether or not such persons are similarly situated. 10.6 No Rights as Shareholders. Participants as such shall have no rights as shareholders of the Corporation, except as provided in Section 8.4, unless and until shares of Common Stock are registered in their name. 10.7 Adjustments of Stock. If there is any change in the Common Stock by reason of any stock split, stock dividend, spin-off, split-up, spin-out, recapitalization, merger, consolidation, reorganization, combination or exchange of shares, or any other similar transaction, the number and kind of shares available for grant under the Plan or subject to or granted pursuant to an Award and the price thereof, or other numeric limitations under the Plan, as applicable, shall be appropriately adjusted by the Committee or the Board. 10.8 Amendment or Termination of the Plan. The Committee or the Board may at any time terminate the Plan or any part thereof and may from time to time amend the Plan as it may deem advisable. Any such action of the Committee or the Board may be taken without the approval of the Corporation’s shareholders, but only to the extent that such shareholder approval is not required by applicable law or regulation, including specifically Rule 16b-3, or the rules of any stock exchange on which the Common Stock is listed. The termination or amendment of the Plan shall not, without the consent of the Participant, adversely affect such Participant’s rights under an Award previously granted. 10.9 Awards to Foreign Nationals and Employees Outside the United States. To the extent the Committee deems it necessary, appropriate or desirable to comply with foreign law or practice and to further the purpose of the Plan, the Committee may, without amending the Plan, (i) establish special rules applicable to Awards granted to Participants who are foreign nationals, are employed outside the United States, or both, including rules that differ from those set forth in this Plan, and (ii) grant Awards to such Participants in accordance with those rules. 10.10 Previously Granted Awards. Awards outstanding on the effective date of this amended and restated Plan shall continue to be governed by and construed in accordance with the Plan as in effect on the date of grant of the Award; except that outstanding Deferred Cash Incentive Awards shall be subject to the limitations of Section 7.3(a) and (b) of the Plan and, to the extent required by Section 162(m) of the Code, a grant of a Reload Option shall be subject to the limitation of Section 3.4(d) of the Plan. April 2004 (as amended September 2006)   15

  Exhibit 10.31 EXECUTION COPY     ASSET PURCHASE AGREEMENT by and among iWatt, Inc. IKOR Acquisition Corporation and Advanced Energy Industries, Inc. Dated November 23, 2005       --------------------------------------------------------------------------------   TABLE OF CONTENTS                       Page   ARTICLE 1 DEFINITIONS     1                 1.1   Defined Terms.     1                 ARTICLE 2 TRANSFER OF ASSETS     9                 2.1   Closing     9   2.2   Transfer of Assets     9   2.3   Assumption of Liabilities     10   2.4   Excluded Liabilities     10   2.5   Payments to Seller     11   2.6   Allocation of Purchase Price     11   2.7   Closing Deliveries; Collateral Agreements     11   2.8   Further Assurances, Conveyances, Agreement to Perform Necessary Acts     12   2.9   Responsibility for Taxes and Tax Returns     13   2.10   Withholding Rights     14   2.11   Transfer Taxes     14                 ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF SELLER     14                 3.1   Organization of Seller     15   3.2   Authorization of Transaction     15   3.3   Non-contravention; Consents     15   3.4   Title of Properties; Absence of Liens and Encumbrances; Condition     16   3.5   Intellectual Property Rights     16   3.6   Brokers’ and Finders’ Fees     19   3.7   Legal and Other Compliance     19   3.8   Transferred Assets and Transferred Technology     19   3.9   Environmental Matters     20   3.10   Litigation     20   3.11   Employment Matters     20   3.12   Bulk Transfer Laws     22   3.13   Business Financial Information     22   3.14   Contracts; No Defaults     23   3.15   Warranties; Defects; Liabilities.     23   3.16   Insurance     23   3.17   Tax Matters     24   3.18   Accounts Receivable     24   3.19   Inventory     24   3.20   Representations and Disclosures Complete     25                 ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF PARENT AND BUYER     25                 4.1   Organization     25   4.2   Authority for Agreement     25   4.3   Noncontravention     25   - i - --------------------------------------------------------------------------------   TABLE OF CONTENTS (Continued)                       Page   ARTICLE 5 ADDITIONAL AGREEMENTS OF THE PARTIES     26                 5.1   Operation of the Business     26   5.2   Access     27   5.3   Post-Closing Audits of Business Financial Statements     28   5.4   Third Party Consents; Assignment of Transferred Contracts     28   5.5   Renewal Fees     29   5.6   Transition Services     29   5.7   Software Other than IT Systems     30   5.8   Technology Documentation     30   5.9   Intellectual Property     31   5.10   Reasonable Best Efforts     31   5.11   No Other Bids     31   5.12   Confidentiality; Public Announcements     32   5.13   Covenant Not to Compete     32   5.14   Covenant Not to Solicit or Hire     33   5.15   Notification of Certain Matters     33   5.16   Severability of Covenants     34   5.17   SEC Support Letter     34                 ARTICLE 6 EMPLOYEES     34                 6.1   Seller Cooperation     34   6.2   Employment Offers     34   6.3   Waiver     35   6.4   Employees     35   6.5   COBRA Continuation Coverage     35   6.6   Employee Liability Claims     36                 ARTICLE 7 CLOSING, PURCHASE PRICE AND PAYMENTS     37                 7.1   Conditions to Obligations of Buyer     37   7.2   Conditions to Obligations of Seller     38                 ARTICLE 8 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND INDEMNIFICATION     40                 8.1   Survival of Representations and Warranties     40   8.2   Indemnification by Seller     40   8.3   Limitation on Indemnification     41   8.4   Indemnification Procedure     41   8.5   Escrow     42   8.6   Purchase Price Adjustment     43                 ARTICLE 9 TERMINATION AND ABANDONMENT     43                 9.1   Methods of Termination     43   9.2   Procedure upon Termination     44   9.3   Survival of Certain Provisions     44   - ii - --------------------------------------------------------------------------------   TABLE OF CONTENTS (Continued)                       Page   ARTICLE 10 GENERAL     44                 10.1   No Agency     44   10.2   Fees and Expenses     44   10.3   Notices     45   10.4   Governing Law     45   10.5   Forum and Venue     45   10.6   Construction     46   10.7   Breaches and Remedies     46   10.8   Waiver     46   10.9   Assignment     47   10.10   Severability     47   10.11   Entire Agreement     47   10.12   Amendments     47   10.13   Counterparts     47   - iii - --------------------------------------------------------------------------------   ASSET PURCHASE AGREEMENT      THIS ASSET PURCHASE AGREEMENT (this “Agreement”) is made and entered into as of November 23,2005 (the “Effective Date”), by and among iWatt, Inc., a California corporation (the “Parent”), IKOR Acquisition Corporation, a Delaware corporation and wholly owned subsidiary of Parent (the “Buyer”), and Advanced Energy Industries, Inc., a Delaware corporation (the “Seller”), each, a “Party,” together, the “Parties”. RECITALS      WHEREAS, Seller is currently engaged in, among other things, the Business (as defined below) in its IKOR division;      WHEREAS, Parent and Buyer wish to purchase all assets, tangible and intangible, of Seller used in or necessary for the operation of the Business;      WHEREAS, Seller wishes to sell such assets to Parent and Buyer; and      WHEREAS, the Parties desire that certain current employees of Seller become employees of Buyer.      NOW, THEREFORE, in consideration of the covenants, promises, representations and warranties set forth herein, and for other good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged by the Parties), intending to be legally bound hereby, the Parties agree as follows: Article 1 DEFINITIONS      1.1 Defined Terms.      The following capitalized terms shall have the meanings set forth below:           (a) “Affiliate” means with respect to a Person, a Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by, or is under common Control with, such Person, including any Subsidiary of such Person. A “Subsidiary” means with respect to a Person, a Person that directly, or indirectly through one or more intermediaries, is Controlled by such Person. For the purposes of this definition of “Affiliate”, “Control” (including derivative forms such as “Controlling,” “Controlled by” and “under common Control with”) means the ownership or possession, direct or indirect by the controlling Person of: (a) voting shares or other securities, representing more than fifty percent (50%) of the outstanding shares or securities entitled to vote for the election of the board of directors or similar managing authority of such controlled Person; or (b) if such controlling Person does not have voting shares or other securities, more than fifty percent (50%) of the ownership interest that represents the right to make decisions, including the election of directors, for such controlled Person.   --------------------------------------------------------------------------------             (b) “Assigned IPR” means (i) the Assigned Patents and (ii) the Assigned Trademarks.           (c) “Assigned Patents” means each of the Patents and invention disclosures set forth in Schedule 1.1(c) and any Patents that are a member of the same Patent Family as any one of such scheduled Patents, in each case whether pending, issued, expired, abandoned or closed, and all foreign counterparts of any such Patent.           (d) “Assigned Trademarks” means each of the Trademarks listed or described in Schedule 1.1(d), in each case whether or not such Trademarks are Registered IP or registerable as Registered IP.           (e) “Benefit Plan” means any plan, program, policy, practice, contract, agreement or other arrangement providing for compensation, severance, termination pay, deferred compensation, performance awards, stock or stock-related awards, fringe benefits or other employee benefits or remuneration of any kind, whether written or unwritten or otherwise, funded or unfunded, including without limitation, each “employee benefit plan,” within the meaning of Section 3(3) of ERISA which is maintained, contributed to, or required to be contributed to, by Seller or any ERISA Affiliate for the benefit of any Employee, or with respect to which Seller or any ERISA Affiliate has or may have any liability or obligation.           (f) “Bill of Sale” means one or more fully executed bills of sale for the Transferred Tangible Assets, in a form set forth in Schedule 1.1(f).           (g) “Books and Records” means the books and records of Seller and its Affiliates that are or have been related to, used in or necessary for the operation of the Business, the Transferred Assets or the Designated Employees, including books of account; the sales records; customer lists and information; supplier lists and information; Transferred Product records; marketing materials; distributor and other sales information; copies of Transferred Contracts; product and design materials (for internal or external use); plans; drawings; general financial and accounting data; documentation sufficient to fully utilize, understand and implement the Transferred Assets (including the Transferred Tangible Assets and Assigned IPR); technical and operating materials (for internal or external use); in each case in whatever form (hard copy or electronic) relating to the Transferred Assets, copies of policies and procedures or other communications regarding marketing and customer matters, and the Patent Files.           (h) “Business” means the development, sale, licensing, distribution and support of power supply components, modules and systems utilized in computing, office automation and communications products, including the business, intellectual property, technology, assets and operations of Seller and its Affiliates currently conducted in its “IKOR” business unit, and the activities and operations of the Designated Employees.           (i) “Closing Date” means the date upon which the Closing occurs in accordance with Section 2.1.           (j) “Code” means the Internal Revenue Code of 1986, as amended. - 2 - --------------------------------------------------------------------------------             (k) “Confidential Information” means any nonpublic information disclosed by one Party (the “Disclosing Party”) to the other (the “Receiving Party”) (including any nonpublic information disclosed in the course of the performance of the Transition Services): (a) which relates to the actual or anticipated business or research and development of the Disclosing Party, technical data, trade secrets or know-how, including, but not limited to, research, product plans or other information regarding the Disclosing Party’s products or services and markets therefor, customer lists and customers, software, developments, inventions, processes, formulas, technology, designs, drawings, engineering, hardware configuration information, marketing, finances or other business information or (b) which is otherwise deemed to be “Confidential Information” by the terms of this Agreement, other than information the Receiving Party can demonstrate was in the public domain at the time of disclosure through no act or omission on the part of the Receiving Party.           (l) “Consent” means any consent, approval, permit, or authorization of any Person not a Party to this Agreement.           (m) “Control,” “Controls,” “Controlled” or “Controlling” means, with respect to any Intellectual Property Rights, the possession by Seller or its Affiliates of the right to grant a license or sublicense under such Intellectual Property Rights of the scope provided herein without incurring an obligation to pay additional consideration to a third party (except for payments among such Party and its Affiliates, and payments to employees for inventions made by them while employed by such Party or its Affiliates made in the ordinary course of their employment).           (n) “Designated Employees” means the individuals listed on Schedule 1.1(n) (including individuals identified between the Effective Date and the Closing Date and added to Schedule 1.1(n) in accordance with Section 6.1) as “Designated Employees.” For clarity, any reference in this Agreement to “Designated Employees” shall include all individuals on Schedule 1.1(n) that are also designated as “Key Employees.”           (o) “Employee” shall mean any current or former employee, consultant or director of Seller or any ERISA Affiliate, who has provided services to the Business.           (p) “Employment Agreement” shall mean each management, employment, severance, consulting, relocation, repatriation, expatriation, visa, work permit or other agreement, contract or understanding between Seller or any ERISA Affiliate and any Employee.           (q) “Employment Liabilities” shall mean any and all claims, debts, liabilities, commitments and obligations, whether fixed, contingent or absolute, matured or unmatured, liquidated or unliquidated, accrued or unaccrued, known or unknown, whenever or however arising, including all costs and expenses relating thereto arising under law, rule, regulation, permit, action or proceeding before any governmental authority, order or consent decree or any award of any arbitrator of any kind relating to any Benefit Plan, Employment Agreement or otherwise relating to an Employee and his or her employment with Seller or any ERISA Affiliate.           (r) “ERISA Affiliate” shall mean each subsidiary of Seller and any other person or entity under common control with Seller or any of its subsidiaries within the meaning of Section 414(b), (c), (m) or (o) of the Code and the regulations issued thereunder. - 3 - --------------------------------------------------------------------------------             (s) “ERISA” means the Employee Retirement Income Security Act of 1974, as amended.           (t) “Escrow Agent” means the escrow agent identified in the Escrow Agreement.           (u) “Escrow Agreement” means an Escrow Agreement among Parent, Buyer, Seller and Escrow Agent (as identified therein) effective as of the Closing Date, in the form attached hereto as Exhibit A.           (v) “Excluded Assets” means (a) all of Seller’s tangible assets other than the Transferred Assets, (b) all cash, (c) all amounts prepaid on any insurance policy maintained by the Seller on behalf of the Business and (d) such other assets of Seller as are listed on Schedule 1.1(v).           (w) “Exploit” or “Exploitation” means with respect to any Technology, process or product, to make, have made, use, modify, enhance, sell, offer for sale, market, import, make derivative works from, perform, copy, disclose, or distribute such product or Technology (or derivative thereof) or practice such process (or derivative thereof), as the case may be.           (x) “Governmental Entity” means any court, administrative agency or commission or other federal, state, provincial, county, local or other governmental authority, instrumentality, agency or commission in any country worldwide.           (y) “Hazardous Material” means any substance that has been designated by any Governmental Entity or by applicable federal, state or local law to be radioactive, toxic, hazardous or otherwise a danger to health or the environment, including, without limitation all substances listed as hazardous substances pursuant to the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended, or defined as a hazardous waste pursuant to the United States Resource Conservation and Recovery Act of 1976, as amended, and the regulations promulgated pursuant to said laws.           (z) “Intellectual Property Rights” or “IPR” means any or all of the following and all statutory and/or common law rights throughout the world in, arising out of, or associated therewith: (a) all patents and applications therefor and all reissues, divisions, renewals, extensions, provisionals, continuations and continuations-in-part thereof and all rights that claim priority therefrom, along with each foreign patent or patent application that shares common disclosure therewith (collectively, “Patents”); (b) all inventions (whether patentable or not), invention disclosures and improvements, all trade secrets, proprietary information, know-how and technology; (c) all works of authorship, copyrights, rights in Mask Works, copyright and Mask Work registrations and applications; (d) all industrial designs and any registrations and applications therefor; (e) all trade names, logos, trademarks and service marks; trademark and service mark registrations and applications (collectively, “Trademarks”); (f) all databases and data collections (including knowledge databases, customer lists and customer databases) and all rights therein; (g) all rights in Software; (h) rights to Uniform Resource Locators, Web site addresses and domain names; (i) any similar, corresponding or equivalent rights to any of the foregoing and (j) all moral and equivalent rights throughout the world. - 4 - --------------------------------------------------------------------------------             (aa) “Key Employees” means the Designated Employees listed on Schedule 1.1(n) that are specified as “Key Employees”.           (bb) “Liability” means any liability, duty, obligation or indebtedness (whether known or unknown, whether asserted or unasserted, whether absolute or contingent, whether accrued or unaccrued, whether liquidated or unliquidated, whether incurred or consequential and whether due or to become due), including any liability for Taxes.           (cc) “License Agreement” means that license agreement entered into between Seller and Parent and Buyer effective as of the Closing Date, in the form attached hereto as Exhibit F pursuant to which Seller licenses to Parent and Buyer the Licensed IPR.           (dd) “Licensed IPR” means all Intellectual Property Rights (other than the Assigned IPR) used in or necessary for the operation of the Business.           (ee) “Lien” means any mortgage, pledge, lien, security interest, charge, claim, equity, encumbrance, limitation, restriction on use or transfer, conditional sale or other title retention device or arrangement (including, without limitation, a capital lease), transfer for the purpose of subjection to the payment of any indebtedness, or restriction on the creation of any of the foregoing, whether relating to any property or right or the income or profits therefrom.           (ff) “Loss” means any and all Liabilities, losses, damages, claims, costs and expenses, interest, awards, judgments and penalties (including without limitation legal costs and expenses and interest on the amount of any Loss from the date suffered or incurred).           (gg) “Mask Works” means the physical mask works or reticles for the manufacture or customization of a semiconductor device.           (hh) “Open Source Software” means Software or other material that is distributed as “free software,” “open source software” or under a similar licensing or distribution model (including but not limited to the GNU General Public License (GPL) and GNU Lesser General Public License (LGPL)) that require, as a condition of use, modification and/or distribution of such Open Source Software that other Software incorporated into, derived from or distributed with such Open Source Software be (a) disclosed or distributed in source code form; (b) be licensed for the purpose of making derivative works; or (c) be redistributable at no charge.           (ii) “Patent Family” means a set comprised of all Patents that (a) are directly or indirectly linked or entitled to be linked through one or more Priority Claims or by a terminal disclaimer (including under 35 U.S.C. Sec. 253 or 37 CFR 1.321 or the equivalent laws or regulation of any other patent authority); (b) are foreign counterparts, reissues, divisionals, renewals, extensions, parents, continuations or continuations-in-part with respect to any other Patent in such set; or (c) issue from any of the foregoing.           (jj) “Patent Files” means complete prosecution files for the Assigned Patents, including all correspondence and filings with patent authorities with respect to such Patents and any related materials or documents in the possession or control of Seller or its Affiliates or any attorney or patent agent involved in the prosecution or enforcement of such Patents. - 5 - --------------------------------------------------------------------------------             (kk) “Person” means an individual, partnership, corporation, limited liability company, association, joint venture, trust, unincorporated organization or Governmental Entity.           (ll) “Priority Claim” means a claim to priority made in any Patent or Patent application to any other Patent or Patent application pursuant to 35 U.S.C. Secs. 120 or 119(e) or the equivalent claim to priority under the laws and regulations applicable to a foreign Patent or Patent application, as the case may be.           (mm) “Product Software” means all Software that is included in or part of any version of the Transferred Products as firmware or otherwise, or that is part of or related to the use, operation, programming, verification, design, simulation, testing, support or application of a Transferred Product or the reference design related thereto, including the Software listed or described on Schedule 1.1(mm), all versions of any of the foregoing, and any Software from which any of the foregoing Software was derived or that was derived from such Software.           (nn) “Registered IP” means all United States, international and foreign: (a) Patents; (b) registered Trademarks, applications to register Trademarks, intent-to-use applications, or other registrations or applications related to Trademarks; (c) registered copyrights and applications for copyright registration; (d) domain name registrations; and (e) any other Intellectual Property Rights that are the subject of an application, certificate, filing, registration or other document issued, filed with, or recorded by any Governmental Entity.           (oo) “Software” means any and all computer software and code, including assemblers, applets, compilers, source code, object code, data (including image and sound data), design tools and user interfaces, in any form or format, however fixed. Software includes source code listings and documentation.           (pp) “Tax” and “Taxes” means (a) any and all federal, provincial, state, and local taxes in any country worldwide (including estimated taxes), assessments, and other governmental charges, duties, impositions and liabilities, including taxes based upon or measured by gross receipts, income, profits, sales, use and occupation, and value-added, ad valorem, transfer, franchise, withholding, payroll, recapture, employment, excise and property taxes, together with all interest, penalties and additions imposed with respect to such amounts; (b) any liability for the payment of any amounts of the type described in clause (a) of this definition as a result of being a member of an affiliated, consolidated, combined or unitary group for any period; and (c) any liability for the payment of any amounts of the type described in clause (a) or (b) of this definition as a result of any express or implied obligation to indemnify any other person or as a result of any obligations under any agreements or arrangements with any other person or entity with respect to such amounts and including any liability for taxes of a predecessor entity.           (qq) “Technology” means all technology, including all know-how, show-how, techniques, design rules, trade secrets, inventions (whether or not patented or patentable) and invention disclosures, algorithms, routines, Software, files, databases, works of authorship, processes, devices, prototypes, lab notebooks, reference designs, test boards, test fixtures, test programs, development and lab equipment, schematics, netlist, Mask Works, test methodologies, documentation, hardware development tools, any media on which any of the foregoing is recorded, and any other tangible embodiments of any of the foregoing. - 6 - --------------------------------------------------------------------------------             (rr) “Transferred Claims” means all rights and claims of Seller or its Subsidiaries related to the Business against any third parties, including all rights under express or implied warranties relating to the Business or the ownership, use, function or value of any Transferred Asset.           (ss) “Transferred Contracts” means those contracts listed on Schedule 1.1(ss), and all open purchase agreements and other agreements to purchase work in progress with respect to the Transferred Products.           (tt) “Transferred Inventory” means any and all inventory, wherever located, including raw materials, work in process, finished products, recycled materials, inventoriable supplies, and spare parts owned by Seller and its Affiliates and related to, used in, or necessary for the operation of the Business, and any rights of Seller and its Affiliates to the warranties received from suppliers of such inventory and any and all rights of Seller and its Affiliates to related claims, credits, rights of recovery and setoff with respect to such inventory, but only to the extent such rights are assignable.           (uu) “Transferred Permits” means all governmental permits and licenses, certificates of inspection, approvals or other authorizations issued to Seller with respect to the Business or the premises used in connection with the Business and necessary for the operation or conduct of the Business as currently conducted under applicable laws.           (vv) “Transferred Personal Property” means any and all personal property (including equipment, computers, servers, machinery, furniture, office equipment, furnishings, office supplies, storage devices, etc.) that are or have been, related to, used in or necessary for the operation of the Business. For the avoidance of doubt, such Transferred Personal Property shall include any personal property related to, used in or necessary for the operation of the Business that was previously provided to Seller under a leasing arrangement that is not covered under a Transferred Contract (e.g. copy machines, phone systems, etc.).           (ww) “Transferred Products” means any and all products, in whatever stage of development and in whatever form, that are (a) designed by or for, or related to, the Business; or (b) otherwise listed or described on Schedule 1.1(ww) and any Product Software that is part of such Transferred Products, and any reference designs or development boards or platforms for such Transferred Products (including boards and systems for the simulation, test or verification of such Products) (x) that are of the type provided to actual or potential purchasers for use with or evaluation of such Transferred Products or (y) otherwise listed or described on Schedule 1.1(ww).           (xx) “Transferred Tangible Assets” means all tangible assets of any type or nature, other than Excluded Assets, that are or have been: (a) used in or necessary for the operation of the Business, including the Transferred Products, Transferred Personal Property and Transferred Inventory; (b) reflected on the Business’s balance sheet, including accounts receivable; or (c) otherwise described on Schedule 1.1(xx).           (yy) “Transferred Technology” means all Technology used in or necessary to the operation of the Business or constituting any of the Transferred Products or otherwise listed or described on Schedule 1.1(yy) and including all (a) know-how and other Technology known by any - 7 - --------------------------------------------------------------------------------   and all Designated Employees, whether or not such Technology was reduced to any tangible media on or prior to the Closing Date; (b) copies and versions of the Product Software; (c) Technology that is used in the design, development, manufacture or testing Transferred Products (including all versions of any design tools or development environments used in the design of any Transferred Product); (d) Mask Works, netlists, GERBER files and other representations of any Transferred Product; and (e) files necessary for the operation of the Transferred Websites, including all of the content therein.           (zz) “Transferred Websites” means those Web sites (including content) and the Uniform Resource Locators set forth in Schedule 1.1(zz).           (aaa) Each of the following terms is defined in the Section or Exhibit set forth opposite such term:           TERM   SECTION/EXHIBIT “Allocation”       Section 2.6 “Assumed Liabilities”       Section 2.3 “Audit Completion Date”       Section 5.3 “Buyer Indemnitee”       Section 8.2 “Buyer Indemnitees”       Section 8.2 “Cash Amount”       Section 2.5(a) “Claim”       Section 8.4(a) “Closing”       Section 2.1 “Closing Date”       Section 2.1 “COBRA”       Section 6.5 “Collateral Agreements”       Section 2.7(b) “Conflict”       Section 3.3 “Disclosing Party”       Section 1.1(k) “Disclosure Schedule”       Article 3 “Employee Excluded Liabilities”       Section 6.6(a) “Escrow Amount”       Section 2.5(b) “Excluded Liabilities”       Section 2.4 “Indemnifiable Audit Costs”       Section 5.3 “International Employee Plan”       Section 3.11(a) “IP Assignments”       Section 2.7(b) “M&A Qualified Beneficiaries”       Section 6.5 “Multiemployer Plan”       Section 3.11(a) “Non-Assignable Contract”       Section 5.4 “Non-Paying Party”       Section 2.9(c) “Patents”       Section 1.1(z) “Paying Party”       Section 2.9(c) “Pension Plan”       Section 3.11(a) “Purchase Price”       Section 2.5(b) “Receiving Party”       Section 1.1(k) “Selling Group”       Section 6.5 “Straddle Period Taxes”       Section 2.9(c) - 8 - --------------------------------------------------------------------------------             TERM   SECTION/EXHIBIT “Tax Returns”       Section 2.9 “Termination Date”       Section 9.1 “Trademarks”       Section 1.1(z) “Transfer Taxes”       Section 2.11 “Transferred Assets”       Section 2.2 “Transition Services”       Section 5.6 “Transition Services Fees”       Section 5.6 Article 2 TRANSFER OF ASSETS      2.1 Closing. Subject to the terms hereof, the closing of the transactions contemplated by this Agreement (the “Closing”) will take place on a date occurring as promptly as reasonably practicable but no later than two (2) days following the date on which all conditions set forth in Sections 7.1 and 7.2 have been satisfied or waived, or on such date as may be agreed upon by the Parties (the “Closing Date”), at the offices of Wilson Sonsini Goodrich & Rosati, Professional Corporation, 650 Page Mill Road, Palo Alto, CA 94304.      2.2 Transfer of Assets. Upon the terms and subject to the conditions set forth in this Agreement, effective as of the Closing Date, Seller shall, and shall cause its Affiliates to, grant, deliver, sell, convey, transfer and assign to Buyer or its Affiliate(s) (with the allocation among such entities to be designated by Buyer) all rights, title and interest in and to the following assets (the “Transferred Assets”), free and clear of all Liens:   (a)   the Transferred Tangible Assets;     (b)   the Transferred Contracts;     (c)   the Assigned IPR;     (d)   the Books and Records;     (e)   the Transferred Permits;     (f)   the Transferred Claims;     (g)   the Transferred Websites;     (h)   the Transferred Technology; and     (i)   all goodwill relating to the Business. For the purposes of this Section 2.2, Assigned IPR shall include the right to register, prosecute, maintain or record any of such Intellectual Property Rights with any Governmental Entity and the right to all past and future income, royalties, damages and payments due with respect to such - 9 - --------------------------------------------------------------------------------   Intellectual Property Rights, including without limitation rights to damages and payments for past, present or future infringements or misappropriations thereof, as well as all goodwill associated with such Intellectual Property Rights or the Business. Notwithstanding the foregoing transfers, Buyer shall grant to Seller a royalty-free, perpetual, non-exclusive, non-assignable, non-transferable, license (without right to sublicense) under the Assigned Patents to make, use, sell, offer to sell and import any products (and modifications and derivatives thereof) offered by units of Seller other than the IKOR unit Business as of the Closing Date, all of which Seller represents, warrants and covenants are unrelated to and are not and will not be competitive with any products offered or under development by the Business.      2.3 Assumption of Liabilities. Upon the terms and subject to the conditions set forth in this Agreement, effective at the time of the Closing Date, Buyer shall assume the following Liabilities, and only the following Liabilities, of Seller (collectively, the “Assumed Liabilities”):           (a) Liabilities under or arising out of the Transferred Contracts, which are required to be paid or performed from or after the Closing Date, through no act, omission or fault of Seller (other than the Liabilities of Seller under Section 5.4 and Section 5.5).           (b) Liabilities relating to any warranty, returns, refunds, support obligation or similar claims with respect to any Transferred Products sold prior to the Closing Date and required to be performed after the Closing Date, which obligations arise under any Transferred Contract; and           (c) Trade accounts payable of the Business existing on the Closing Date, it being understood that Seller will continue to pay all trade payables at the times and in a manner consistent with prior practices from the Effective Date until the Closing Date.           (d) Liabilities arising out of Parent’s or Buyer’s operation and ownership of the Transferred Assets, but only to the extent such Liabilities accrue after the Closing Date.      2.4 Excluded Liabilities. Notwithstanding the foregoing, unless otherwise expressly set forth in this Agreement and other than the Assumed Liabilities, nothing set forth herein shall constitute the transfer to, or the assumption by, Parent or Buyer of any Liability or Lien of the Seller, including but not limited to the following (collectively, the “Excluded Liabilities”):           (a) any indebtedness of Seller;           (b) any Liability with respect to any Employee who does not accept in writing an offer of employment with Buyer by the Closing Date;           (c) any Liability to an Affiliate of Seller;           (d) any Liability not disclosed on the Disclosure Schedule or the Financial Statements;           (e) Employee Excluded Liabilities;           (f) any Liability related to or arising from any asset that is not a Transferred Asset; or - 10 - --------------------------------------------------------------------------------             (g) any Liability of Seller for Taxes for any taxable period, and any Liability for Taxes arising from or attributable to the Business, the Transferred Assets or Seller’s operation of the Business for all taxable periods (or portions thereof) ending on or prior to the Closing Date, including any Transfer Taxes for which Seller is liable pursuant to Section 2.11 and the portion of any Straddle Period Taxes allocated to Seller pursuant to Section 2.9(c) (and all Employment Liabilities).      2.5 Payments to Seller. In consideration of the grant, delivery, sale, conveyance, transfer and assignment of the Transferred Assets, and in addition to the assumption of certain Liabilities, upon the terms and subject to the conditions set forth in this Agreement:           (a) At the Closing, Parent shall pay to Seller, in cash by wire transfer of immediately available funds to an account number provided to Parent by the Seller prior to the Closing, a total of $9,425,000 (the “Cash Amount”).           (b) At the Closing, Parent shall deposit $1,000,000 (the “Escrow Amount,” together with the Cash Amount, the “Purchase Price”) in the Escrow Fund pursuant to the Escrow Agreement and Section 8.5.      2.6 Allocation of Purchase Price. Within ninety (90) days of the Closing Date, Parent or Buyer shall provide Seller with an allocation of the Purchase Price (and the Assumed Liabilities to the extent properly taken into account) among the Transferred Assets and any other rights acquired hereunder in accordance with Section 1060 of the Code and the regulations promulgated thereunder (the “Allocation”) (as adjusted to take into account any indemnity payments pursuant to Article 8). The Parties agree that the amount allocated to the Transferred Personal Property shall be the depreciated book value of such property as of the Closing Date. The Allocation shall be conclusive and binding upon Parent, Buyer and Seller for all purposes, and the parties agree that all returns and reports (including IRS Form 8594) and all financial statements shall be prepared in a manner consistent with (and the Parties shall not otherwise file a Tax Return position inconsistent with) the Allocation unless required by the IRS or any other applicable taxing authority.      2.7 Closing Deliveries; Collateral Agreements.           (a) On the Closing Date, Seller shall, and shall cause its Affiliates to, at Seller’s sole cost, in the manner and form and to the locations specified by Buyer, deliver to Buyer all of the Transferred Assets, or in the case of the Assigned IPR or other intangible assets, deliver such instruments as are necessary or desirable to transfer title to such assets from Seller (or its Affiliates) to Buyer. Transfer and delivery of the Transferred Tangible Assets shall include physical or electronic delivery of all Transferred Technology, including delivery or production of Books and Records and other appropriate documentation thereof as reasonably requested by Buyer to facilitate the transfer and operation of the Business. The Parties shall cooperate in good faith to define and transfer such Transferred Technology, but it is understood and acknowledged that Seller is ultimately responsible for delivering all Transferred Tangible Assets. It is further understood and acknowledged that any Transferred Tangible Assets not delivered on the Closing Date shall be held by Seller for and on behalf of Buyer until such time as Buyer is granted possession thereof and that, during that period, Seller shall bear all risk of loss with respect to such Transferred Tangible Assets. To the maximum extent practicable, all Software to be delivered hereunder shall be delivered by - 11 - --------------------------------------------------------------------------------   electronic means in a manner specified by Buyer. Seller shall not retain in its possession or control any Transferred Tangible Assets or Transferred Technology or any copy thereof.           (b) On the Closing Date, Seller shall deliver to Buyer (i) the Bill of Sale; (ii) fully executed documents in a form reasonably satisfactory to Parent and Buyer, sufficient to enable transfer of all Assigned IPR and proper recordation thereof in each jurisdiction in which such Assigned IPR exist or have been filed, registered or issued (“IP Assignments”); (iii) the sublease, in the form attached hereto as Exhibit E, covering the space presently occupied by the Business at 4424 Innovation Drive, Fort Collins, Colorado as set forth in Section 7.1(d) hereof; (iv) the Escrow Agreement; (v) the License Agreement; and (vi) any other transfer documents reasonably requested by, and in a form reasonably satisfactory to, Buyer (collectively, the “Collateral Agreements”).      2.8 Further Assurances, Conveyances, Agreement to Perform Necessary Acts.           (a) From time to time following the Closing, Seller and Buyer shall, and shall cause their respective Affiliates to, execute, acknowledge and deliver all such further conveyances, notices, assumptions, releases and acquittances and such other instruments, and shall take such further actions, as may be necessary or appropriate to fully and effectively transfer, assign and convey onto Buyer and its Affiliates and their respective successors or assigns, all of the properties, rights, titles, interests, estates, remedies, powers and privileges intended to be conveyed to Buyer under this Agreement and the Collateral Agreements, to fully and effectively transfer, assign and convey onto Buyer and its Affiliates and their successors and assigns, any Assumed Liabilities and obligations intended to be assumed by Buyer under this Agreement and the Collateral Agreements, to otherwise make effective the transactions contemplated hereby and thereby and to confirm Buyer’s title to or interest in the Transferred Assets, to put Buyer in actual possession and operating control thereof and to assist Buyer in exercising all rights with respect thereto. If it is determined that any material Transferred Asset (including any Patent owned or Controlled by Seller) that falls within the definition of a “Transferred Asset,” was not included on a Schedule and transferred to Buyer as of the Closing, Seller shall promptly, without payment of further consideration by Parent or Buyer, transfer and assign such asset to Seller, which assignment shall be deemed to have been effective as of the Closing Date, and the relevant Schedule shall be amended accordingly.           (b) Seller agrees that, if requested by Parent or Buyer, it will cooperate with Parent or Buyer in enforcing the terms of any agreements between Seller and any third party involving the Business, including without limitation terms relating to confidentiality and the protection of Intellectual Property Rights. In the event that Parent or Buyer is unable to enforce its Intellectual Property Rights against a third party as a result of a rule or law barring enforcement of such rights by a transferee of such rights, Seller agrees to reasonably cooperate with Parent or Buyer by assigning to Parent or Buyer such rights as may be required by Parent or Buyer to enforce its Intellectual Property Rights in its own name. If such assignment still does not permit Parent or Buyer to enforce its Intellectual Property Rights against the third party, Seller agrees to initiate proceedings against such third party in Seller’s name, provided that Seller shall be entitled to participate in such proceedings, all at Parent’s or Buyer’s expense.           (c) Following the Closing and without demanding further consideration therefor, Seller shall, and shall cause its Affiliates and its and their Employees (including any named - 12 - --------------------------------------------------------------------------------   inventors on any Patents included in the Transferred Assets) and agents, to provide Parent or Buyer with access to relevant information and otherwise to provide Parent or Buyer with reasonable cooperation and assistance in the enforcement or prosecution of any Assigned IPR and the proper recordation of the transfer thereof. Assistance under this Section 2.8 shall include, upon Parent’s or Buyer’s reasonable request, the execution, acknowledgment and recordation of specific assignments, oaths, declarations and other documents on a jurisdiction-by-jurisdiction and/or a country-by-country basis and such other instruments of sale, transfer, conveyance, and assignment as Parent or Buyer may reasonably request.           (d) Seller hereby grants Parent and Buyer the irrevocable power of attorney to represent Seller, where such representation is legally permissible, without restrictions towards legal entities and natural persons, public authorities and courts, to do, sign under hand (or, as required, under personal seal), deliver, receive and perform all and any acts, matters, statements and things which may be necessary to put Buyer or its Affiliates in ownership, possession, and operating control of the Transferred Assets, including execution, acknowledgment and recordation of specific assignments, oaths, declarations and other documents on a country-by-country basis and such other instruments of sale, transfer, conveyance, and assignment as may be required for this purpose. Under this power of attorney, Parent and Buyer is entitled to enter into transactions on behalf of Seller with itself in its own name or in its capacity as attorney-in-fact of a third party and, therefore, Parent and Buyer are released from any prohibition or restriction of self-dealing which may exist under any applicable law. Parent and Buyer shall be entitled to delegate the rights granted to it by this power-of-attorney and to grant dispensation from any legal prohibition or restriction of self-dealing that may exist. The foregoing power of attorney is coupled with an interest and as of the closing shall be irrevocable. Notwithstanding anything to the contrary in this Section 2.8(d), Parent and Buyer shall not exercise the foregoing power of attorney unless and to the extent Seller does not comply with its obligations under this Section 2.8.      2.9 Responsibility for Taxes and Tax Returns.           (a) Subject to Section 2.9(c) below, Seller will be responsible for the preparation and filing of all returns, estimates, information statements and reports required to be filed with a taxing authority (“Tax Returns”) (including Tax Returns required to be filed after the Closing Date), to the extent such Tax Returns include or relate to the operation of the Business or the use or ownership of the Transferred Assets on or prior to the Closing Date. Seller will be responsible for and make all payments of Taxes shown to be due on such Tax Returns to the extent they relate to the Transferred Assets or the Business.           (b) Parent will be responsible for the preparation and filing of all Tax Returns it is required to file with respect to Buyer’s ownership or use of the Transferred Assets or its operation of the Business attributable to taxable periods (or portions thereof) commencing after the Closing Date. Parent will make all payments of Taxes shown to be due on such Tax Returns to the extent they relate to the Transferred Assets or the Business.           (c) In the case of any real or personal property taxes (or other similar Taxes) attributable to the Transferred Assets for which Taxes are reported on a Tax Return covering a period commencing before the Closing and ending thereafter (a “Straddle Period Tax”), any such Straddle Period Taxes shall be prorated between Parent and Seller on a per diem basis. The party - 13 - --------------------------------------------------------------------------------   required by law to pay any such Straddle Period Tax (the “Paying Party”) shall file the Tax Return related to such Straddle Period Tax within the time period prescribed by law and shall timely pay such Straddle Period Tax. To the extent any such payment exceeds the obligation of the Paying Party hereunder, the Paying Party shall provide the other party (the “Non-Paying Party”) with notice of payment, and within ten (10) days of receipt of such notice of payment, the Non-Paying Party shall reimburse the Paying Party for the Non-Paying Party’s share of such Straddle Period Taxes.           (d) To the extent relevant to the Business or the Transferred Assets, each Party shall (a) provide the other with such assistance as may reasonably be required in connection with the preparation of any Tax Return and the conduct of any audit or other examination by any taxing authority or in connection with judicial or administrative proceedings relating to any liability for Taxes and (b) retain and provide the other with all records or other information that may be relevant to the preparation of any Tax Returns, or the conduct of any audit or examination, or other proceeding relating to Taxes. Seller shall retain all documents, including prior years’ Tax Returns, supporting work schedules and other records or information with respect to all sales, use and employment tax returns and, absent the receipt by Seller of the relevant tax clearance certificates, shall not destroy or otherwise dispose of any such records for six (6) years after Closing Date without the prior written consent of Parent or Buyer.      2.10 Withholding Rights. Parent shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement such amounts as Parent is required to deduct and withhold with respect to the making of such payment under the Code or any provision of state, local or foreign Tax law. To the extent that amounts are so withheld by Parent, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to Seller.      2.11 Transfer Taxes . All sales, use, value-added, gross receipts, excise, registration, stamp duty, transfer or other similar taxes or governmental fees (“Transfer Taxes”) imposed or levied by reason of, in connection with or attributable to this Agreement and the transactions contemplated hereby shall be borne by Seller; provided, however, the sales tax on the transfer of the Transferred Personal Property to Buyer pursuant to this Agreement by the state of Colorado shall be shared equally by Seller and Parent. The Parties shall cooperate with each other to the extent reasonably requested and legally permitted to minimize any such Transfer Taxes. The Party required by law to file a Tax Return with respect to such Transfer Taxes shall do so within the time period prescribed by law, and the other Party shall reimburse the filing Party for its share of such tax upon receipt of notice that such Transfer Taxes have been paid. Article 3 REPRESENTATIONS AND WARRANTIES OF SELLER      Seller represents and warrants to Parent and Buyer, subject to such exceptions as are specifically set forth in the disclosure schedule (referencing the appropriate Section numbers) attached hereto as Exhibit C (the “Disclosure Schedule”) and dated as of the Closing Date, as follows. Nothing in the Disclosure Schedule shall be deemed adequate to disclose an exception to a representation or warranty made herein, however, unless the Disclosure Schedule identifies the exception with reasonable particularity and describes the relevant facts in reasonable detail. Without - 14 - --------------------------------------------------------------------------------   limiting the generality of the foregoing, the mere listing (or inclusion of a copy) of a document or other item shall not be deemed adequate to disclose an exception to a representation or warranty made herein unless the representation or warranty has to do with the existence of the document or other item itself.      3.1 Organization of Seller. Seller is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has full power and authority (corporate and governmental) to conduct the Business as it is presently being conducted and to own and lease its properties and assets including the Transferred Assets. Seller is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction where the character of its properties owned or leased or the nature of its activities make such qualification necessary, except where the failure to be so qualified or in good standing would not, either individually or in the aggregate, have a material adverse effect on the Transferred Assets or Business.      3.2 Authorization of Transaction. Seller has all requisite corporate power and authority to enter into this Agreement, the Collateral Agreements and all related agreements and instruments to be executed and delivered by Seller and to consummate the transactions contemplated hereby and thereby. The execution and delivery of this Agreement, the Collateral Agreements and all related agreements and instruments to be executed and delivered by Seller and the consummation of the transactions contemplated hereby and thereby have been duly authorized by all other necessary corporate action on the part of Seller. The signatory officers of Seller have the power and authority to execute and deliver this Agreement and the Collateral Agreements and to consummate the transactions contemplated hereby and thereby and to take all other actions required to be taken by Seller pursuant to the provisions hereof and thereof. This Agreement and the Collateral Agreements have been duly executed and delivered by Seller and constitute the legal, valid and binding obligation of Seller, enforceable in accordance with their terms, except as such enforceability may be subject to the laws of general application relating to bankruptcy, insolvency and the relief of debtors and rules of law governing specific performance, injunctive relief or other equitable remedies.      3.3 Non-contravention; Consents.           (a) None of the execution, delivery or performance of this Agreement or the Collateral Agreements, the consummation of the transactions contemplated hereby or thereby, nor compliance by Seller with any of the provisions hereof or thereof, will, with or without the passage of time or the delivery of notice or both, (a) violate or conflict with any terms, conditions or provision of the certificate of incorporation or bylaws, each as in effect, of Seller, (b) violate, conflict with, result in a breach of or constitute a default under, or result in the termination of, or accelerate the performance required by, or result in a right to terminate, accelerate or modify under, or require a notice under, or result in the creation of any Lien upon any of the Transferred Assets under any contract, lease, sublease, license, sublicense, franchise, patent, permit, indenture, agreement for borrowed money or mortgage, instrument of indebtedness, security interest or other arrangement to which Seller or any Affiliate of Seller is a party or by which it is bound or to which any of its assets are subject, (c) violate any statute, ordinance, law, rule, regulation, order, writ, injunction or decree of any Governmental Entity, or (d) impose any Lien on any Transferred Assets or the Business (any such event, a “Conflict”). - 15 - --------------------------------------------------------------------------------             (b) Except as set forth on Schedule 3.3(b), no consent, waiver, or order of, or registration, declaration or filing with, any Governmental Entity or any third party is required by or with respect to Seller or any of its Affiliates in connection with the execution and delivery of this Agreement or the Collateral Agreements or the consummation of the transactions contemplated hereby or thereby.           (c) There is no agreement (not to compete or otherwise), commitment, judgment, injunction, order or decree to which Seller or any Affiliate of Seller is a party or otherwise binding upon Seller or any of its Affiliates which has or may have the effect of prohibiting the transactions contemplated by this Agreement or the Collateral Agreements or impairing the Business or the Transferred Assets or the value thereof in any material respect. Neither Seller nor any Affiliate of Seller has entered into any agreement that restricts Seller or any of its Affiliates with respect to selling, licensing or distributing the Transferred Products, providing services related to the Transferred Products, or otherwise conducting the Business.      3.4 Title of Properties; Absence of Liens and Encumbrances; Condition. Seller has good and valid title to all of the Transferred Assets and the unrestricted power and the unqualified right to sell, assign and deliver to Buyer the Transferred Assets free and clear of any Liens, and at Closing Seller will transfer to Buyer good, valid and marketable title to all of the Transferred Assets free and clear of any Liens. To the knowledge of the Seller, no basis exists for the assertion of any claim which, if adversely determined, would result in a Lien on any Transferred Asset or result in a material adverse effect. The Transferred Tangible Assets are (i) adequate for the conduct of the Business by Seller as currently conducted and as currently contemplated to be conducted, and (ii) in good operating condition, regularly and properly maintained, subject to normal wear and tear. Except as set forth on Schedule 3.4, Seller is in custody and control of all the Transferred Assets being sold and transferred by Seller to Buyer pursuant to this Agreement and the Collateral Agreements.      3.5 Intellectual Property Rights.           (a) Schedules. All schedules referenced in this Section 3.5 are complete and accurate in all material respects.           (b) Assigned IPR. Schedule 3.5(b) lists all Transferred Assets that are Registered IP, including the Assigned Patents and Assigned Trademarks. All such Registered IP is currently in compliance with formal legal requirements (including payment of filing, examination and maintenance fees and proofs of use), and is not subject to any unpaid maintenance fees or taxes or actions falling due within one hundred twenty (120) days after the date hereof. All Assigned IPR is, to the best of Seller’s knowledge, valid and subsisting and is free and clear of all Liens. There are no proceedings or actions known to Seller before any court, tribunal (including the United States Patent and Trademark Office or equivalent authority anywhere in the world) related to any such Assigned IPR. Seller has not made any misrepresentations to any Governmental Entity in the prosecution and maintenance of any Transferred Assets that are Registered IP, or otherwise impaired the enforceability of such Registered IP through action or inaction. Immediately prior to the Closing, all Assigned Patents are solely and exclusively owned by Seller, and all assignments of the Assigned Patents (from the inventors thereof and any and all intermediate assignees) are effective and have been properly recorded with the appropriate Governmental Entity. The Assigned - 16 - --------------------------------------------------------------------------------   IPR transferred to Buyer and the Licensed IPR hereunder constitute all of the Intellectual Property Rights of Seller, which absent such transfer would be infringed by the operation of the Business by Parent or Buyer following the Closing in the manner the Business as conducted by Seller immediately prior to the Closing.           (c) Non-Infringement. To the best of Seller’s knowledge, neither (i) the Transferred Assets when Exploited by Buyer after the Closing (including the development, use, distribution, sales, licensing and support of the Transferred Products), nor (ii) conduct of the Business or the use of Transferred Assets or Licensed IPR by Seller prior to the Closing will or did: (A) infringe or misappropriate the Intellectual Property Rights of any Person, (B) violate the rights of any Person (including rights to privacy or publicity), or (C) constitute unfair competition or trade practices under the laws of any jurisdiction. Neither Seller nor any of its Affiliates have received notice from any Person claiming or alleging any such infringement, misappropriation, or violation. To the best of Seller’s knowledge, there has been and is no unauthorized use, disclosure, infringement or misappropriation of any Assigned IPR by any person or entity, including any employee or former employee of Seller. Seller has not brought any action, suit or proceeding for infringement of Assigned IPR against any third party and does not currently have any plans to do so.           (d) Ownership. Seller owns and has the right to transfer ownership to Buyer of all Assigned IPR and Transferred Technology free and clear of all Liens. Following the Closing, Buyer will own exclusively all such Transferred Technology and Assigned IPR except pursuant to non-exclusive licenses pursuant to the Transferred Contracts. All of the Transferred Technology and the Intellectual Property Rights therein and thereto, either (i) were created by an Employee of Seller, within the scope of that Employee’s employment, such that ownership of and all Intellectual Property Rights in and to the Transferred Assets has vested in Seller pursuant to a written agreement under which the Employee agreed to assign ownership of all inventions to Seller, or (ii) were created by another Person exclusively for Seller, and Seller has a written agreement with that Person that has been provided to Buyer under which Seller has obtained ownership of, and is the exclusive owner of, all such Transferred Technology and Intellectual Property Rights. Seller has taken all steps that are reasonably required to protect Seller’s rights in confidential information and trade secrets of Seller or provided by any other person to Seller, including entering into a binding proprietary information, confidentiality and assignment agreement with each of its current and former Employees, consultants and contractors, each of which have been provided to Buyer. Except with respect to any individuals separately identified on Schedule 3.5(d), all current and former employees, consultants and contractors of Seller who have created or modified any of the Transferred Technology have executed such an agreement assigning all of such employees’, consultants’ and contractors’ rights in and to the Transferred Technology and the Intellectual Property Rights to Seller. With respect to any individuals identified on Schedule 3.5(d), the description of such individual’s activities related to the Transferred Technology and Intellectual Property Rights provided in Schedule 3.5(d) is accurate and complete in all material respects. Except as set forth in Schedule 3.5(d), neither Seller nor any of its Affiliates has transferred ownership of or, granted any exclusive licenses to, any Intellectual Property Rights of Seller or any of its Affiliates otherwise required to be transferred to Buyer as a Transferred Asset. - 17 - --------------------------------------------------------------------------------             (e) Transferred Products and Product Software.                (i) Schedule 1.1(ww) together with Schedule 3.5(e) is a complete and accurate list of all Transferred Products that are or have been sold or offered for sale by Seller or its Affiliates in the five year period prior to the Effective Date or that are currently under development by Seller or any of its Affiliates.                (ii) Seller has taken reasonable steps and implemented reasonable procedures (based on standard industry practices) to ensure that the Transferred Products are free from defects, bugs, viruses and other disabling codes that would have an adverse effect on the Transferred Products, and Seller has disclosed to Parent and Buyer all information about material defects, bugs, viruses and other disabling codes in the Transferred Products about which Seller has knowledge, and has used a system and a procedure for tracking those bugs, the results of which have been shared with Parent and Buyer and are included in the Transferred Assets. Each of the Transferred Products complies in all material respects with the specifications therefor. There are no defects or errors in any of the designs for any of the Transferred Products. All of the Transferred Products when manufactured in accordance with the design and specifications therefor will be free from defects.                (iii) To the extent the Transferred Products or other Transferred Technology include or incorporate any open source, public source or freeware code, or any modification or derivative thereof, including any version of any Open Source Software, Seller has disclosed and described to Parent and Buyer, in writing, the manner in which such Open Source Software is incorporated or included. No third party possesses any copy of any material source code to any Product Software or other Software included in the Transferred Assets. Other than as explicitly set forth in Section 2.8, as of the Closing Seller will have delivered to Parent and Buyer, and neither Seller nor any of its Affiliates will have retained any copy of, any source code to any Product Software or other material Software included in the Transferred Assets.                (iv) With respect to Transferred Products in commercial production as of the Closing Date, all design databases, GERBER files and other information necessary to manufacture, design, test and simulate, and necessary for the verification of, all of such Transferred Products will correspond in all material respects (except with respect to the GERBER files which shall correspond exactly) to such Transferred Products at the time of the relevant Closing. Schedule 1.1(mm) lists any Product Software and other material Software that is included in or part of the current version of the Transferred Products as firmware or otherwise or that is part of, used in or necessary to the use, operation, programming, verification, testing, support or application Software of any Transferred Product or the reference design related thereto that is owned by a third Person, and neither Seller nor its Affiliates is a party or subject to any contract, license or agreement with respect to such Product Software or other material Software except as set forth on Schedule 3.5(f)(i).           (f) Agreements.                (i) Schedule 3.5(f)(i) lists all contracts, licenses or agreements to which Seller or any Affiliate of Seller is a party (A) related to the licensing to, or acquisition of, any third party Intellectual Property Rights or Technology related to or used in the Business or incorporated - 18 - --------------------------------------------------------------------------------   into the Transferred Products or (B) related to the sale or licensing of any Assigned IPR, including any covenants not to sue thereunder, other than non-exclusive object code-only licenses granted by Seller in the ordinary course and provided that forms of such licenses have been provided to Parent and Buyer. There are no contracts, licenses or agreements between Seller and any other Person with respect to the Transferred Assets under which there is any dispute or, to the knowledge of Seller, any threatened dispute regarding the scope of such agreement or performance under such agreement.                (ii) Neither this Agreement nor the transactions contemplated by this Agreement, including the assignment to Buyer, by operation of law or otherwise, of any contracts or agreements to which Seller is a Party, will result, under the terms of any contract, license or agreement of Seller, in (A) Buyer granting to any third party any right to or with respect to any Technology or Intellectual Property Rights Right owned by, or licensed to, Buyer, (B) Parent or Buyer being bound by, or subject to, any non-compete or other restriction on the operation or scope of its businesses, or (C) Parent or Buyer being obligated to pay any royalties or other amounts to any third party in excess of those payable by Parent or Buyer upon Closing.                (iii) The Transferred Contracts when transferred to Buyer in accordance with Section 2.8 will confer and grant to Buyer all rights and licenses with respect to third party Intellectual Property Rights and Technology previously licensed to Seller under such agreements that are necessary to enable Parent or Buyer to operate the Business following the Closing without infringing the Intellectual Property Right or incurring any liability to such third parties (other than as expressly set forth in such Transferred Contracts).           (g) Standards Bodies. Schedule 3.5(g) lists all industry standards bodies or similar organizations related to the Business or Transferred Assets to which Seller or its Affiliates participates and has or is required to contribute or disclose any Technology or Intellectual Property Rights related to the Business or the Transferred Assets.      3.6 Brokers’ and Finders’ Fees. Except as set forth on Schedule 3.6, neither Seller nor any of its Affiliates has employed any broker or finder or incurred, nor will they, Parent or Buyer (except for Parent or Buyer with respect to any such person engaged directly by Parent or Buyer) incur, directly or indirectly, any liability for brokerage or finders’ fees or agents’ commissions or any similar charges in connection with the Agreement or any transaction contemplated hereby.      3.7 Legal and Other Compliance. Seller and each Affiliate of Seller have been and are in compliance with all applicable laws (including rules, regulations, codes, plans, injunctions, judgments, orders, decrees, rulings, and charges thereunder) of Governmental Entities applicable to the Business, Transferred Assets, and Designated Employees, and no action, suit, proceeding, hearing, investigation, charge, complaint, claim, demand, or notice alleging any failure to so comply has been made, filed or commenced. Neither Seller nor any Affiliate of Seller holds, nor is it required by any applicable law, rule or regulation of any Governmental Entity to hold, any permits, government approvals, licenses, registrations, clearances, authorizations or consents necessary for the conduct of the Business.      3.8 Transferred Assets and Transferred Technology. The Transferred Assets comprise all of the tangible and intangible assets, properties and rights of every type and description (other than real property) used in or necessary to the operation of the Business and are sufficient for the - 19 - --------------------------------------------------------------------------------   operation of the Business by Parent and Buyer following the Closing in the manner the Business was conducted by Seller immediately prior to the Closing. The Transferred Technology comprises all of the Technology used in or necessary to the operation of the Business by Parent and Buyer following the Closing in the manner the Business was conducted by Seller immediately prior to the Closing. Neither Seller nor any Affiliate of Seller has made or entered into any agreement, written or oral, to sell or transfer any part of the Transferred Assets, or has sold or transferred any part of the Transferred Assets, to any party other than Parent and Buyer.      3.9 Environmental Matters. No Hazardous Materials are present in, on or under any property, including the land and the improvements, ground water and surface water thereof, that Seller or any of its Affiliates has at any time owned, operated, occupied or leased in connection with operation of the Business. Neither Seller nor any of its Affiliates have, in connection with operation of the Business, transported, stored, used, manufactured, disposed of, released or exposed its Employees or others to Hazardous Materials or any product containing a Hazardous Material in violation of any rule, regulation, treaty or statute promulgated by any Governmental Entity in effect prior to or as of the Effective Date. No action, proceeding, revocation proceeding, amendment procedure, writ, injunction or claim is pending or, to the knowledge of Seller or any of its Affiliates, threatened concerning any activities of Seller or any of its Affiliates related to Hazardous Materials in connection with operation of the Business. Neither Seller nor any of its Affiliates have knowledge of any fact or circumstance which could involve any Person in any environmental litigation or impose upon any Person any environmental liability in connection with operation of the Business.      3.10 Litigation. There are no claims, actions, suits, inquiries, proceedings or investigations against Seller or any of its Affiliates relating to the Business, the Designated Employees or the Transferred Assets which are currently pending or, to Seller’s knowledge, threatened, at law or in equity or before or by any Governmental Entity. There are no grievance or arbitration proceedings pending or, to Seller’s knowledge, threatened. There are no judgments, orders, decrees, citations, fines or penalties heretofore assessed against Seller or any of its Affiliates affecting or involving the Business, the Designated Employees or the Transferred Assets under any foreign, federal, state, provincial or local law.      3.11 Employment Matters.           (a) Definitions. The following terms, when used in this Section 3.11, shall have the following meanings:                (i) “International Employee Plan” shall mean each Benefit Plan that has been adopted or maintained by Seller or any ERISA Affiliate, whether informally or formally, or with respect to which Seller or any ERISA Affiliate will or may have any liability, for the benefit of Employees who perform or performed services outside the United States.                (ii) “Multiemployer Plan” means any Pension Plan which is a “multiemployer plan,” as defined in Section 3(37) of ERISA.                (iii) “Pension Plan” shall mean each Benefit Plan which is an “employee pension benefit plan,” within the meaning of Section 3(2) of ERISA. - 20 - --------------------------------------------------------------------------------             (b) Designated Employees and Key Employees. Schedule 1.1(n) contains a complete and accurate list of the Employees and shows: (i) Employee name, position held, annual base salary, target incentive compensation and equity compensation; (ii) net credited service date; (iii) vacation eligibility for calendar year 2005; (iv) visa status; (v) leave status (including type of leave, expected return date for non-disability related leaves and expiration dates for disability leaves); and (vi) the name of any union, collective bargaining agreement or other similar labor agreement covering such Employee.           (c) Pension and Benefit Plans.                (i) Neither Seller nor any ERISA Affiliate has ever maintained, established, sponsored, participated in, contributed to, or had or could have any obligation to, any (A) Pension Plan which is subject to Part 3 of Subtitle B of Title I of ERISA, Title IV of ERISA or Section 412 of the Code, (B) multiple employer plan or to any plan described in Section 413 of the Code, or (C) Multiemployer Plan. The Seller does not now, nor has it ever had the obligation to, maintain, establish, sponsor, participate in, or contribute to any International Employee Plan.                (ii) Section 3.11(c)(ii) of the Disclosure Schedule contains a complete list of all Benefit Plans for which Employees are eligible or that that currently provide, or have provided, benefits to Employees. Seller and, as applicable, its ERISA Affiliates, are in material compliance with Benefit Plan terms and all applicable laws for each Benefit Plan including, but not limited to, ERISA and the Code.           (d) No Post-Employment Obligations. No Benefit Plan provides, or has any liability to provide, life insurance, medical or other employee benefits to any current or former Employee upon his or her retirement or termination of employment for any reason, except as may be required by statute, and neither Seller nor any of its ERISA Affiliates has ever represented, promised or contracted (whether in oral or written form) to any Employee (either individually or to Employees as a group) that such Employee(s) would be provided with life insurance, medical or other employee welfare benefits upon their retirement or termination of employment, except to the extent required by statute.           (e) Employment Matters. Seller and its ERISA Affiliates: (i) are in compliance with all applicable federal, state and local laws, rules and regulations respecting employment, employment practices, terms and conditions of employment and wages and hours, in each case, with respect to Employees; (ii) have withheld and reported all amounts required by law or by agreement to be withheld and reported with respect to the wages, salaries and other payments to Employees by virtue employment, the transactions specifically contemplated by this Agreement or otherwise; (iii) are not liable for any arrears of wages or any taxes or any penalty for failure to comply with any of the foregoing; and (iv) are not liable for any payment to any trust or other fund or to any governmental or administrative authority, with respect to unemployment compensation benefits, social security or other benefits or obligations for Employees (other than routine payments to be made in the normal course of business and consistent with past practice). There are no pending or, to the knowledge of Seller or any ERISA Affiliate, any threatened or reasonably anticipated claims or actions against Seller or any ERISA Affiliate under any worker’s compensation policy or long-term disability policy with respect to any Employees. - 21 - --------------------------------------------------------------------------------             (f) Labor. No work stoppage or labor strike against Seller or any ERISA Affiliate is pending, threatened or reasonably anticipated with respect to the Business. Seller does not know of any activities or proceedings of any labor union to organize any current Employees (including Designated Employees). There are no actions, suits, claims, labor disputes or grievances pending, or, to the knowledge of Seller, threatened or reasonably anticipated relating to any labor, safety or discrimination matters involving any Employee (including Designated Employees), including, without limitation, charges of unfair labor practices or discrimination complaints, which, if adversely determined, would, individually or in the aggregate, result in any material liability to Seller or any of its subsidiaries. Neither Seller nor any of its subsidiaries has engaged in any unfair labor practices within the meaning of the National Labor Relations Act. Seller is not presently, nor has it been in the past, a party to, or bound by, any collective bargaining agreement or union contract with respect to Employees (including Designated Employees) and no collective bargaining agreement is being negotiated with respect to Employees (including Designated Employees).           (g) No payment or benefit which will or may be made by Seller or its ERISA Affiliates with respect to any Employee or any other “disqualified individual” (as defined in Code Section 280G and the regulations thereunder) will be characterized as a “parachute payment,” within the meaning of Section 280G(b)(2) of the Code.      3.12 Bulk Transfer Laws. There are no current or past creditors of Seller to whom any law, rule or regulation requires the delivery of notice or from whom any form of consent is required in conjunction with undertaking the transactions contemplated by this Agreement, and the “bulk transfer laws” of any state in which the Transferred Assets are located do not apply to the transfer of those Transferred Assets under this Agreement.      3.13 Business Financial Information.           (a) Seller has delivered to Parent and Buyer, and Schedule 3.13(a) contains, true, correct and complete copies of (i) the unaudited partial balance sheet of the Business at September 30, 2005 which includes only the categories of Transferred Assets and Assumed Liabilities as of such date and (ii) unaudited statements of revenue and direct expenses of the Business for the year ended December 31, 2004 and the nine months ended September 30, 2005 (the “Financial Statements”). The Financial Statements were compiled from books and records regularly maintained by management of Seller used to prepare financial statements of Seller and fairly present the financial condition and results of operations at the date and for the periods covered thereby.           (b) Since September 30, 2005, there has not occurred any event or condition of any character that has had or is reasonably likely to have a material adverse effect on the Business, the Transferred Products or the Transferred Assets, or any damage, destruction or loss, whether or not covered by insurance.           (c) Except as and to the extent reflected on the Financial Statements or on Schedule 3.13(c), Seller does not have Liabilities that are within the definition of Assumed Liabilities and are of a nature customarily reflected on a balance sheet. The amount of Seller’s warranty obligations with respect to the Transferred Products sold by Seller prior to Closing Date does not exceed $75,000. - 22 - --------------------------------------------------------------------------------        3.14 Contracts; No Defaults.           (a) Contracts. Schedule 3.14(a) sets forth a complete and accurate list, with respect to the Business, the Transferred Assets and the Designated Employees, of each agreement, contract, understanding or commitment (including, without limitation, any of the Transferred Contracts) entered into by Seller or any of its Affiliates with respect to the Business or the Transferred Assets.           (b) Defaults. Neither Seller nor any Affiliate of Seller is in default under or with respect to any judgment, order, writ, injunction or decree of any Governmental Entity. There does not exist any default by Seller or, to the knowledge of Seller, by any other Person, or event that, with notice or lapse of time, or both, would constitute a default under any agreement, contract, understanding or commitment (including, without limitation, any of the Transferred Contracts) entered into by Seller or any of its Affiliates with respect to the Business or the Transferred Assets, and no notices of breach thereof have been received by Seller or any of its Affiliates. Except as set forth on Schedule 3.14(b), neither the Seller nor any Affiliate of Seller is a party to or bound by any agreement, contract, understanding, or commitment with respect to the Business or the Transferred Assets which is not immediately terminable by Seller without penalty. Each of the Transferred Contracts is fully assignable to Buyer without giving rise to any obligation, loss of rights or penalty and when assigned to Buyer, shall place Buyer in the position of Seller (or its Affiliate) under the terms of such Transferred Contract.      3.15 Warranties; Defects; Liabilities. Each Transferred Product manufactured, sold, licensed, leased or delivered by Seller, and all services performed by Seller, have been in conformity with all applicable contractual commitments and all express and implied warranties except where the failure to be in such conformity would not have a material adverse effect. Except for Seller’s standard product warranty, the Seller has no Liability (and to the knowledge the Seller, there is no current reasonable basis for any present or future action, suit, proceeding, hearing, investigation, charge, complaint, claim or demand against any of them giving rise to any Liability) for replacement or repair thereof or other damages in connection therewith. No Transferred Product manufactured, sold, licensed, leased, or delivered by Seller, and no service performed by Seller, is subject to any guaranty, warranty or other indemnity beyond the applicable standard terms and conditions of sale, license or lease or beyond that implied or imposed by applicable law. Schedule 3.15 includes copies of the standard terms and conditions of license or services for Seller (each Contract setting forth such standard terms and conditions for licensing a Transferred Product shall be referred to herein as a “Standard Product License Agreement”) and sets forth all Contracts under which Seller has manufactured, sold, or licensed Transferred Products or performed services or provided any guaranty, warranty or indemnity to a third party in connection therewith which contains terms that materially deviate from such standard terms and conditions.      3.16 Insurance. There is no claim by Seller pending under any insurance policy or fidelity bond covering the Business, the Transferred Products or the Transferred Assets. All premiums payable under all such policies and bonds have been paid, and Seller is otherwise in compliance with the terms of such policies and bonds. To the knowledge of the Seller, such policies of insurance and bonds are of the type and in amounts customarily carried by persons conducting businesses similar to those of Seller in the jurisdictions in which Seller operates. - 23 - --------------------------------------------------------------------------------        3.17 Tax Matters.           (a) To the extent relevant to the Transferred Assets or the Business, Seller has prepared and timely filed all required Tax Returns relating to any and all Taxes concerning or attributable to the Seller and such Tax Returns are true and correct and have been completed in accordance with applicable law.           (b) To the extent failure to do so could adversely impact Parent or Buyer, the Business, the Transferred Assets, or Parent’s or Buyer’s use or ownership of the Transferred Assets or operation of the Business, Seller has timely paid all Taxes it is required to pay and has timely withheld and paid over to the appropriate Governmental Entity all income taxes, social security and national insurance contributions and other Taxes required to be withheld.           (c) Neither Parent nor Buyer shall have any liability or obligation, nor shall Parent or Buyer incur any loss, expense or cost, and none of the Transferred Assets shall be subject to any Liens, by reason of any Taxes arising out of (i) the Business as conducted by Seller prior to the consummation of the sale hereunder of the Transferred Assets or (ii) any other operations or activities of Seller whether conducted prior to the date hereof or hereafter. Seller is not aware of, and has no knowledge of a factual basis for the assertion of, any claim for Taxes for which Parent or Buyer would become liable as a result of the transactions contemplated by this Agreement.           (d) To the extent failure to do so could adversely impact Parent or Buyer, the Business, the Transferred Assets, or Parent’s or Buyer’s use or ownership of the Transferred Assets or operation of the Business, as of the Closing Date, Seller will not be delinquent in the payment of any Tax, nor will there be any Tax deficiency outstanding, assessed or proposed against Seller.           (e) Seller has not executed any waiver of any statute of limitations on or extending the period for assessment or collection of any Tax.           (f) No audit or other examination of any Tax Return of Seller’s with respect to the Business or Transferred Assets is presently in progress, nor has any Seller been formally or informally notified of any request for such an audit or other examination.      3.18 Accounts Receivable. All of the accounts receivable of the Business (a) arose from bona fide sales transactions in the ordinary course of business, and are payable on ordinary trade terms, (b) are legal, valid, and binding obligations of the respective debtors enforceable in accordance with their respective terms, (c) are not subject to any valid set-off or counterclaim, and (d) do not represent obligations for goods sold on consignment, on approval or on a sale-or-return basis or subject to any other repurchase or return arrangement. No person has any Lien on any accounts receivable of the Business and no request or agreement for deduction or discount has been made with respect to any accounts receivable of the Business.      3.19 Inventory. The Transferred Inventory is of a quality and quantity usable and salable in the ordinary course of business. All items included in the Transferred Inventory of the Business are the property of the Seller, free and clear of any Lien, have not been pledged as collateral, are not held on consignment from others and conform in all material respects to all standards applicable to such Transferred Inventory and its use or sale imposed by any Governmental Entity. - 24 - --------------------------------------------------------------------------------        3.20 Representations and Disclosures Complete. Seller is not aware of any facts or circumstances that affect the Business, the Transferred Assets or the Designated Employees in a material adverse manner or that are reasonably likely to affect the Business, the Transferred Assets or the Designated Employees in a material adverse manner. None of the representations or warranties made by Seller (as modified by the Disclosure Schedule), nor any statement made in any Schedule, Exhibit, agreement or certificate furnished by Seller pursuant to this Agreement, contains or will contain at the Closing any untrue statement of a material fact, or omits or will omit at the Closing to state any material fact necessary in order to make the statements contained herein or therein, in light of the circumstances under which made, not misleading. Seller has delivered or made available true and complete copies of each existing document that has been requested by Parent, Buyer or its counsel. Article 4 REPRESENTATIONS AND WARRANTIES OF PARENT AND BUYER      Parent and Buyer represent and warrant to Seller as follows:      4.1 Organization. Parent is duly organized, validly existing, and in good standing under the laws of the jurisdiction of the State of California. Buyer is duly organized, validly existing, and in good standing under the laws of the jurisdiction of the State of Delaware.      4.2 Authority for Agreement. Parent and Buyer have all requisite corporate power and authority to enter into this Agreement, the Collateral Agreements to which Parent and Buyer are a party and all related agreements and instruments to be executed and delivered by Parent and Buyer and to consummate the transactions contemplated hereby and thereby. The execution and delivery of this Agreement, the Collateral Agreements to which Parent and Buyer are a party and the related agreements and instruments and the consummation of the transactions contemplated hereby and thereby have been duly authorized by all necessary corporate action on the part of Parent and Buyer. This Agreement has been duly executed and delivered by Parent and Buyer and constitutes, and the related agreements and instruments, when duly executed and delivered by Parent and Buyer, will constitute the valid and binding obligations of Parent and Buyer, enforceable in accordance with their terms, except as such enforceability may be subject to the laws of general application relating to bankruptcy, insolvency and the relief of debtors and rules of law governing specific performance, injunctive relief or other equitable remedies.      4.3 Noncontravention(a) . As of the Closing Date, neither the execution and the delivery of this Agreement, the related agreements and instruments to be executed and delivered by Parent and Buyer nor the consummation of the transactions contemplated hereby or thereby, will (a) violate any provision of the certificate of incorporation or bylaws, each as in effect, of each of Parent and Buyer or (b) Conflict with any material agreement, contract, lease, license, instrument, or other arrangement to which Parent and Buyer are a party or by which it is bound or to which any of its assets is subject except for such Conflicts which would not, either individually or in the aggregate, have a material adverse effect on Parent and Buyer. - 25 - --------------------------------------------------------------------------------   Article 5 ADDITIONAL AGREEMENTS OF THE PARTIES      5.1 Operation of the Business.           (a) Between the Effective Date and the Closing Date, unless otherwise agreed in writing in advance by Parent or Buyer, Seller shall: (i) except as otherwise allowed or required pursuant to the terms of this Agreement, conduct the Business in the usual, regular and ordinary course in substantially the same manner as heretofore conducted; (ii) pay the debts, trade payables and Taxes of the Business when due and in a manner consistent with prior practices; (iii) pay or perform other obligations of the Business when due; (iv) preserve intact the current business organization of Seller relating to the Business, keep available the services of the Designated Employees, and maintain the relations and goodwill with the suppliers, customers, distributors, licensors, licensees, landlords, trade creditors, Employees, agents, and others having business relationships with Seller relating to the Business, with the goal of preserving unimpaired the goodwill and ongoing business of the Business; (v) maintain all of the Transferred Assets in their current condition, ordinary wear and tear excepted, and, in the event of any damage to or destruction of any of the Transferred Assets prior to the Closing Date, promptly replace, repair or restore such Transferred Assets; (vi) promptly notify Parent and Buyer in writing of any event or occurrence not in the usual, regular and ordinary course of the operation of the Business, or that has resulted, will result, or is reasonably likely to result, in the failure to satisfy any of the conditions specified in this Section 5.1 hereof;           (b) Except as otherwise expressly permitted by this Agreement, between the Effective Date and the Closing Date, Seller will not, without the prior written consent of Parent or Buyer:                (i) sell, lease or otherwise transfer or dispose of, or enter into any outbound license agreement with respect to any of the Transferred Assets;                (ii) take any action to impair, encumber, create a Lien against or otherwise adversely affect the Transferred Assets;                (iii) revalue any of the Transferred Assets, including without limitation writing down the value of any inventory;                (iv) amend or modify, or violate the terms of, any of the Transferred Contracts;                (v) make or change any election in respect of Taxes, adopt or change any accounting method in respect of Taxes, enter into any closing agreement, settle any claim or assessment in respect of Taxes, or consent to any extension or waiver of the limitation period applicable to any claim or assessment in respect of Taxes, in each case relating to the Business, the Transferred Products or the Transferred Assets;                (vi) create, incur or assume any Liability that would materially and adversely affect the Business, the Transferred Assets or Parent’s and Buyer’s ability to conduct the - 26 - --------------------------------------------------------------------------------   Business in substantially the same manner and condition as conducted by Seller on the Effective Date;                (vii) commence or settle any legal actions or proceedings or obtain any releases of threatened actions or proceedings involving or relating to the Business or the Transferred Assets;                (viii) accelerate any accounts receivable or defer any accounts payable in any manner outside the ordinary course of business;                (ix) take any action, or fail to take any action, that would result in any of the representations and warranties set forth in Article 3 not being true and correct on and as of the Closing Date with the same force and effect as if such representations and warranties had been made on and as of the Closing Date; or                (x) agree to take any action described in subsection (i) through (ix) above.      5.2 Access.           (a) During the period commencing on the Effective Date and continuing through the Closing Date, Seller will permit Parent and Buyer to make a full and complete investigation of the Transferred Assets and the Business and to receive all information of Seller relating to the Transferred Assets or reasonably related to Seller’s conduct of the Business. In addition, to the maximum extent permitted by applicable laws and regulations, Seller will provide Parent and Buyer access to the employee files of the Designated Employees or Employees that would potentially be Designated Employees. Without limitation on this right, Seller, upon reasonable prior notice from Parent or Buyer to Seller, will (i) afford to Parent and Buyer and their representatives, at all reasonable times during normal business hours, full and complete access to the Transferred Assets and Seller’s personnel, professional advisors, properties, contracts, files, Books and Records, and other documents and data; (ii) furnish Parent or Buyer and its representatives with copies of all such Transferred Contracts, Books and Records, and other existing documents and data as Parent or Buyer may reasonably request; and (iii) furnish Parent or Buyer and their representatives with such additional financial (including Tax Returns and supporting documentation), operating, and other data and information as Parent or Buyer may reasonably request, in each case relating to the Business. Seller shall maintain and make available the information and records specified in this Section 5.2 in the ordinary course of Seller’s business and document retention policies, as if the transactions contemplated by this Agreement had not occurred. No information or knowledge obtained in any investigation pursuant to this Section 5.2 shall affect or be deemed to modify any representation or warranty contained herein or the conditions to the obligations of the Parties hereto to consummate the transactions contemplated hereby.           (b) During the period commencing on the Effective Date and continuing through the Closing Date, each Party shall provide the other Party (at such other Party’s expense) with such reasonable assistance, including the provision of available relevant records or other information and reasonable access to and cooperation of any personnel within their employ, as may be reasonably requested by either of them in connection with the preparation of any financial statement or Tax - 27 - --------------------------------------------------------------------------------   Return, or any audit or examination by any taxing authority, or any judicial or administrative proceeding relating to liability for Taxes.           (c) For two (2) years after the Closing Date, Seller shall give Parent and Buyer reasonable access, during normal business hours, to all books, records and files requested by Parent and Buyer that are reasonably necessary in order for Parent and Buyer to respond to any third party or governmental inquiries, investigations, claims or audits related to the Transferred Assets or the Business.      5.3 Post-Closing Audits of Business Financial Statements. During the period commencing on the Closing Date and ending on the date that the audits of the Business’s financial statements for the years ended December 31, 2004 and the period from January 1, 2005 through the Closing Date by third party auditors are completed (the “Audit Completion Date”), Seller shall provide Parent (at Seller’s expense) with such reasonable assistance, including the provision of available relevant records or other information and reasonable access to and cooperation of any personnel within Seller’s employ, as may be reasonably requested by Parent in connection with the preparation of the audits of the Business’s financial statements for the years ended December 31, 2004 and the period from January 1, 2005 through the Closing Date (the “Post-Closing Audits”). Parent shall select the third party auditor for the Post-Closing Audits and will bear the fees of the third party auditor for the Post-Closing Audits up to $125,000 for a so-called “carve out” audit. Any third party auditor fees in excess of $125,000 for the “carve out” audit shall be referred to as “Indemnifiable Audit Costs” and shall constitute “Losses” for purposes of Article 8.      5.4 Third Party Consents; Assignment of Transferred Contracts.           (a) Seller, Parent and Buyer shall use reasonable best efforts to obtain, within the applicable time periods required, all waivers, permits, consents, assignments and approvals and to effect all registrations, filings and notices with or to third parties or Governmental Entities that are necessary to consummate the transactions contemplated by this Agreement, including without limitation by cooperating in good faith to effect any required assignment to Buyer or its designees of each of the Transferred Contracts in such a manner that Buyer or its designees shall assume only those obligations under such Transferred Contracts arising from Buyer’s or its designee’s performance or non-performance of its obligations under such Transferred Contracts from and after the Closing Date.           (b) With respect to contracts that are to be Transferred Assets, Seller shall use prior to the Closing commercially reasonable efforts to obtain the consent of the other Persons to the assignment thereof to Buyer or its designees (at no cost to Buyer) such that Buyer or its designees shall be able to secure the benefits of such Transferred Contracts directly. If such consent is not obtained prior to the Closing, or if an attempted assignment thereof would be ineffective or would adversely affect the rights thereunder so that Buyer or its designees would not receive substantially all such rights, (i) this Agreement shall not constitute an agreement to assign such contracts (a “Non-Assignable Contract”) and (ii) Seller shall (x) continue to use reasonable best efforts to obtain the consent of the other Persons for the assignment thereof to Buyer or its designees, and (y) use reasonable best efforts so as to ensure that Buyer or its designees would obtain the benefits and assume the obligations thereunder in accordance with this Agreement, including subcontracting, sublicensing or subleasing to Buyer or its designees, or enter into - 28 - --------------------------------------------------------------------------------   arrangements under which Seller would enforce for the benefit of Buyer or its designees, with Buyer or its designee, assuming Seller’s obligations, any and all rights of Seller against a third party thereto. Seller shall promptly pay to Parent all monies received by Seller with respect to such Non-Assignable Contracts, except to the extent the same represents an Excluded Asset. To the extent the benefits therefrom and obligations thereunder have been provided by alternative arrangements as provided above reasonably acceptable to Parent or Buyer, any such Non-Assignable Contract shall be deemed to be a Transferred Asset or Assumed Liability, as the case may be, provided Parent and Buyer shall not be responsible for any Liabilities (i) arising out of a claim of breach of such Non-Assignable Contract due to the establishment of the alternative arrangements, or (ii) arising out of such Non-Assignable Contract as a result of Seller’s action without Parent’s or Buyer’s approval in a manner inconsistent with the alternative arrangements. Parent and Buyer will use commercially reasonable efforts to assist Seller in obtaining such consents (such commercially reasonable efforts shall not include the payment of money).           (c) In furtherance, and not in limitation of the foregoing subsection (a), in the event that Seller is unable to obtain any required consent to the transfer at the Closing to the Buyer or its designees of any Non-Assignable Contract and Seller and Buyer have failed to agree on alternate arrangements to an assignment reasonably satisfactory to Buyer, then (i) the party thereto shall remain a party and shall continue to be bound by such Non-Assignable Contract, (ii) Buyer or its designee shall pay, perform and discharge fully all of the obligations of such party from and after the Closing Date, upon the terms and subject to the conditions of such Non-Assignable Contract, (iii) such party shall, without further consideration therefor, pay, assign and remit to Buyer or its designee promptly all monies, rights and other consideration received in respect of such Non-Assignable Contract on and after the Closing Date, and (iv) such party shall, without further consideration therefor, exercise its rights and options under such Non-Assignable Contract in the manner and only to the extent directed by Buyer. If and when any consent shall be obtained following the Closing Date with respect to the transfer by Seller to Buyer of any such Non-Assignable Contract or such Non-Assignable Contract shall otherwise become assignable following the Closing Date, Seller shall promptly assign all of its rights and obligations thereunder to Buyer or its designee, without further consideration therefor, and Buyer shall, without further consideration therefor, assume such rights and obligations, to the fullest extent permitted and such Non-Assignable Contract shall be deemed to be a Transferred Asset or Assumed Liability, as the case may be. The existence of the provisions of this Section 5.4 shall not reduce or otherwise adversely affect any party’s ability to enforce any of its rights under this Agreement.      5.5 Renewal Fees. In furtherance, and not in limitation of the foregoing Section 5.4, Seller agrees to pay for Buyer’s renewal fees of all agreements and licenses with respect to third party Software previously licensed to Seller that are (i) listed on Schedule 5.5; (ii) Non-Assignable Contracts or (iii) otherwise necessary to enable Parent or Buyer to operate the Business following the Closing.      5.6 Transition Services. For a period of not more than 9 months from the Closing Date, Seller will continue to provide Parent and Buyer with support services to the Business as detailed in Exhibit B-1 (the “Transition Services”). The cost of such support services will be paid by Parent or Buyer to Seller at the rates set forth on Exhibit B-1 (the “Transition Services Fees”), pro-rated for partial months. Parent and Buyer may terminate each or all of such Transition Services at any time, provided, however, that Seller’s provision of IT system services shall not be terminated until Parent - 29 - --------------------------------------------------------------------------------   or Buyer implements a system capable of handling such IT system services. For any support service that Parent and Buyer is utilizing after 90 days, the Transition Services Fees will increase for such services by 20% each quarter after such 90 days. Seller agrees to transfer all data of or related to the Business which resides on Seller’s IT system for use with Parent’s or Buyer’s IT system, at Parent’s or Buyer’s request and at Seller’s cost. Seller shall provide the Transition Services, or cause the Transition Services to be provided, in a diligent and workmanlike manner, in good faith and in a manner consistent with the historical provision of such services in the ordinary course of business, with at least the same degree of skill, duty, care and timeliness as such services have been provided in Seller’s Fort Collins facilities prior to the Closing Date, but in no event less than reasonable care. Seller will provide the Transition Services to Parent and Buyer with the same priority as it provides similar services to its own subsidiaries and businesses, including similar treatment with respect to critical and time-sensitive needs. Seller shall not have the right to subcontract the provision of the Transition Services without the prior written consent of Parent or Buyer except to the extent such Services were subcontracted prior to the Closing Date. Prior to termination of such Transition Services, Seller will provide any transition-related assistance and migrate to Parent or Buyer all data reasonably necessary for Parent or Buyer to effect the transition of Transition Services, so that Parent or Buyer will be able to perform the Transition Services itself or through a third party service provider. Seller will be responsible for costs or expenses incurred in support of Parent’s or Buyer’s migration plan.      5.7 Software Other than IT Systems      Seller has provided Parent and Buyer, and attached hereto as Exhibit B-2, a complete list of third- party software presently utilized by Employees of the Business including the relicensing costs which are required to continue such use after the Closing. Seller has allowed Parent a credit against the purchase price for the Transferred Assets to enable Parent or Buyer to acquire such software as Parent or Buyer deems necessary. All license payments to third parties shall be at Parent’s and Buyer’s expense. Seller shall allow Parent and Buyer to acquire an unlimited, perpetual license to Seller’s P-Tools software in exchange for a onetime payment of $10,000. Such license to Seller’s P-Tools software shall be transferable in the event of a change in control or acquisition of Parent or Buyer.      5.8 Technology Documentation. Commencing on the Effective Date, Seller shall fully cooperate with Parent and Buyer to perform a detailed technical review of all Transferred Technology and shall diligently prepare such documentation sufficient to enable Parent and Buyer to fully utilize, understand and implement the Transferred Technology for delivery to Buyer at the Closing. It is understood and acknowledged that any Technology created solely or jointly by either Party in the creation of such documentation shall be Transferred Tangible Assets, and any Intellectual Property Rights therein shall be Assigned IPR. - 30 - --------------------------------------------------------------------------------        5.9 Intellectual Property.           (a) Except as otherwise expressly permitted by this Agreement, between the Effective Date and the Closing Date, Seller will not, without the prior written consent of Parent or Buyer:                (i) enter into any inbound license agreement with respect to Intellectual Property Rights or Technology of any third party to be incorporated in or used in connection with the Transferred Assets or the Business;                (ii) sell, lease or otherwise transfer or dispose of or encumber (including any Lien), or enter into any outbound license agreement (including any covenant not to sue a third party) with respect to, any of the Transferred Assets or the Business;                (iii) propose, enter into or negotiate a contract with any Person, other than Parent and Buyer, providing for the possible acquisition, transfer or disposition (whether by way of merger, purchase of capital stock, purchase of assets or otherwise) of any of the Transferred Assets or the Business; or                (iv) enter into any other contract relating to (A) the sale or distribution of any Transferred Technology; (B) the provision of any services related to the Business; or (C) any other of the Transferred Assets.           (b) Between the Effective Date and the Closing Date, Seller shall, and shall cause its Affiliates to, take all actions, and not omit to take any action, necessary to preserve and maintain all Assigned IPR, including payment of any Patent issuance, maintenance or other fees when due and the filing of any documents, certificates or notices when due related to the prosecution or maintenance of any Assigned IPR.      5.10 Reasonable Best Efforts . The Parties shall use reasonable best efforts (a) to cause to be fulfilled and satisfied all of the conditions to the Closing to be fulfilled and satisfied by each of them and (b) to cause to be performed all of the matters required of each of them at the Closing.      5.11 No Other Bids. Until the earlier to occur of (a) the Closing or (b) the termination of this Agreement pursuant to its terms, neither Seller nor any of its Affiliates, officers, directors, Employees, stockholders, agents or other representatives shall, directly or indirectly: (i) initiate, solicit, entertain or encourage (including by way of furnishing information regarding the Business or the Transferred Assets) any proposals, inquiries or offers, or make any statements to third parties which may reasonably be expected to lead to any proposal, inquiry or offer, from any Person concerning the acquisition or license of all or any material portion of the Business or the Transferred Assets; or (ii) negotiate, engage in any substantive discussions, or enter into any agreement, with any Person concerning the acquisition or license of all or any material portion of the Business or the Transferred Assets. Seller will promptly inform Parent and Buyer in writing of any third party inquiries or proposals received by Seller and shall provide to Parent and Buyer the name of such third party and the terms of any such proposal. The covenants in this Section 5.11 will apply to any and all discussions in which Seller is currently involved with third parties, and Seller shall immediately terminate all such discussions. - 31 - --------------------------------------------------------------------------------        5.12 Confidentiality; Public Announcements.           (a) The Receiving Party shall treat as confidential all of the Disclosing Party’s Confidential Information and shall not use or disclose to third parties such Confidential Information except as expressly permitted under this Agreement. Without limiting the foregoing, the Receiving Party shall use at least the same degree of care that it uses to prevent the disclosure of its own confidential information, but in no event with less than reasonable care, to prevent the disclosure of the Disclosing Party’s Confidential Information.           (b) Notwithstanding the foregoing Section 5.12(a), after the Closing the following shall be deemed the Confidential Information of Parent and Buyer and the obligations set forth in Section 5.12(a) shall no longer apply to Parent and Buyer with respect thereto: any Confidential Information related to the Business or the Transferred Assets or constituting or included with the Transferred Assets.           (c) Seller agrees that the terms, conditions and existence of this Agreement shall be treated as Confidential Information of Parent and Buyer and that no reference to this Agreement or the transactions contemplated herein may be made by Seller in any form of public or commercial announcement or advertising without the prior written consent of the other; provided, however, that Seller may disclose, upon prior written notice to the other, the terms, conditions and existence of this Agreement: (a) as required by any Governmental Entity (including the United States Securities and Exchange Commission) in which case, the Parties shall confer as to the appropriate disclosure; (b) as otherwise required by law; (c) in confidence, to legal counsel and accountants of Seller; or (d) in confidence, in connection with the enforcement of this Agreement or Seller’s rights under this Agreement.           (d) In the event the Receiving Party must disclose the Disclosing Party’s Confidential Information pursuant to the order or requirement of a court, administrative agency, or other Governmental Entity, the Receiving Party shall provide prompt notice thereof to the Disclosing Party to allow the Disclosing Party to obtain a protective order, and the Receiving Party shall also use its reasonable efforts to obtain a protective order, assist Disclosing Party in obtaining a protective order or otherwise prevent public disclosure of such information.           (e) The Parties agree that Seller’s Confidential Information related to the Business and known to the Designated Employees is included in the Transferred Assets under this Agreement. Accordingly, to the extent a Designated Employee hired by Buyer would, as a result of an employment or other agreement between Seller and that Designated Employee, be restricted from disclosing Confidential Information to Parent or Buyer or from using information on Parent’s or Buyer’s behalf or otherwise in connection with its employment by Parent or Buyer, Seller agrees to, and hereby does waive, in favor or Parent and Buyer, any right that it may have to enforce such restrictions and consents to Parent’s or Buyer’s use and disclosure of such information for its own benefit and on its own behalf, without restriction.      5.13 Covenant Not to Compete. Beginning on the Closing Date and ending on the third (3rd) anniversary of the Closing Date, neither Seller nor any of its Affiliates or permitted successors or assigns shall, directly or indirectly, without the prior written consent of Parent or Buyer, engage anywhere in the world in (whether as an agent, consultant, advisor, independent contractor, - 32 - --------------------------------------------------------------------------------   proprietor, partner, officer, director or otherwise), or have any ownership interest in, or participate in the financing, operation, management or control of, any firm, partnership, corporation, entity or business that engages or participates in the design, development, manufacture, marketing or sale of Transferred Products or other products intended for use in the Business, or otherwise engages in the Business; provided, however, that it shall not be a violation of this Section 5.13 for Seller to (a) own debt securities or other debt obligations (other than convertible debt) of any Person, or (b) invest in securities representing less than one percent (1%) of the outstanding capital stock of any Person, whose stock is traded on a national securities exchange or through the automated quotation system of a registered securities association. Notwithstanding Section 1.1(a), any entity that (i) in the future acquires Control of Seller in an acquisition or merger transaction and (ii) at the time of such transaction sells products intended for use in the Business shall not be deemed an “Affiliate” for purposes of this Section 5.13 only.      5.14 Covenant Not to Solicit or Hire.           (a) Beginning on the Closing Date and ending on the third (3rd) anniversary of the Closing Date, neither Seller nor its Affiliates shall, directly or indirectly, without the prior written consent of Parent: (i) hire any employee of Parent or Buyer (including any Designated Employees) for employment by Seller or any of its Affiliates; or (ii) solicit any employee of Parent or Buyer (including any Designated Employees) to terminate his or her employment or consultancy with Parent or Buyer or any of their Affiliates; provided, however, that this Section 5.14(a) shall not prohibit Seller or any Affiliate of Seller from: (i) soliciting employees through, or hiring employees who respond to, general job advertisements or similar notices that are not targeted specifically at the employees of a party; or (ii) engaging any recruiting firm or similar organization to identify or solicit persons for employment on its behalf as long as such recruiting firm or organization is not instructed or otherwise informed to target any employee of Buyer.           (b) Beginning on the Closing Date and ending on the third (3rd) anniversary of the Closing Date, neither Parent, Buyer nor their Affiliates shall, directly or indirectly, without the prior written consent of Seller: (i) hire any employee of Seller (other than any Designated Employee) for employment by Parent, Buyer or any of their Affiliates; or (ii) solicit any employee of Seller (other than any Designated Employee) to terminate his or her employment or consultancy with Seller or any Affiliate of Seller; provided, however, that Section 5.14(b) shall not prohibit Parent, Buyer or any of their Affiliates from: (i) soliciting employees through, or hiring employees who respond to, general job advertisements or similar notices that are not targeted specifically at the employees of a party; or (ii) engaging any recruiting firm or similar organization to identify or solicit persons for employment on its behalf as long as such recruiting firm or organization is not instructed or otherwise informed to target any employee of Seller.      5.15 Notification of Certain Matters. Seller shall give prompt notice to Parent and Buyer of (a) Seller becoming aware of the occurrence or non-occurrence of any event that is likely to cause any representation or warranty of Seller contained in this Agreement to be untrue or inaccurate in any material respect at or prior to the Closing, and (b) any failure of Seller to comply with or satisfy in any material respect any covenant, condition or agreement to be complied with or satisfied by it hereunder; provided, however, that the delivery of any notice pursuant to this Section 5.15 shall not (i) limit or otherwise affect any remedies available to the party receiving such notice or (ii) constitute an acknowledgment or admission of a breach of this Agreement. No disclosure by pursuant to this - 33 - --------------------------------------------------------------------------------   Section 5.15, however, shall be deemed to amend or supplement the Disclosure Schedule or prevent or cure any misrepresentations, breach of warranty or breach of covenant.      5.16 Severability of Covenants. The covenants contained in the preceding paragraphs shall be construed as a series of separate covenants, one for each county, city and state of any geographic area where any business is carried on by Parent or Buyer or their Affiliates. Except for geographic coverage, each such separate covenant shall be deemed identical in terms to the covenant contained in the preceding paragraphs. If, in any judicial proceeding, a court refuses to enforce any of such separate covenants (or any part thereof), then such unenforceable covenant (or such part) shall be eliminated from this Agreement to the extent necessary to permit the remaining separate covenants (or portions thereof) to be enforced. If the provisions of Sections 5.13 and 5.14 are deemed to exceed the time, geographic or scope limitations permitted by applicable law, then such provisions shall be reformed to the maximum time, geographic or scope limitations, as the case may be, permitted by applicable laws.      5.17 SEC Support Letter. Seller covenants to provide a letter to the Securities and Exchange Commission (the “SEC”), similar to the forms provided by Parent to Seller as of the Closing (the “Support Letter”), in support of the request by Parent or Buyer to the SEC for permission to file certain financial information in lieu of the full financial statements that may otherwise be required in any future SEC filings by Parent or Buyer, such as a registration statement on Form S-1 or Form S-4 (the “SEC Request”). Seller shall provide Parent and Buyer with such reasonable assistance, including the provision of available relevant records or other information and reasonable access to and cooperation of any personnel within Seller’s employ, as may be reasonably requested by Parent or Buyer, in preparing the SEC Request, providing information requested by the SEC, or complying with the SEC’s response to the SEC Request. Seller covenants to provide Parent and Buyer a draft of the Support Letter by December 31, 2005. Article 6 EMPLOYEES      6.1 Seller Cooperation. During the period commencing on the Effective Date and continuing through the Closing Date, Seller shall assist and cooperate with Parent and Buyer to identify Seller’s Employees employed in connection with the Business who will be Designated Employees, including by permitting Parent and Buyer to review employee files, compensation data, and job descriptions for any such Employees. In the event Parent or Buyer identifies additional Employees as Designated Employees in its discretion during such period, Parent or Buyer shall notify Seller thereof in writing and Schedule 1.1(n) shall thereafter be amended to include such additional Designated Employees. After the Effective Date, Seller shall promptly provide Parent and Buyer with copies of the employment files of all Designated Employees to the extent not already provided to Parent and Buyer, and shall promptly provide any additional information about such Employees upon Parent’s or Buyer’s reasonable request. After the Effective Date, Seller shall permit Parent and Buyer to contact and interview Designated Employees at Seller’s premises during normal business hours, and Seller shall cooperate fully with Parent and Buyer in all such respects.      6.2 Employment Offers. - 34 - --------------------------------------------------------------------------------             (a) It is expected that prior to Closing, Buyer shall make offers of “at-will” employment to all Designated Employees, provided that Buyer may elect not to make an offer to any Designated Employees in its sole discretion. Any such “at-will” employment offers will (a) be contingent on Closing; (b) be subject to and in compliance with Parent’s or Buyer’s standard human resources policies and procedures, including requirements for proof evidencing a legal right to work in the offeree’s country of current employment; (c) have terms, including the position, salary and responsibilities of such Employee, which will be determined by Buyer in its sole discretion, except that all Designated Employees will be offered a hiring bonus equal to one month’s base salary and a retention bonus consistent with its prior discussions with Seller; and (d) supersede any prior Employment Agreements and other arrangements with such Employee in effect prior to the Closing Date.           (b) For each day that the Designated Employees start employment with Buyer after the Closing, Parent will reimburse Seller an amount equal to one day’s salary of the Designated Employees who accept employment with Buyer at the time of the Closing, based on the then-current salaries of the Designated Employees with Seller, such payment to be made at the time of Buyer’s first payment to Seller for the Transition Services.      6.3 Waiver. Seller hereby agrees to waive any condition or restriction which it may have the contractual right to impose on the hiring and employment of Designated Employees by Parent or Buyer.      6.4 Employees. Between the Effective Date and the Closing Date, Seller will not, without the prior written consent of Parent or Buyer:           (a) terminate the employment of any Employee, except for cause, provided Seller provides notice to Parent and Buyer prior to any such termination;           (b) reassign any Designated Employee to another business unit of Seller;           (c) hire any employees relating to the Business;           (d) change, increase or amend the rate of remuneration (cash, equity or otherwise) or any other terms of employment of any of the Designated Employees or adopt, grant extend or increase the rate or terms of any bonus, insurance pension or other employee benefit plan, payment or arrangement made to, for or with any Designated Employees, except increases pursuant to any applicable law, rule or regulation;           (e) grant any severance or termination pay (whether payable in cash, stock or other equity instruments) to any Designated Employee, or adopt any new severance plan, amend or modify or alter in any manner any severance plan, agreement or arrangement relating to any Designated Employee on the date hereof; or           (f) adopt or amend any Employment Agreement with a Designated Employee.      6.5 COBRA Continuation Coverage. Seller agrees and acknowledges that the selling group (as defined in Treasury Regulation Section 54.4980B-9, Q&A-3(a)) of which it is a part (the “Selling Group”) will continue to offer a group health plan to employees after the Closing Date and, - 35 - --------------------------------------------------------------------------------   accordingly, that Seller and the Selling Group shall be solely responsible for providing continuation coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”) to those individuals who are M&A qualified beneficiaries (as defined in Treasury Regulation Section 54.4980B-9, Q&A-4(a)) with respect to the transactions contemplated by this Agreement (collectively, the “M&A Qualified Beneficiaries”). Seller shall indemnify, defend and hold harmless Parent and Buyer for, from and against any and all claims, liabilities, losses, costs and expenses (including attorney’s fees) relating to, arising out of, or resulting from any and all COBRA obligations, liabilities and claims related to M&A Qualified Beneficiaries and all other qualified beneficiaries (as defined in Code Section 4980B(g)(1)) with respect to Sellers’ group health plans. Seller further agrees and acknowledges that in the event that the Selling Group ceases to provide any group health plan to any employee prior to the expiration of the continuation coverage period for all M&A Qualified Beneficiaries (pursuant to Treasury Regulation Section 54.4980B-9, Q&A-8(c)), then Seller shall provide Parent and Buyer with (a) written notice of such cessation as far in advance of such cessation as is reasonably practicable (and, in any event, at least thirty (30) days prior to such cessation), and (b) all information necessary or appropriate for Parent or Buyer to offer continuation coverage to such M&A Qualified Beneficiaries.      6.6 Employee Liability Claims.           (a) As between the Parties, the Seller and any ERISA Affiliate shall (i) sponsor and (ii) assume or retain, as the case may be, and be solely responsible for all of the following from and after Closing, which will be considered “Employee Excluded Liabilities” for purposes of this Agreement, including Section 2.3 hereof:                (i) Employment Liabilities, including but not limited to payments or entitlements that Seller may owe or have promised to pay to the Designated Employees or any other Employees, including wages, other remuneration, holiday or vacation pay, bonus, severance pay (statutory or otherwise), commission, pension contributions, taxes, and any other liability, payment or obligations related to Employees or contractors;                (ii) all payments with respect to the Designated Employees that are due to be paid prior to or on the Closing Date (including, without prejudice to the generality of the foregoing, pension contributions, insurance premiums and taxation) to any third party in connection with the employment of any of the Designated Employees; and                (iii) any non-forfeitable claims or expectancies of any Designated Employees from their prior employment with Seller or an ERISA Affiliate which have been incurred or accrued on or prior to the Closing Date.           (b) All costs and disbursements incurred in connection with the termination of any employment of a Designated Employee or any other Employee prior to or in connection with the Closing Date (including any Designated Employee who does not accept an offer of employment with Parent or Buyer) shall be borne by Seller. - 36 - --------------------------------------------------------------------------------   Article 7 CLOSING, PURCHASE PRICE AND PAYMENTS      7.1 Conditions to Obligations of Buyer. The obligations of Parent and Buyer to consummate the transactions contemplated by this Agreement shall be subject to the satisfaction at or prior to the Closing Date of the conditions set forth in this Section 7.1, any of which may be waived, in writing, exclusively by Parent:           (a) Representations and Warranties. The representations and warranties of the Seller contained in this Agreement shall be true, correct and complete in all material respects (without regard to any materiality qualifications set forth in any such representation or warranty) as of the Effective Date and shall be true, correct and complete in all material respects (without regard to any materiality qualifications set forth in any such representation or warranty) as of the Closing Date as if made on and as of the Closing Date (other than representations and warranties which by their express terms are made solely as of a specified earlier date, which shall be true, correct and complete in all material respects (without regard to any materiality qualifications set forth in any such representation or warranty) as of such specified earlier date). Notwithstanding the foregoing, representations and warranties of the Seller contained in this Agreement that are qualified by reference to materiality shall be true, correct and complete in all respects as of the dates set forth in this Section 7.1(a).           (b) Performance. Seller shall have performed and complied in all material respects with each agreement, covenant and obligation required by this Agreement to be so performed or complied with by Seller on or before the Closing Date.           (c) Employees. All of the Key Employees and no fewer than ninety percent (90%) of the Designated Employees shall have accepted in writing an offer of employment with Buyer, in a form acceptable to Buyer and substantially in the form attached as Exhibit D; provided, however, that Buyer chooses in its sole discretion to make such offers to such Key Employees and/or Designated Employees.           (d) Sublease of Facility. Seller shall have provided to Buyer a sublease in the form of Exhibit E annexed hereto with respect to that portion of the space at 4424 Innovation Drive, Fort Collins, Colorado (approximately 12,000 sq. ft.) which is presently allocated to the Business. The sublease shall be for the same term as the Master Lease (June 30, 2009) provided Buyer may terminate such sublease on not less than 90 days prior notice to Seller and provided further that Buyer will pay Seller full rent (not including utilities and other costs of facility-related services provided by Seller to Buyer) through the later of June 30, 2006 or the date Buyer moves out of the facility and 50% of the rent (not including utilities and other costs of facility-related services provided by Seller to Buyer) from the date Buyer moves out of the facility to September 30, 2006, if Buyer moves out of the facility prior to September 30, 2006. Buyer also acknowledges that under the Master Lease both Seller and Landlord have the right to terminate such Master Lease upon 270 days prior notice in which event the sublease shall terminate at the same time provided Buyer shall have been provided with a copy of the notice of termination at the time it was given or received by Seller. The sublease rent shall be $6,720 per month, for a total of $7,100 per month inclusive of all utilities (water, gas and electric). - 37 - --------------------------------------------------------------------------------             (e) No Material Adverse Effect. Since the Effective Date, there shall not have occurred any event or condition of any character that has had or is reasonably likely to have a material adverse effect on the Business, the Transferred Products, the Transferred Assets or the financial condition or prospects of the Business.           (f) Closing Certificate. Parent and Buyer shall have received a certificate, dated as of the Closing Date, signed and verified by an officer of Seller on behalf of Seller certifying as to the matters set forth in Sections 7.1(a), (b) and (e).           (g) Consents. All third party consents required to transfer or assign the Transferred Assets (free of any Liens), the Transferred Permits and the Transferred Contracts to Buyer set forth on Schedule 7.1(g) shall have been obtained in a form acceptable to Parent.           (h) Other Agreements. Seller shall have executed and delivered to Parent and Buyer each of the Collateral Agreements, and such agreements shall remain in full force and effect.           (i) No Proceeding or Litigation.                (i) No preliminary or permanent injunction or other order shall have been issued by any Governmental Entity, nor shall any statute, rule, regulation or executive order be promulgated or enacted by any Governmental Entity which prevents the consummation of the transactions contemplated by this Agreement.                (ii) No suit, action, claim, proceeding or investigation before any Governmental Entity shall have been commenced or have been threatened against Seller, Parent or Buyer, or any of their respective Affiliates, associates, officers or directors, seeking to prevent the sale of the Transferred Assets or asserting that the sale of the Transferred Assets would be illegal or create liability for damages.           (j) Documents. This Agreement, any other instruments of conveyance and transfer and all other documents to be delivered by Seller to Parent and Buyer at the Closing and all actions of Seller required by this Agreement or incidental thereto, and all related matters, shall be in form and substance reasonably satisfactory to Parent.           (k) Governmental Filings. Seller, Parent and Buyer shall have made all required filings with Governmental Entities, and any approvals related thereto shall have been obtained or any applicable waiting periods shall have expired.           (l) Series C Preferred Stock Financing. The sale of Parent’s Series C Preferred Stock for an aggregate purchase price of at least $20 million shall have been completed.      7.2 Conditions to Obligations of Seller. The obligations of Seller to consummate the transactions contemplated by this Agreement shall be subject to the satisfaction at or prior to the Closing of the conditions set forth in this Section 7.2, any of which may be waived, in writing, exclusively by Seller:           (a) Representations and Warranties. The representations and warranties of the Parent and Buyer contained in this Agreement shall be true, correct and complete in all material - 38 - --------------------------------------------------------------------------------   respects (without regard to any materiality qualifications set forth in any such representation or warranty) as of the Effective Date and shall be true, correct and complete in all material respects (without regard to any materiality qualifications set forth in any such representation or warranty) as of the Closing Date as if made on and as of the Closing Date (other than representations and warranties which by their express terms are made solely as of a specified earlier date, which shall be true, correct and complete in all material respects (without regard to any materiality qualifications set forth in any such representation or warranty) as of such specified earlier date).           (b) Performance. Parent and Buyer shall have performed and complied in all material respects with each agreement, covenant and obligation required by this Agreement to be so performed or complied with by the Parent and Buyer on or before the Closing Date.           (c) Closing Certificate. Seller shall have received a certificate, dated as of the Closing Date, signed and verified by an officer of each of Parent and Buyer on behalf of each of Parent and Buyer certifying as to the matters set forth in Sections 7.2(a) and 7.2(b).           (d) Other Agreements. Parent and Buyer shall have executed and delivered to Seller each of the Collateral Agreements to which Parent and Buyer are a party, and such agreements shall remain in full force and effect.           (e) No Proceeding or Litigation.                (i) No preliminary or permanent injunction or other order shall have been issued by any Governmental Entity, nor shall any statute, rule, regulation or executive order be promulgated or enacted by any Governmental Entity which prevents the consummation of the transactions contemplated by this Agreement.                (ii) No suit, action, claim, proceeding or investigation before any Governmental Entity shall have been commenced or have been threatened against Seller, Parent or Buyer, or any of their respective Affiliates, associates, officers or directors, seeking to prevent the sale of the Transferred Assets or asserting that the sale of the Transferred Assets would be illegal or create liability for damages.           (f) Documents. This Agreement, any other instruments of conveyance and transfer and all other documents to be delivered by Parent and Buyer to Seller at the Closing and all actions of Parent and Buyer required by this Agreement or incidental thereto, and all related matters, shall be in form and substance reasonably satisfactory to Seller.           (g) Governmental Filings. Seller, Parent and Buyer shall have made all required filings with Governmental Entities, and any approvals related thereto shall have been obtained or any applicable waiting periods shall have expired. - 39 - --------------------------------------------------------------------------------   Article 8 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND INDEMNIFICATION      8.1 Survival of Representations and Warranties. The representations, warranties, covenants and agreements of Seller in this Agreement shall survive until the earlier to occur of (i) twelve (12) months after the Closing Date and (ii) ninety (90) days after the Audit Completion Date, and shall thereafter automatically expire; provided, however, that (x) Seller’s representations in Section 3.5 (Intellectual Property) shall survive for a period of three (3) years after the Closing Date, and shall thereafter automatically expire; (y) Seller’s representations in Section 3.9 (Environmental Matters) and Section 3.17 (Tax Matters) shall survive until the expiration of the applicable statute of limitations; and (z) Seller’s representations in Section 3.4 (Title of Properties) and Section 3.8 (Transferred Assets and Transferred Technology) and Seller’s obligation to indemnify in Section 8.2(c) (Excluded Assets and Excluded Liabilities), Section 8.2(f) (Transition Services) and Section 8.2(g) (License Agreement) shall survive indefinitely. The representations and warranties of Parent and Buyer in Article 4 shall terminate on the Closing Date. No investigation, or knowledge acquired, by Parent or Buyer or on behalf of Parent or Buyer with respect to any breach of any representation or warranty made by Seller or any other matter shall affect Parent’s or Buyer’s rights to indemnification pursuant to this Article 8.      8.2 Indemnification by Seller. Subject to the terms and conditions of this Article 8, following the Closing, Seller shall indemnify and hold harmless Parent, Buyer and their Affiliates and each of their officers, directors, employees, agents, successors and assigns (“Buyer Indemnitees”) for any and all Losses, whether such Loss exists or accrues prior or subsequent to the Closing Date, arising out of, resulting from or caused by:           (a) any inaccuracy or misrepresentation in or breach of any of the representations or warranties made by Seller contained in this Agreement or any Collateral Agreement, it being understood that solely for purposes of calculating Losses relevant to any such inaccuracy or misrepresentation, materiality and knowledge qualifiers will be disregarded;           (b) any breach of any of the covenants or agreements of Seller contained in this Agreement or any Collateral Agreement (other than the License Agreement);           (c) any of the Excluded Assets or Excluded Liabilities, including any Liability arising out of the ownership or operation of the Assets prior to the Closing Date other than the Assumed Liabilities;           (d) any Indemnifiable Audit Costs;           (e) all Liabilities relating to any warranty, returns, refunds, support obligation or similar claims with respect to any Transferred Products sold prior to the Closing Date to the extent that such Liabilities exceed $75,000;           (f) any Losses of any kind or nature whatsoever which may be sustained or suffered by any of them arising out of or based upon any gross negligence or willful misconduct on the part of Seller in performing the Transition Services for Parent and Buyer; - 40 - --------------------------------------------------------------------------------             (g) any breach of any of the representations, covenants or agreements of Seller contained in the License Agreement; and           (h) any failure to comply with any applicable “bulk sales” law or regulation in connection with the transactions contemplated by this Agreement. Notwithstanding the foregoing, for purposes of calculating Losses relevant to any breach, inaccuracy or misrepresentation of the first sentence of Section 3.5(c) (the “Non-Infringement Representation”), the knowledge qualifier of the Non-Infringement Representation will be disregarded for twelve (12) months after the Closing Date.      8.3 Limitation on Indemnification. Notwithstanding the foregoing, (i) Seller shall have no liability under Section 8.2 until the aggregate of all such Losses exceeds $100,000 (at which point the Seller will be obligated to indemnify the Buyer Indemnitees against all Losses relating back to the first dollar of Losses) and (ii) except for intentional fraud or willful misconduct, the aggregate liability for Seller under Section 8.2 for all Losses shall in no event exceed $1,500,000 for Seller. The limitations in this Section 8.3(ii) shall not apply to matters arising in respect of Section 3.4 (Title of Properties), Section 3.5 (Intellectual Property) (excluding the Non-Infringement Representation), Section 3.8 (Transferred Assets and Transferred Technology), Section 3.9 (Environmental Matters), Section 3.17 (Tax Matters), and the limitations in this Section 8.3(i) and Section 8.3(ii) shall not apply to matters arising in respect of Section 8.2(c) (Excluded Assets and Excluded Liabilities), Section 8.2(f) (Transition Services), and Section 8.2(g) (License Agreement). For purposes of clarity, any Losses related to the Non-Infringement Representation will be subject to Section 8.3(i) and Section 8.3(ii).      8.4 Indemnification Procedure.           (a) Whenever any Loss shall be asserted against or incurred by a Buyer Indemnitee, the Buyer Indemnitee shall give written notice thereof (a “Claim”) to Seller. The Buyer Indemnitee shall furnish to the Seller in reasonable detail such information as the Buyer Indemnitee may have with respect to the Claim (including in any case copies of any summons, complaint or other pleading which may have been served on it and any written claim, demand, invoice, billing or other document evidencing or asserting the same). If the Claim has been provided to the Seller prior to the lapse of the expiration of the right to make a Claim, then the Seller shall continue to have the obligation to indemnify until the resolution of such Claim. The failure to give such notice shall not relieve the Seller of its indemnification obligations under this Agreement.           (b) Any controversy involving only Parent, Buyer and Seller regarding whether a Claim is properly indemnifiable under the terms of this Article 8 shall be settled by binding arbitration administered by the American Arbitration Association (“AAA”) in accordance with its Commercial Arbitration Rules, and judgment upon the award rendered through arbitration may be entered in any court having jurisdiction thereof. Such arbitration shall be held in Santa Clara County, California, unless the parties mutually agree in writing to change the location, before a single neutral arbitrator appointed in the manner prescribed in AAA Commercial Arbitration Rule 13 provided that Parent, Buyer and Seller have attempted to resolve such controversy through negotiations in good faith. Either Parent, Buyer or Seller may seek from any court, interim or - 41 - --------------------------------------------------------------------------------   provisional, relief that is necessary to protect the rights or property of such Party, pending the appointment of the arbitrator or the arbitrator’s determination of the merits of the controversy. The Parties shall be entitled to conduct discovery in accordance with the Federal Rules of Civil Procedure. The fees and expenses of the arbitrators shall be borne equally by Buyer and Seller. Each Party shall be responsible for its own legal fees and expenses for the proceeding. The decision of the arbitrators shall be final and non-appealable. The arbitration award shall be in writing and shall specify the factual and legal bases for the award. Judgment on the award may be entered in any court having jurisdiction.           (c) If the Claim is based on a claim of a person that is not a party to this Agreement, the Seller shall, at its expense, undertake the defense of such Claim with attorneys of its own choosing reasonably satisfactory to the Buyer Indemnitee provided that the Seller acknowledges the Buyer Indemnitee’s right to indemnification for such Claim pursuant to this Agreement. In the event the Seller, within ten (10) business days after receiving notice of a Claim from the Buyer Indemnitee, fails to defend the Claim, the Buyer Indemnitee may, at the Seller’s expense, undertake the defense of the Claim and may compromise or settle the Claim, all for the account of the Seller. After notice from the Seller to the Buyer Indemnitee of its election to assume the defense of such Claim, the Seller shall not be liable to the Buyer Indemnitee under this Section 8.4 for any legal expenses subsequently incurred by the Buyer Indemnitee in connection with the defense thereof, except for such expenses incurred in connection with cooperation with, or at the request of, the Seller; provided, however, that the Buyer Indemnitee shall have the right to engage counsel to represent it if, in the Buyer Indemnitee’s reasonable judgment, based upon the advice of counsel, it is advisable, in light of the separate interests of the Buyer Indemnitee and the Seller, for the Buyer Indemnitee to be represented by separate counsel, and in that event the reasonable fees and expenses of such separate counsel shall be paid by the Seller.           (d) The Seller shall not consent to entry of any judgment, except with the consent of the Buyer Indemnitee (which may be given or withheld in its sole discretion), or enter into any settlement, except with the consent of the Buyer Indemnitee, which such consent shall not be unreasonably withheld or delayed. In the event the Buyer Indemnitee refuses to consent to the entry of a judgment or a settlement for which the Seller is solely and entirely responsible and has indicated its sole and entire responsibility in writing to the Buyer Indemnitee, following such refusal, the liability of the Seller to the Buyer Indemnitee will be fixed at the amount of any money damages provided in the proposed judgment or settlement.      8.5 Escrow. As partial security for the indemnity provided for in Section 8.2 hereof, at the Closing, Buyer will deposit with the Escrow Agent the Escrow Amount into an escrow fund (the “Escrow Fund”) maintained by the Escrow Agent and established pursuant to the Escrow Agreement; it being understood that the Escrow Fund shall not be the sole and exclusively remedy of Buyer Indemnitees for the indemnity provided for in Section 8.2. Subject to the following requirements, the Escrow Fund shall be in existence immediately following the initial delivery of the Escrow Fund to the Escrow Agent and shall expire as follows: 50% of the Escrow Fund shall be released twelve (12) months after the Closing Date, and 50% of the Escrow Fund shall be released thirty (30) days after the Audit Completion Date (the “Escrow Period”); provided that the Escrow Period shall not terminate with respect to such amount as is necessary, to satisfy any Claims previously asserted and which are being contested. As soon as all such Claims have been resolved, - 42 - --------------------------------------------------------------------------------   the Escrow Agent shall deliver to Seller the remaining portion of the Escrow Fund not required to satisfy such Claims.           8.6 Purchase Price Adjustment. Any payment pursuant to this Article 8 shall be treated for all Tax purposes as an adjustment to the Purchase Price. Article 9 TERMINATION AND ABANDONMENT      9.1 Methods of Termination. The transactions contemplated herein may be terminated and/or abandoned at any time prior to the Closing:           (a) by the mutual written consent of the Parent, Buyer and Seller;           (b) By Parent, Buyer or Seller, if the Closing shall not have occurred on or before December 31, 2005 (the “Termination Date”); provided, however, that the right to terminate this Agreement under this clause (b) of Section 9.1 shall not be available to any party whose breach of this Agreement has resulted in the failure of the Closing to occur on or before the Termination Date;           (c) at the election of Parent, Buyer or Seller, if any Governmental Entity shall have issued an order, decree or ruling or taken any other action enjoining or otherwise prohibiting the transactions contemplated under this Agreement and such order, decree, ruling or other action shall have become final and nonappealable;           (d) by the Parent or Buyer if any of the representations and warranties of the Seller contained in this Agreement shall have been inaccurate as of the date of this Agreement or shall have become inaccurate as of any subsequent date (as if made on such subsequent date), in either case such that the condition set forth in Section 7.1(a) would not be satisfied, or if any of the Seller’s covenants contained in this Agreement shall have been breached in any respect such that the condition set forth in Section 7.1(b) would not be satisfied; provided, however, that if an inaccuracy in any of the representations and warranties of the Seller as of a date subsequent to the date of this Agreement or a breach of a covenant by the Seller is curable by the Seller through the use of commercially reasonable efforts within 10 days after the Parent or Buyer notifies the Seller in writing of the existence of such inaccuracy or breach (the “Seller Cure Period”), then the Parent or Buyer may not terminate this Agreement under this Section 9.1(d) as a result of such inaccuracy or breach prior to the expiration of the Seller Cure Period, provided the Seller, during the Seller Cure Period, continues to exercise commercially reasonable efforts to cure such inaccuracy or breach (it being understood that Parent or Buyer may not terminate this Agreement pursuant to this Section 9.1(d) with respect to such inaccuracy or breach if such inaccuracy or breach is cured prior to the expiration of the Seller Cure Period); or           (e) by the Seller if any of Parent’s or Buyer’s representations and warranties contained in this Agreement shall have been inaccurate as of the date of this Agreement or shall have become inaccurate as of any subsequent date (as if made on such subsequent date), in either case such that the condition set forth in Section 7.2(a) would not be satisfied, or if any of Parent’s or Buyer’s covenants contained in this Agreement shall have been breached in any respect such that - 43 - --------------------------------------------------------------------------------   the condition set forth in Section 7.2(b) would not be satisfied; provided, however, that if an inaccuracy in any of the representations and warranties of Parent or Buyer as of a date subsequent to the date of this Agreement or a breach of a covenant by Parent or Buyer is curable by Parent or Buyer through the use of commercially reasonable efforts within 10 days after the Seller notifies Parent or Buyer in writing of the existence of such inaccuracy or breach (the “Buyer Cure Period”), then the Seller may not terminate this Agreement under this Section 9.1(e) as a result of such inaccuracy or breach prior to the expiration of the Buyer Cure Period, provided the Parent or Buyer, during the Buyer Cure Period, continues to exercise commercially reasonable efforts to cure such inaccuracy or breach (it being understood that the Seller may not terminate this Agreement pursuant to this Section 9.1(e) with respect to such inaccuracy or breach if such inaccuracy or breach is cured prior to the expiration of the Buyer Cure Period)      9.2 Procedure upon Termination. In the event of termination and abandonment by a Party pursuant to Section 9.1, written notice thereof shall be given to the other Party and the transactions contemplated by this Agreement shall be terminated and/or abandoned, without further action by the Parties. If the transactions contemplated by this Agreement are terminated and/or abandoned as provided herein:           (a) each Party will redeliver all documents, work papers and other material (and all copies thereof) of the other Party relating to the transactions contemplated hereby, whether so obtained before or after the execution hereof, to the other Party furnishing the same; and           (b) all Confidential Information received by either Party hereto with respect to the business of the other Party shall be treated in accordance with Section 5.12, provided that either Party shall be free to use or exploit for any purpose the residuals resulting from access to or work with the other Party’s Confidential Information. For the purposes of this Section 9.2(b), “residuals” means information retained in the unaided memories of individuals who have had access to such Confidential Information.      9.3 Survival of Certain Provisions. The following provisions of this Agreement shall survive any termination of this Agreement: Section 5.12 (Confidentiality), this Article 9, and Article 10 (General) and any provision which, by its terms, must survive. Article 10 GENERAL      10.1 No Agency. Except as expressly provided herein, each Party shall in all matters relating to this Agreement act as an independent contractor. Neither Party shall have authority, nor shall either Party represent that it has any authority, to assume or create any obligation, express or implied, on behalf of the other, or to represent the other Party as agent or employee or in any other capacity. Neither execution nor performance of this Agreement shall be construed to have established any agency, joint venture, or partnership.      10.2 Fees and Expenses. Whether or not the transactions contemplated by this Agreement are consummated, all expenses, including without limitation all legal, accounting, financial advisory, consulting and other fees, incurred in connection with the negotiation or effectuation of this - 44 - --------------------------------------------------------------------------------   Agreement or consummation of the transactions contemplated by this Agreement, shall be the obligation of the respective Party incurring such expenses.      10.3 Notices. Any notice or other communication required or permitted to be delivered to any Party under this Agreement must be in writing and shall be deemed properly delivered, given and received when delivered (by hand, by registered mail, by courier or express delivery service or by facsimile) to the address or facsimile telephone number set forth beneath the name of such Party below (or to such other address or facsimile telephone number as such Party may have specified in a written notice given to the other Party):                   if to Parent or Buyer:   iWatt, Inc.             101 Albright Way             Los Gatos, California 95032-1827             Attn: Curtis Davis, Chief Executive Officer             Telephone: (408) 374-4200             Facsimile: (408) 341-0455                       with a copy to:   Wilson Sonsini Goodrich & Rosati             Professional Corporation             650 Page Mill Road             Palo Alto, California 94304-1050             Attn: Neil J. Wolff             Telephone: (650) 493-9300             Facsimile: (650) 493-6811                       if to Seller:   Advanced Energy Industries, Inc.             1625 Sharp Point Drive             Fort Collins, Colorado 80525             Attn: Michael El-Hillow, Chief Financial Officer             Telephone: (800) 446-9167             Facsimile: (970) 407-6550                       with a copy to:   Thelen Reid & Priest LLP             225 W. Santa Clara Street, 12th Floor             San Jose, California 95113             Attn: Jay L. Margulies             Telephone: (408) 282-1815             Facsimile: (408) 278-8215      10.4 Governing Law. This Agreement shall be governed in all respects by the laws of the United States of America and the State of California as such laws apply to agreements entered into and to be performed entirely within California by California residents.      10.5 Forum and Venue. Any judicial action or proceeding arising hereunder or relating hereto shall be brought in, and the Parties hereby consent to the exclusive, personal jurisdiction of, the state and federal courts located in the County of Santa Clara, California. Seller hereby consents - 45 - --------------------------------------------------------------------------------   to the jurisdiction of such courts and hereby appoints its counsel identified in Section 10.3 as its agent for service of process.      10.6 Construction.           (a) For purposes of this Agreement, whenever the context requires: the singular number will include the plural, and vice versa; the masculine gender will include the feminine and neuter genders; the feminine gender will include the masculine and neuter genders; and the neuter gender will include the masculine and feminine genders.           (b) Any rule of construction to the effect that ambiguities are to be resolved against the drafting Party will not be applied in the construction or interpretation of this Agreement.           (c) As used in this Agreement, the words “include” and “including” and variations thereof, will not be deemed to be terms of limitation, but rather will be deemed to be followed by the words “without limitation.”           (d) Unless the context requires otherwise, the term “Seller” as used herein refers to Seller and its Affiliates.           (e) Except as otherwise indicated, all references in this Agreement to “Schedules,” “Sections” and “Exhibits” are intended to refer to Schedules, Sections and Exhibits to this Agreement.           (f) The headings in this Agreement are for convenience of reference only, will not be deemed to be a part of this Agreement, and will not be referred to in connection with the construction or interpretation of this Agreement.      10.7 Breaches and Remedies. Except as otherwise provided herein, any and all remedies herein expressly conferred upon a Party will be deemed cumulative with and not exclusive of any other remedy conferred hereby, or by law or equity upon such Party, and the exercise by a Party of any one remedy will not preclude the exercise of any other remedy. Without limiting the generality of the foregoing, Seller agrees that if it breaches any provision of Sections 5.13 and 5.14, Parent and Buyer will have available, in addition to any other right or remedy otherwise available, the right to seek an injunction from a court of competent jurisdiction restraining such breach or threatened breach and to specific performance of any such provision of this Agreement without the requirement that Parent or Buyer post a bond.      10.8 Waiver. No failure on the part of a Party to exercise any power, right, privilege, or remedy under this Agreement, and no delay on the part of any Party in exercising any power, right, privilege, or remedy under this Agreement, will operate as a waiver of such power, right, privilege, or remedy; and no single or partial exercise of any such power, right, privilege, or remedy will preclude any other or further exercise thereof or of any other power, right, privilege, or remedy. No Party shall be deemed to have waived any claim arising from this Agreement, or any power, right, privilege or remedy under this Agreement, unless the waiver of such claim, power, right, privilege or remedy is expressly set forth in a written instrument duly executed and delivered on behalf of such Party; and any such waiver will not be applicable or have any effect except in the specific instance in which it is given. - 46 - --------------------------------------------------------------------------------        10.9 Assignment. Neither Party may assign this Agreement in whole or in part without the prior written consent of the other Party. After the Closing, except as provided herein, Parent and Buyer may assign or transfer this Agreement in whole or part. Any attempted transfer or assignment except as provided herein shall be void and of no effect. Subject to the foregoing, this Agreement shall be binding upon and inure to the benefit of the successors or permitted assigns of the Parties. Nothing set forth herein shall in any way limit the transfer, assignment or licensing by Parent or Buyer of the Transferred Assets in their entirety or in part after the Closing.      10.10 Severability. If, for any reason, a court of competent jurisdiction finds any provision of this Agreement, or portion thereof, to be invalid or unenforceable, such provision of the Agreement will be enforced to the maximum extent permissible so as to effect the intent of the Parties, and the remainder of this Agreement will continue in full force and effect. The Parties agree to negotiate in good faith an enforceable substitute provision for any unenforceable provision that most nearly achieves the intent and economic effect of the unenforceable provision. Notwithstanding the foregoing, if a court of competent jurisdiction determines that any restriction on any license granted herein is invalid or unenforceable, then the license grants to which such restriction relates shall terminate automatically.      10.11 Entire Agreement. This Agreement (including the Collateral Agreements, Schedules and Exhibits hereto) sets forth the entire understanding of the Parties hereto relating to the subject matter hereof and supersedes all prior agreements and understandings between the Parties hereto relating to the subject matter hereof.      10.12 Amendments. This Agreement may not be amended, modified, altered or supplemented other than by means of a written instrument duly executed and delivered on behalf of Seller, Parent and Buyer.      10.13 Counterparts. This Agreement may be executed in counterparts, which, when taken together, shall constitute one agreement. * * * * * - 47 - --------------------------------------------------------------------------------        IN WITNESS WHEREOF, the Parties, by their duly authorized representatives, have executed this Agreement as of the date first written above.                   “SELLER”       “PARENT”                   ADVANCED ENERGY INDUSTRIES, INC.       IWATT, INC.                   By:           By:                                         Name:           Name:                                         Title:           Title:                                         “BUYER”                               IKOR ACQUISITION CORPORATION                               By:                                                     Name:                                                     Title:                                   [Asset Purchase Agreement]   --------------------------------------------------------------------------------   List of Schedules and Exhibits       Schedule Number   Title of Schedule 1.1(c)   Assigned Patents 1.1(d)   Assigned Trademarks 1.1(f)   Form of Bill of Sale 1.1(n)   Designated Employees 1.1(mm)   Product Software 1.1(v)   Excluded Assets 1.1(ss)   Transferred Contracts 1.1(ww)   Transferred Products 1.1(xx)   Transferred Tangible Assets 1.1(yy)   Transferred Technology 1.1(zz)   Transferred Websites 5.5   Software Licenses 7.1(g)   Required Consents       Exhibit Number   Exhibit Title A   Escrow Agreement B-1   Transition Services B-2   Third Party Software Licenses C   Disclosure Schedule D   Form of Employment Offer Letter E   Form of Sublease F   Form of License Agreement  

Exhibit 10.1   ADOBE MANAGEMENT TEAM ANNUAL INCENTIVE PLAN (FY 2006)   OBJECTIVES: 1)              Drive revenue growth and accountability 2)              Drive execution of operating plan and strategic objectives 3)              Motivate and inspire employees to contribute at peak performance   ELIGIBILITY:    Members of the Management Team who are employed by Adobe (full time or part time) during the full eligibility period (fiscal year) are eligible for the Management Team Annual Incentive Plan.  If hired prior to the fourth quarter, employee is eligible for a prorated annual bonus. If hired in the fourth quarter, employee is not eligible for bonus.   INCENTIVE TARGET:  Incentive target stated as a percentage of annual base salary.   PAYMENT SCHEDULE:  Annual incentive bonus target paid on annual basis approx 45-60 days from the end of the fiscal year.   MANAGEMEMENT TEAM – Bonus Components The Corporate Results threshold must be achieved before bonus is paid.  Subsequently, management team members are measured on achievement against revenue and individual targets.   Corporate Target is driven by the corporate operating profit and revenue plan (Corporate Results). •                  Minimum payment (50%) requires a threshold achievement of 90% revenue to plan & 90% operating profit to plan •                  Upside payment potential to 200%   Individual Target is based on achievement of goals tied to the corporate operating plan and strategic objectives (Individual Results). •                  50% of bonus is weighted on individual results and tied to Corporate Results   Revenue Target is based on budget revenue numbers for the Company (Revenue Results). •                  50% of bonus is comprised of revenue •                  Minimum payment (50% ) requires threshold achievement of at least 90% of revenue to plan •                  Upside payment potential to 200%   Bonus Formula if Company meets threshold: Target x Corporate Results% x Individual Results% x Weight 50% + Target x Revenue Results% x Weight 50% = Bonus   Note: Members of the Management Team that are on a sales commission plan will not be subject to this Plan.   Participation in the Plan is at the discretion of Company management.  The Company reserves the right to make changes to the Plan at any time.  The compensation committee of the Board of Directors may alter the incentive payout based on achievement of publicly announced targets, product milestones, strategic goals, cross functional teamwork and collaboration, and unforeseen changes in the economy and/or geopolitical climate.   --------------------------------------------------------------------------------

QuickLinks -- Click here to rapidly navigate through this document Exhibit 10.24 COMPENSATION OF KEITH E. TROTMAN, EXECUTIVE OFFICER         Keith E. Trotman, an Executive Officer of Zenith National Insurance Corp. (the "Company"), serves without an employment agreement. As such, his employment is considered "at-will." As of February 15, 2006, his annual salary is $450,000 and is subject to such changes as may be made from time to time in its sole discretion by the Compensation Committee (the "Compensation Committee") of the Board of Directors. Mr. Trotman also receives an annual automobile allowance of $15,600.         From time to time, the Compensation Committee may award Mr. Trotman shares of restricted stock under the Company's restricted stock plan in its sole discretion. He is entitled to dividends on such shares and the dividends are required by applicable income tax regulations to be reported as additional income so long as such shares are "unvested."         Mr. Trotman is eligible for discretionary bonuses as may be authorized, declared, and paid by the Compensation Committee in its sole discretion and is also be eligible for such bonuses under the Company's Executive Officer Bonus Plan, as may be awarded by the Compensation Committee pursuant to the terms of such plan.         Mr. Trotman is also eligible to participate in the Company's fringe benefits, such as group insurance plans and the Company-sponsored 401(k) plan, which are generally available to all employees. Mr. Trotman does not receive any perquisites or other personal benefits that are exclusive to him and not available to other employees of the Company. -------------------------------------------------------------------------------- QuickLinks Exhibit 10.24 COMPENSATION OF KEITH E. TROTMAN, EXECUTIVE OFFICER

  Exhibit 10.7 AMENDED AND RESTATED SUPPLEMENTAL RETIREMENT AGREEMENT      THIS AMENDED AND RESTATED SUPPLEMENTAL RETIREMENT AGREEMENT (this “Agreement”) is made and entered into as of this 9th day of May 2006 by and between TD Banknorth Inc. (formerly known as Banknorth Group, Inc.), its subsidiaries and affiliates (collectively, the “Corporation”), and William J. Ryan (the “Executive”). WITNESSETH:      WHEREAS, the Corporation and the Executive are parties to a certain amended and restated Supplemental Retirement Agreement dated as of February 18, 2004, as amended by a First Amendment dated February 14, 2005 (as so amended, the “Prior Agreement”); and      WHEREAS, the Corporation and the Executive wish to amend and restate the Prior Agreement in its entirety as hereinafter set forth in order to comply with the requirements of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), including the guidance issued to date by the Internal Revenue Service (the “IRS”) and the proposed regulations issued by the IRS in the fall of 2005, with none of the benefits payable under this Plan to be deemed grandfathered for purposes of Section 409A of the Code;      NOW, THEREFORE, in consideration of the foregoing, the mutual covenants and agreements herein contained, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Corporation and the Executive hereby agree, and amend and restate the Prior Agreement in its entirety, as follows: ARTICLE ONE      Section 1.1 Employment. This Agreement is not an agreement of employment and nothing herein shall be deemed to confer on the Executive any right to continued employment with the Corporation or limit in any way the right of the Corporation to terminate such employment. The benefits provided under this Agreement are not part of any salary reduction plan or an arrangement deferring a bonus or a salary increase. ARTICLE TWO      Section 2.1. Normal Retirement Benefits.      (a) Generally. If the Executive continues in employment with the Corporation until his sixty-fifth (65th) birthday (the “Normal Retirement Date”), subject to Sections 2.1(b) and 2.1(c) below, he shall be entitled to a retirement benefit (the “Normal Retirement Benefit”) following his actual “Separation from Service” as defined in Section 2.1(e) below, payable monthly as set forth in Section 2.1 (d) below in the annual amount of sixty-five percent (65%) of his Benefit Computation Base (defined in Section 2.2), multiplied by a fraction, not to exceed one (1), the numerator of which is the actual number of months of the Executive’s employment   --------------------------------------------------------------------------------   with the Corporation (including partial months for month of hire and month of termination) plus sixty-six (66) and the denominator of which is three hundred (300) months, and reduced by:   (1)   fifty percent (50%) of the Executive’s Primary Social Security retirement benefit estimated as of the Normal Retirement Date based on the Social Security retirement benefit formula assuming level future earnings based on his Benefit Computation Base in effect on the date of termination of the Executive’s employment with the Corporation;     (2)   the annual amount of benefits payable to the Executive, stated as a life annuity commencing at the Normal Retirement Date, from the tax-qualified defined benefit pension plan maintained by the Corporation (such plan, as it may hereafter be amended, restated, otherwise modified or replaced, is hereinafter referred to as the “Pension Plan”);     (3)   the annual amount of benefits payable to the Executive, stated as a life annuity commencing at the Normal Retirement Date, which is the actuarial equivalent (determined as described below) at the date of determination of the Normal Retirement Benefit, of that portion of the Executive’s account balances attributable to contributions by the Corporation to any and all qualified defined contribution plans maintained by the Corporation; and     (4)   the annual amount of benefits payable to the Executive, stated as a life annuity commencing at the Normal Retirement Date, attributable to contributions by the Corporation (but not any amounts attributable to deferrals or contributions by the Executive) from any other qualified or non-qualified retirement plan or agreement maintained or entered into by the Corporation.      Whenever an “actuarial equivalent” is required to be determined under this Agreement, such actuarial equivalent shall be determined in the manner provided for determining actuarial equivalents under the Pension Plan; provided however that such manner of determination shall be no less favorable to the Executive than that prescribed for determining actuarial equivalents under the Pension Plan as in effect on the date of this Agreement.      (b) Normal Retirement Benefit if Executive is Married. Notwithstanding anything to the contrary in Section 2.1(a) or elsewhere, if and for so long as the Executive is married, the Normal Retirement Benefit shall be the actuarial equivalent of the benefit that would otherwise be provided in the form of a single life annuity as described in Section 2.1(a) above, but provided in the form of a joint and survivor annuity for the benefit of the Executive and his spouse with continuation of one hundred percent (100%) of the lifetime benefit to the survivor, calculated in a manner consistent with provisions of the Pension Plan providing for joint and survivor annuity benefits.      (c) Additional Age and Service Credits. The Executive is entitled to additional age and service credits for purposes of calculating the Executive’s benefits under this Agreement pursuant to the Executive’s Employment Agreement with the Corporation dated as of August 25, 2 --------------------------------------------------------------------------------   2004, as amended (the “Employment Agreement”). If the Executive makes a valid election to receive his additional benefits in the form of an increased Normal Retirement Benefit under this Agreement in accordance with Section 2.4(c) below rather than in the form of a lump sum cash payment at the time the Executive’s “Non-Competition and Retention Amount” is paid, as such term is defined in the Employment Agreement, then the computation of the Executive’s Normal Retirement Benefit under this Agreement shall reflect the additional age and service credits provided to the Executive under his Employment Agreement in accordance with the terms of such agreement.      (d) Payment of Monthly Benefits. The monthly benefits payable under this Section 2.1 shall commence on the first day of the month following the lapse of six months from the date of the Executive’s Separation from Service (the “First Payment Date”) and end with the monthly payment preceding his death, provided that the first monthly payment shall equal the sum of (i) one monthly payment plus (ii) the cumulative amount of the monthly payments that would have been paid as of the first day of each month following the date of Separation from Service and prior to the First Payment Date absent the six-month delay required by Section 409A of the Code.      (e) Separation from Service. A “Separation from Service” shall mean separation from service within the meaning of Section 409A of the Code and the regulations issued thereunder.      Section 2.2 Benefit Computation Base. The Executive’s Benefit Computation Base for purposes of Section 2.1(a) shall be the average of the Executive’s compensation from the Corporation for the five (5) consecutive calendar years during the ten (10) years preceding the Executive’s termination of employment with the Corporation in which such compensation is the highest (excluding all years of the Executive’s employment by the Corporation after the year in which the Normal Retirement Date occurs). For the purposes of this Agreement, compensation shall mean the amount actually paid or made available to the Executive during a calendar year as remuneration of a kind or nature reported by the Corporation on the Executive’s W-2, except as set forth below. Compensation shall also include annual bonuses, any contributions made on behalf of the Executive by the Corporation pursuant to a salary reduction agreement under Internal Revenue Code Sections 125, 129 and/or 401(k), and any and all other amounts that would have been reportable by the Corporation on the Executive’s W-2 but for deferral of payment of such amounts under any agreement or plan or program (other than the Pension Plan), including any voluntary deferrals and any deferrals required or mandated by the terms of any agreement or plan or program of the Corporation or action of its Board of Directors, except that the $178,480 short-term incentive bonus for calendar 2004 the payment of which was accelerated to December 2004 shall be taken into account as if it was paid in 2005 rather than 2004. Compensation shall not include any amounts available to the Executive pursuant to any Stock Option, Stock Appreciation Right, Senior Management Long Term Incentive or Restricted Stock Unit Plans of the Corporation or paid to the Executive pursuant to Sections 7, 10 and 11 of the Employment Agreement.      Section 2.3 Accrued Benefit. The term “Accrued Benefit” shall mean the Normal Retirement Benefit (before applying the offsets in clauses (1), (2), (3), and (4) of Section 2.1(a) 3 --------------------------------------------------------------------------------   above) to which the Executive would be entitled under Section 2.1(a) commencing at the Normal Retirement Date assuming continuation of the Executive’s employment with the Corporation until the Normal Retirement Date based on the Benefit Computation Base on the date the Accrued Benefit is determined, multiplied by a fraction not to exceed one (1), the numerator of which is the actual number of months of the Executive’s employment with the Corporation (including partial months for month of hire and month of termination) plus sixty-six (66) and the denominator of which is three hundred (300) months, and reduced by:   (1)   fifty percent (50%) of the Executive’s Primary Social Security retirement benefit estimated as of the Normal Retirement Date based on the Social Security retirement benefit formula assuming level future earnings based on his Benefit Computation Base in effect on the date of termination of the Executive’s employment with the Corporation;     (2)   the annual amount of benefits payable to the Executive, stated as a life annuity commencing at the Normal Retirement Date, from the Pension Plan;     (3)   the annual amount of benefits payable to the Executive, stated as a life annuity commencing at the Normal Retirement Date, which is the actuarial equivalent, at the date of determination of the Accrued Benefit, of that portion of the Executive’s account balances attributable to contributions by the Corporation to any and all qualified defined contribution plans maintained by the Corporation; and     (4)   the annual amount of benefits payable to the Executive, stated as a life annuity commencing at the Normal Retirement Date, attributable to contributions by the Corporation (but not any amounts attributable to deferrals or contributions by the Executive) from any other qualified or non-qualified retirement plan or agreement maintained or entered into by the Corporation.      Section 2.4 Form of Payment and Payment Elections.      (a) Optional Forms of Payment. In lieu of the life annuity payments provided either (i) in Section 2.1 above (life annuity payments and joint and survivor annuity payments as described in Section 2.1 above are hereinafter referred to as payments made in the “Normal Form”), or (ii) as an Accrued Benefit under this Agreement, the Executive may elect, in writing, in a form acceptable to the Corporation, an optional form of payment which shall be the actuarial equivalent of payments that would otherwise be made in the Normal Form, and which shall be (x) any optional form which is made available under the terms of the Pension Plan (including the different forms of annuities set forth in Section 4.04 of the Pension Plan) or (y) a single lump sum payment, provided that such election is made as set forth below. In addition, the Executive may elect to receive his benefits under this Agreement upon any of the following events: (i) early retirement before age 65, if the Executive is entitled to any early retirement benefit under the Pension Plan and if such early retirement constitutes a Separation from Service, or (ii) termination of employment after the Executive’s Normal Retirement Date if such termination constitutes a Separation from Service, provided that in no event shall payments that are made 4 --------------------------------------------------------------------------------   under this Agreement as a result of a Separation from Service be made prior to the lapse of six months from the date of such Separation from Service.      (b) Prior Elections. Any payment elections made by the Executive before January 1, 2005 shall continue in effect until such time as the Executive makes a subsequent payment election and such election becomes effective as set forth below. If no prior payment election was made, then the current payment election shall be deemed to be a Normal Form commencing at the time set forth in Section 2.1(a) above.      (c) Transitional Elections in 2006. On or before December 31, 2006, if the Executive wishes to change his payment election, the Executive may do so by completing a payment election form approved by the Corporation, provided that any such election (i) must be made at least 12 months before the date on which benefit payments are scheduled to commence, (ii) must be made while the Executive is an active employee of the Corporation or one of its subsidiaries, (iii) shall not take effect before the date that is 12 months after the date the election is made and accepted by the Corporation, (iv) does not cause a payment that would otherwise be made in 2006 to be delayed to a later year, and (v) does not accelerate into 2006 a payment that is otherwise scheduled to be made in a later year. With respect to the additional age and service credits that the Executive is entitled to under his Employment Agreement for purposes of calculating his benefits under this Agreement, the Executive may make a transitional election in 2006 to have such additional benefits paid to the Executive in the form of an increased retirement benefit under this Agreement, provided that the Executive submits a properly completed payment election form to the Corporation in a timely manner.      (d) Changes in Payment Elections After 2006. On or after January 1, 2007, if the Executive wishes to change his payment election, the Executive may do so by completing a payment election form approved by the Corporation, provided that any such election (i) must be made while the Executive is an active employee of the Corporation or one of its subsidiaries, (ii) must be made at least 12 months before the date on which any benefit payments as of a fixed date or pursuant to a fixed schedule are scheduled to commence, (iii) shall not take effect until at least 12 months after the date the election is made and accepted by the Corporation, and (iv) for payments to be made other than upon death, must provide an additional deferral period of at least five years from the date such payment would otherwise have been made (or in the case of any life annuity or installment payments treated as a single payment, five years from the date the first amount was scheduled to be paid), provided that clause (iv) above shall not apply to a change in the form of a payment from one type of “life annuity” (as defined in the regulations under Section 409A of the Code) to another type of life annuity if the annuities are actuarially equivalent applying reasonable actuarial assumptions. For purposes of this Agreement and clause (iv) above, all life annuities or installment payments under this Agreement shall be treated as a single payment.      Section 2.5 Vesting. The Executive, having completed more than five (5) years of employment with the Corporation, has a vested interest in the retirement benefits payable under this Agreement. 5 --------------------------------------------------------------------------------   ARTICLE THREE      Section 3.1 Beneficiary. In the event of the death of the Executive, any payments to be made to the Executive hereunder after the date of his death (“Remaining Payments”) shall be made to the Executive’s Beneficiary, as defined below, and in such case all references to “Executive” herein shall, where applicable, apply to the Beneficiary. The Executive may name one or more beneficiaries (each, a “Beneficiary”) in writing to the Corporation. If no Beneficiary is so named or if no named Beneficiary is living at the time a payment is due, that payment and all subsequent payments shall be made, when otherwise due, to the Executive’s estate, which shall be the “Beneficiary” for purposes of this Agreement. ARTICLE FOUR      Section 4.1 Disability Prior to Retirement. No disability benefits will be paid under this Agreement. If the Executive’s employment is terminated or suspended by reason of mental or physical disability, disability benefits may be paid to the Executive pursuant to insurance provided by the Corporation pursuant to a separate policy, plan or agreement. Upon the later of (x) termination of any such other disability benefits, (y) the Normal Retirement Date or (z) the lapse of six months following the date of termination of employment, payment to the Executive of his Accrued Benefit (determined as of the date of disability) shall commence and such payment shall be made in the form provided in Section 2.4. If, following termination or suspension of the Executive’s employment by reason of disability, the Executive resumes employment with the Corporation in the position he held immediately prior to the onset of disability, this Agreement shall continue in full force and effect as if no such disability or termination or suspension of employment had occurred. For the purposes of the numerator of the fractions in Sections 2.1 and 2.3, the Executive’s period of disability shall be treated as a period of employment with the Corporation. ARTICLE FIVE      Section 5.1 Termination of Employment Prior to Normal Retirement Date. If the Executive has a Separation from Service prior to the Normal Retirement Date for any reason, the Executive shall be entitled to benefits in the amount of the Accrued Benefit determined as of the date of his Separation from Service (“Early Retirement Benefits”) payable (x) in the Normal Form commencing at the Normal Retirement Date or (y) to the extent so elected by the Executive, in any other form permitted under Section 2.4 and commencing at such other time as may be permitted under Section 5.2 below, subject to such adjustment as may be provided under Section 5.2 below.      Section 5.2 Early Payment. By written notice to the Company, the Executive may elect to have the Corporation commence payment of Early Retirement Benefits at any time after the Executive has both attained age fifty-five (55) and has a Separation of Service, provided that such payments are not made or do not commence prior to the first day of the month following the lapse of six months from the date of Separation of Service. Early Retirement Benefits shall be in the amount(s) determined in accordance with Section 5.1, but further reduced (1) by one-quarter of one percent (.25%) per month for each month or partial month (up to sixty (60)) between the 6 --------------------------------------------------------------------------------   date of commencement of Early Retirement Benefits and the Executive’s sixty-fifth (65th) birthday and (2) by one-half of one percent (.50%) per month for each month or partial month between the date of commencement of Early Retirement Benefits and the date of the Executive’s sixtieth (60th) birthday.      Section 5.3 Payment. Benefits payable under this Article Five shall be paid in the Normal Form or in any other manner elected by the Executive and permitted under Section 2.4.      Section 5.4 Forfeiture. Notwithstanding anything to the contrary herein, benefits under this Agreement shall be forfeited and all rights of the Executive and his Beneficiary shall become null and void if the Executive’s employment is terminated for Cause. For the purposes of this Section 5.4, the term “Cause” shall have the meaning given such term in the Employment Agreement. ARTICLE SIX      Section 6.1 Assignment . No right to payment of any amount under this Agreement may be assigned, pledged or encumbered, nor shall any such right or other interest in amounts payable under this Agreement be subject to any attachment, garnishment, execution or other legal process. ARTICLE SEVEN      Section 7.1 Participation in Other Plans. Nothing contained in this Agreement shall be construed to alter, abridge or in any manner affect the rights and privileges of the Executive to participate in and be covered by any pension, profit-sharing, group insurance, bonus or any other employee plan or plans which the Corporation may have or hereafter have.      Section 7.2 Alternative Benefit under the SERP Plan. Without limiting the foregoing, and notwithstanding anything to the contrary in the TD Banknorth Inc. Amended and Restated Supplemental Retirement Plan (as the same may be amended, restated, otherwise modified or replaced, the “SERP Plan”), including, without limitation, Article Three thereof, if on the date that benefits become payable under this Agreement, the actuarial equivalent of the aggregate amount of the benefits payable to the Executive under the terms of this Agreement is less than the actuarial equivalent of the aggregate amount of the benefits to which the Executive would be entitled under the SERP Plan if he were a “Participant” (as defined in the SERP Plan) in the SERP Plan (such amount, the “Alternative Benefit”), the Executive shall be entitled to benefits payable in accordance with the terms of this Agreement but in an aggregate amount equal to the actuarial equivalent of the Alternative Benefit instead of in an aggregate benefit amount determined under this Agreement. For purposes of calculating the actuarial equivalent of the Alternative Benefit to which the Executive would be entitled under the SERP Plan, (1) the $178,480 short-term incentive payment the payment of which was accelerated to December 2004 shall be taken into account as if it was paid in 2005 rather than 2004, (2) the $6,260,440 long-term incentive payment the payment of which was accelerated to December 2004 shall be taken into account in such amounts and at such times as it would have been paid absent the 7 --------------------------------------------------------------------------------   acceleration, and (3) no amounts payable to the Executive pursuant to Sections 7, 10 and 11 of the Employment Agreement shall be taken into account. ARTICLE EIGHT      Section 8.1 Funding. The Corporation shall have the right, in its discretion, at any time and from time to time to insure or otherwise provide for the obligations of the Corporation under this Agreement or to refrain from same, and to determine the extent, nature and method thereof, including the establishment of one or more trusts, provided that the terms of each trust comply with Section 409A of the Code. Should the Corporation elect to insure this Agreement, in whole or in part, through the medium of insurance or annuities, or both, the Corporation shall be the owner and beneficiary of the policy. At no time shall the Executive be deemed to have any right, title or interest in or to any specified asset or assets of any such trust or escrow arrangement, including, without limitation, any insurance or annuity or other contracts or proceeds therefrom. No such policy, contract or other asset shall in any way be considered to be security for the performance of the Corporation’s obligations under this Agreement. The Executive agrees that, if the Corporation purchases a life insurance or annuity policy on his life, he will sign any papers that may be required for that purpose and undergo any medical examination or tests which may be necessary, and otherwise reasonably cooperate with the Corporation in its efforts to secure any such policy.      Section 8.2. No Trust. Nothing herein and no action taken pursuant hereto shall create or be deemed to create any trust or fiduciary relationship between the Corporation and the Executive, his Beneficiary, or any other person. ARTICLE NINE      Section 9.1 Reorganization. The Corporation shall not merge with or consolidate into or with another corporation or other entity, or reorganize, or sell substantially all of its assets to another corporation, firm or person unless and until such succeeding or continuing corporation, firm or person agrees to assume and discharge the obligations of the Corporation under this Agreement. Upon the occurrence of any such merger, consolidation, reorganization or sale, the term “Corporation” as used in this Agreement shall be deemed to refer to such successor, assignee or survivor or successor corporation, firm or person. ARTICLE TEN      Section 10.1 Binding Effect. This Agreement shall be binding upon and inure to the benefit of the Executive and his Beneficiary and the Corporation and any successor organization which shall succeed to substantially all of its assets and business without regard to the form of such succession.      Section 10.2 Corporation. As used in this Agreement, the term “Corporation” shall mean TD Banknorth Inc., and any entity that from time to time is aggregated with TD Banknorth Inc., its successors and assigns, under Sections 414(b), 414(c), 414(m), 414(n) or 414(o) of the Code. For the purpose of determining the Executive’s period of employment with the Corporation as 8 --------------------------------------------------------------------------------   required hereunder, the term “Corporation” shall also include any predecessor of the Corporation. ARTICLE ELEVEN      Section 11.1. Communications. Any notice or other communication required or permitted to be given under this Agreement shall be in writing and shall be deemed given (i) when delivered or refused if sent by hand during regular business hours, (ii) three (3) business days after being sent by United States Postal Service, registered or certified mail, postage prepaid, return receipt requested, (iii) on the next business day when sent by reputable overnight express mail service that provides tracing and proof of receipt or refusal of items mailed, or (iv) when received by the addressee if by telecopier transmission addressed to the Corporation or Executive, as the case may be, at the address or addresses set forth below or such other addresses as the parties may designate in a notice given in accordance with this Section. To the Corporation: TD Banknorth Inc. Two Portland Square Portland, ME 04112 To the Executive: William J. Ryan At the address last appearing on the personnel records of the Corporation ARTICLE TWELVE      Section 12.1 Scope of Claims Procedures. This Article is based on final regulations issued by the Department of Labor and published in the Federal Register on November 21, 2000 and codified at 29 C.F.R. Section 2560.503-1. If any provision of this Article conflicts with the requirements of those regulations, the requirements of those regulations will prevail.      Section 12.2 Initial Claim. The Executive or any Beneficiary who believes he or she is entitled to any benefit under the Plan (a “Claimant”) may file a claim with the Corporation. The Corporation shall review the claim itself or appoint an individual or an entity to review the claim.   (a)   Initial Decision. The Claimant shall be notified within ninety (90) days after the claim is filed whether the claim is allowed or denied, unless the Claimant receives written notice from the Corporation or appointee of the Corporation prior to the end of the ninety (90) day period stating that special circumstances require an extension of the time for decision, such extension not to extend beyond the day which is one hundred eighty (180) days after the day the claims is filed. 9 --------------------------------------------------------------------------------     (b)   Manner and Content of Denial of Initial Claims. If the Corporation denies a claim, it must provide to the Claimant, in writing or by electronic communication:   (i)   The specific reasons for the denial;     (ii)   A reference to the Plan provision upon which the denial is based;     (iii)   A description of any additional information or material that the Claimant must provide in order to perfect the claim;     (iv)   An explanation of why such additional material or information is necessary;     (v)   Notice that the Claimant has a right to request a review of the claim denial and information on the steps to be taken if the Claimant wishes to request a review of the claim denial; and     (vi)   A statement of the Claimant’s right to bring a civil action under Section 502(a) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), following a denial on review of the initial denial.      Section 12.3 Review Procedures.   (a)   Request For Review. A request for review of a denied claim must be made in writing to the Corporation within sixty (60) days after receiving notice of denial. The decision upon review will be made within sixty (60) days after the Corporation’s receipt of a request for review, unless special circumstances require an extension of time for processing, in which case a decision will be rendered not later than one hundred twenty (120) days after receipt of a request for review. A notice of such an extension must be provided to the Claimant within the initial sixty (60) day period and must explain the special circumstances and provide an expected date of decision.         The reviewer shall afford the Claimant an opportunity to review and receive, without charge, all relevant documents, information and records and to submit issues and comments in writing to the Corporation. The reviewer shall take into account all comments, documents, records and other information submitted by the Claimant relating to the claim regardless of whether the information was submitted or considered in the initial benefit determination.     (b)   Manner and Content of Notice of Decision on Review. Upon completion of its review of an adverse claim determination, the Corporation will give the Claimant, in writing or by electronic notification, a notice containing:   (i)   its decision; 10 --------------------------------------------------------------------------------     (ii)   the specific reasons for the decision;     (iii)   the relevant Plan provisions on which its decision is based;     (iv)   a statement that the Claimant is entitled to receive, upon request and without charge, reasonable access to, and copies of, all documents, records and other information in the Plan’s files which is relevant to the Claimant’s claim for benefits;     (v)   a statement describing the Claimant’s right to bring an action for judicial review under Section 502(a) of ERISA; and     (vi)   if an internal rule, guideline, protocol or other similar criterion was relied upon in making the adverse determination on review, a statement that a copy of the rule, guideline, protocol or other similar criterion will be provided without charge to the Claimant upon request.      Section 12.4 Calculation of Time Periods. For purposes of the time periods specified in this Article, the period of time during which a benefit determination is required to be made begins at the time a claim is filed in accordance with the Plan procedures without regard to whether all the information necessary to make a decision accompanies the claim. If a period of time is extended due to a Claimant’s failure to submit all information necessary, the period for making the determination shall be tolled from the date the notification is sent to the Claimant until the date the Claimant responds.      Section 12.5 Legal Action. If the Corporation fails to follow the claims procedures required by this Article, a Claimant shall be deemed to have exhausted the administrative remedies available under the Plan and shall be entitled to pursue any available remedy under Section 502(a) of ERISA on the basis that the Plan has failed to provide a reasonable claims procedure that would yield a decision on the merits of the claim. A Claimant’s compliance with the foregoing provisions of this Article is a mandatory requisite to a Claimant’s right to commence any legal action with respect to any claims for benefits under the Plan.      Section 12.6 Review by the Corporation. Notwithstanding anything in this Plan to the contrary, the Corporation may determine, in its sole and absolute discretion, to review any claim for benefits submitted by a Claimant under this Plan. ARTICLE THIRTEEN      Section 13.1 Withholding. The Corporation shall be entitled to withhold from payment of benefits hereunder any federal, state or local withholding or other taxes or charge from time to time required to be withheld. 11 --------------------------------------------------------------------------------   ARTICLE FOURTEEN      14.1 General. The Board may at any time and from time to time amend, suspend or terminate this Agreement or the Executive’s participation therein; provided, however, that no amendment, suspension or termination may impair the rights of the Executive (or, in the case of the Executive’s death, his Beneficiary or estate) to receive benefits accrued prior to the effective date of such amendment, suspension or termination. Notwithstanding anything in the Agreement to the contrary, the Board may amend in good faith any terms of the Agreement, including retroactively, in order to comply with Section 409A of the Code. This Agreement may be altered or amended only by a written agreement signed by the parties hereto.      14.2 Termination. Under no circumstances may the Agreement permit the acceleration of the time or form of any payment under the Agreement prior to the payment events specified herein, except as provided in this Section 14.2. The Corporation may, in its discretion, elect to terminate the Agreement in any of the following three circumstances and accelerate the payment of the entire unpaid balance of the Executive’s accrued benefits in an amount equal to the Actuarial Equivalent (as defined in the Pension Plan) of the Executive’s accrued benefits as of the date of such payment in accordance with Section 409A of the Code:   (i)   the Agreement is terminated within the 30 days preceding or the 12 months following a Change In Control and (1) all substantially similar arrangements sponsored by the Corporation are terminated, and (2) the Executive and all participants under the substantially similar arrangements receive all of their benefits under the terminated arrangements within 12 months of the date of termination of the arrangements,     (ii)   the Agreement is terminated and (1) all arrangements sponsored by the Corporation that would be aggregated with the Agreement under Section 1.409A-1(c) if the Executive participated in all of the arrangements are terminated, (2) no payments other than payments that would be payable under the terms of the arrangements if the termination had not occurred are made within 12 months of the termination of the arrangements; (3) all payments are made within 24 months of the termination of the arrangements; and (4) the Corporation does not adopt a new arrangement that would be aggregated with the Agreement under Section 1.409A-1(c) if the Executive participated in both arrangements, at any time within five years following the date of termination of the Agreement, or     (iii)   the Agreement is terminated within 12 months of a corporate dissolution taxed under Section 331 of the Code, or with the approval of a bankruptcy court pursuant to 11 U.S.C. §503(b)(1)(A), provided that the amounts deferred by the Executive under the Agreement are included in the Executive’s gross income in the later of (1) the calendar year in which the termination of the Agreement occurs, or (2) the first calendar year in which the payment is administratively practicable. 12 --------------------------------------------------------------------------------   ARTICLE FIFTEEN      Section 15.1 Entire Agreement. This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supercedes all prior agreements written or oral with respect to its subject matter.      Section 15.2 Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Maine.      Section 15.3 Severability. Each provision of this Agreement is intended to be severable and the invalidity, illegality or unenforceability of any portion of this Agreement shall not affect the validity, legality and enforceability of the remainder. 13 --------------------------------------------------------------------------------        IN WITNESS WHEREOF, the Corporation and the Executive have caused this Agreement to be executed as an instrument under seal as of the date and year first above written.                   TD BANKNORTH INC.               /s/ Jay Milligan   By:   /s/ Cynthia H. Hamilton                   Witness   Name: Cynthia H. Hamilton     Title: Executive Vice President               /s/ Jay Milligan   /s/ William J. Ryan           Witness   William J. Ryan 14

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  Exhibit 10.66 LANDEC CORPORATION 2005 STOCK INCENTIVE PLAN NOTICE OF STOCK OPTION GRANT Optionee:                                                                                                                                 You have been granted an option (the “Option”) to purchase Common Stock of Landec Corporation (the “Company”), as follows:               Date of Grant:                                                          Exercise Price Per Share:                                                          Total Number of Shares Granted:                                                          Total Exercise Price:                                                          Type of Option:                                                          Term/Expiration Date:                                                          Vesting Commencement Date:                                                          Vesting Schedule:   So long as your Service continues, the Shares underlying this Option shall vest and become exercisable in accordance with the following schedule: [1/36th of the total number of Shares subject to this Option shall vest and become exercisable on each monthly anniversary thereafter.]   --------------------------------------------------------------------------------                 Termination Period:   This Option may be exercised for six months after termination of your Service except as set forth in Section 4 of the Stock Option Agreement (but in no event later than the Expiration Date). Optionee is responsible for keeping track of the exercise period following a termination of his or her Service for any reason. The Company will not provide further notice of such period.      Unless otherwise defined in this Notice of Stock Option Grant, the terms used herein shall have the meanings assigned to them in the Plan.      By your signature and the signature of the Company’s representative below, you and the Company agree that this Option is granted under and governed by the terms and conditions of the Landec Corporation 2005 Stock Incentive Plan and the Stock Option Agreement, all of which are attached to, and made a part of, this document.      In addition, you agree and acknowledge that your rights to any Shares underlying this Option will be earned only as you provide Service over time, that the grant of the Option is not as consideration for services you rendered to the Company (or any Parent, Subsidiary, or Affiliate), prior to your Vesting Commencement Date, and that nothing in this Notice of Stock Option Grant or the attached documents confers upon you any right to continue your employment or consulting relationship with the Company (or any Parent, Subsidiary, or Affiliate) for any period of time, nor does it interfere in any way with your right or the Company’s (or any Parent’s, Subsidiary’s, or Affiliate’s) right to terminate that relationship at any time, for any reason, with or without cause.               OPTIONEE:       LANDEC CORPORATION                       By:       Signature                                   Title:       Print Name               --------------------------------------------------------------------------------   LANDEC CORPORATION 2005 STOCK INCENTIVE PLAN STOCK OPTION AGREEMENT      1. Grant of Option. Landec Corporation, a California corporation (the “Company”), hereby grants to the Optionee named in the Notice of Stock Option Grant attached to this Stock Option Agreement (the “Optionee”), an option (the “Option”) to purchase the total number of shares of Common Stock (the “Shares”) set forth in the Notice of Stock Option Grant (the “Notice”), at the exercise price per Share set forth in the Notice (the “Exercise Price”) subject to the terms, definitions and provisions of the 2005 Stock Incentive Plan (the “Plan”), which is incorporated in this Stock Option Agreement (the “Agreement”) by reference. Unless otherwise defined in this Agreement, the terms used in this Agreement shall have the meanings defined in the Plan.      This Option is intended to be an Incentive Stock Option as defined in Section 422 of the Code only to the extent so designated in the Notice, and to the extent it is not so designated or to the extent the Option does not qualify as an Incentive Stock Option, it is intended to be a Nonstatutory Stock Option. Notwithstanding the foregoing, even if designated as an Incentive Stock Option, in the event that the Shares subject to this Option (and all other Incentive Stock Options granted to Optionee by the Company or any Parent or Subsidiary, including under other plans of the Company) that first become exercisable in any calendar year have an aggregate fair market value (determined for each Share as of the date of grant of the option covering such Share) in excess of $100,000, the Shares in excess of $100,000 shall be treated as subject to a Nonstatutory Stock Option in accordance applicable law.      2. Exercise of Option. This Option shall be exercisable during its term in accordance with the Vesting Schedule set out in the Notice and with the applicable provisions of the Plan as follows:           (a) Right to Exercise.                (i) This Option may not be exercised for a fraction of a share.                (ii) In the event of Optionee’s termination of Service, the exercisability of the Option shall be governed by Section 4 below, subject to the limitations contained in paragraph (iii) below.                (iii) In no event may this Option be exercised after the Expiration Date as set forth in the Notice.   --------------------------------------------------------------------------------             (b) Method of Exercise.                (i) This Option may be exercised by delivering to the Company a fully executed Notice of Exercise (in the form attached as Exhibit A) which shall state the Optionee’s election to exercise the Option, the number of Shares in respect of which the Option is being exercised, and such other representations and agreements as to the holder’s investment intent with respect to such Shares as may be required by the Company pursuant to the provisions of the Plan. Such written notice shall be signed by Optionee and shall be delivered to the Company by such means as are determined to constitute adequate delivery by the Plan Administrator in its discretion. The Notice of Exercise shall be accompanied by payment of the Exercise Price. This Option shall be deemed to be exercised upon receipt by the Company of such fully executed Notice of Exercise accompanied by the Exercise Price.                (ii) As a condition to the exercise of this Option, Optionee agrees to make adequate provision for any applicable federal, state or other tax withholding obligations, if any, which arise upon the exercise of the Option or disposition of Shares, whether by withholding, direct payment to the Company, or otherwise.                (iii) The Company is not obligated, and will have no liability for failure, to issue or deliver any Shares upon exercise of the Option unless such issuance or delivery would comply with all applicable laws, with such compliance determined by the Company in consultation with its legal counsel. This Option may not be exercised if the issuance of such Shares upon such exercise or the method of payment of consideration for such shares would constitute a violation of any applicable federal or state securities or other law or regulation, including any rule under Part 221 of Title 12 of the Code of Federal Regulations as promulgated by the Federal Reserve Board. As a condition to the exercise of this Option, the Company may require Optionee to make any representation and warranty to the Company as may be required by any applicable laws. Assuming such compliance, for income tax purposes the Shares shall be considered transferred to Optionee on the date on which the Option is exercised with respect to such Shares.      3. Method of Payment. Payment of the Exercise Price shall be by any of the following, or a combination of the following, at the election of Optionee: (a) cash, (b) check, (c) surrender of other Shares, provided that the Company may, in its sole discretion, require that Shares tendered for payment be previously held by the Optionee for a minimum duration, or (d) Cashless Exercise.      4. Termination of Relationship. Following the date of termination of Optionee’s Service for any reason (the “Termination Date”), Optionee may exercise the Option only as set forth in the Notice and this Section 4. To the extent that Optionee does not exercise this Option within the Termination Period set forth in the Notice or the termination periods set forth below, the Option shall terminate in its entirety. In no event, may any Option be exercised after the Expiration Date of the Option as set forth in the Notice. In the event of termination of Optionee’s Service other than as a result of Optionee’s Disability or death or for Cause, Optionee may, to the extent Optionee is   --------------------------------------------------------------------------------   vested in the Option Shares at the Termination Date, exercise this Option during the Termination Period set forth in the Notice. In the event of any other termination, Optionee may exercise the Option only as described below:           (a) Termination upon Disability of Optionee. In the event of termination of Optionee’s Service as a result of Optionee’s Disability, Optionee may, but only within six months from the Termination Date, exercise this Option to the extent Optionee was vested in the Option Shares as of such Termination Date.           (b) Death of Optionee. In the event of the death of Optionee while in Service, the Option may be exercised at any time within six months following the date of death by Optionee’s estate or by a person who acquired the right to exercise the Option by bequest or inheritance, but only to the extent Optionee was vested in the Option Shares as of the Termination Date.           (c) Termination for Cause. In the event Optionee’s Service is terminated for Cause, the Option shall terminate immediately upon such termination for Cause. In the event Optionee’s employment or consulting relationship with the Company is suspended pending investigation of whether such relationship shall be terminated for Cause, all Optionee’s rights under the Option, including the right to exercise the Option, shall be suspended during the investigation period.      5. Non-Transferability of Option. This Option may not be transferred in any manner otherwise than by will or by the laws of descent or distribution. The designation of a beneficiary does not constitute a transfer. This Option may be exercised during the lifetime of Optionee only by Optionee. The terms of this Option shall be binding upon the executors, administrators, heirs, successors and assigns of Optionee.      6. No Employment Rights. Optionee understands and agrees that the vesting of Shares pursuant to the Vesting Schedule is earned only by continuing as an Employee or Consultant at the will of the Company (or any Parent, Subsidiary, or Affiliate) and not through the act of being hired, being granted this Option or acquiring Shares under this Agreement. Optionee further acknowledges and agrees that nothing in this Agreement, nor in the Plan which is incorporated in this Agreement by reference, shall confer upon Optionee any right with respect to continuation as an Employee or Consultant with the Company (or any Parent, Subsidiary, or Affiliate), nor shall it interfere in any way with his or her right or the Company’s (or any Parent’s, Subsidiary’s, or Affiliate’s) right to terminate his or her employment or consulting relationship at any time, with or without cause.      7. Effect of Agreement. In the event of a conflict between the terms and provisions of the Plan and the terms and provisions of the Notice and this Agreement, the Plan terms and provisions shall prevail. The Option, including the Plan, constitutes the entire agreement between Optionee and the Company on the subject matter hereof and supersedes all proposals, written or oral, and all other communications between the parties relating to such subject matter.   --------------------------------------------------------------------------------        8. Applicable Law. This Agreement will be interpreted and enforced under the laws of the State of California without regard to the conflict of laws principles thereof.      9. Signature. This Agreement shall be deemed executed by the Company and Optionee upon execution by such parties of the Notice attached to this Agreement.   --------------------------------------------------------------------------------   EXHIBIT A NOTICE OF EXERCISE       To:   Landec Corporation Attn:   Administrator of the 2005 Stock Incentive Plan Subject:   Notice of Intention to Exercise Stock Option      This Notice of Exercise constitutes official notice that the undersigned intends to exercise Optionee’s option to purchase ___shares of Landec Corporation Common Stock, under and pursuant to the Company’s 2005 Stock Incentive Plan (the “Plan”) and the Notice of Stock Option and Stock Option Agreement (the “Agreement”) dated ___, as follows:               Number of Shares:                                                                              Exercise Price per Share:                                                                              Total Exercise Price:                                                                              Method of Payment         of Exercise Price:                                                                              The shares should be registered in the name (s) of:                                                              and                                                             . 1      By signing below, I hereby agree to be bound by all of the terms and conditions set forth in the Plan and the Agreement. If applicable, proof of my right to purchase the shares pursuant to the Plan and the Agreement is enclosed. 2 Dated:                                                                            (Signature)     (Signature)3         (Please Print Name)     (Please Print Name)                     (Full Address)     (Full Address)   1   If more than one name is listed, please specify whether the owners will hold the shares as community property or as joint tenants with the right of survivorship.   2   Applicable if someone other than the Optionee (e.g., a death beneficiary) is exercising the stock option.   3   Each person in whose name shares are to be registered must sign this Notice of Exercise.  

EXHIBIT 10.62 NALCO HOLDING COMPANY 2004 STOCK INCENTIVE PLAN RESTRICTED STOCK UNIT AGREEMENT 2006 GRANT THIS AGREEMENT, is made effective as of February 15, 2006 (the "GRANT DATE"), between Nalco Holding Company (the "COMPANY") and Richard B. Marchese (the "PARTICIPANT"). RECITALS: WHEREAS, the Company has adopted the Plan (as defined below), the terms of which are hereby incorporated by reference and made a part of this Agreement; and WHEREAS, the Board of Directors of the Company (the "Board") has determined that the Participant be granted the Restricted Stock Units provided for herein pursuant to the Plan and the terms set forth herein. NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth, the parties agree as follows: 1. Definitions. Whenever the following terms are used in this Agreement, they shall have the meanings set forth below. Capitalized terms not otherwise defined herein shall have the same meanings as in the Plan. (a) "PLAN" means the Nalco Holding Company 2004 Stock Incentive Plan, as the same may be amended, supplemented or modified from time to time. (b) "RESTRICTED STOCK UNIT" means the unfunded, unsecured right of the Participant to receive a share of the Company's common stock, par value $0.01 per share (the "SHARES"). 2. Grant of Restricted Stock Units. The Company hereby grants to the Participant, subject to the terms and conditions of this Agreement and the Plan, 3,670 Restricted Stock Units. The Participant shall not possess any incidents of ownership (including, without limitation, dividend and voting rights) in Shares in respect of the Restricted Stock Units until such Restricted Stock Units have been distributed to the Participant in the form of Shares. 3. Delivery of Shares Underlying the Restricted Stock Units. (a) In General. Subject to Sections 3(b), 3(c) and 3(d), (i) the Company shall issue or cause there to be transferred to the Participant on January 1, 2008, a number of Shares equal to the aggregate number of Restricted Stock Units granted to the Participant under this Agreement. (b) Change of Control. Notwithstanding the foregoing, upon a Change of Control, the Company shall issue or cause there to be transferred, to the extent not previously cancelled or forfeited, to the Participant a number of Shares equal to the aggregate number of Restricted Stock Units granted to the Participant under this Agreement. (c) Cancellation of Restricted Stock Units. Upon the issuance or transfer of Shares in accordance with this Section 3, a number of Restricted Stock Units equal to the number of Shares issued or transferred to the Participant shall be cancelled. (d) Termination of Service on the Board of Directors. If the Participant ceases to be a member of the Board of Directors of the Company for any reason, the Restricted Stock Units shall be immediately canceled by the Company without any payment or other consideration. (e) Registration or Qualification. Notwithstanding any other provision of the Plan or this Agreement to the contrary, absent an available exemption to registration or qualification, a Restricted Stock Unit may not be delivered prior to the completion of any registration or qualification of the Restricted Stock Units or the Shares to which they relate under applicable state and federal securities or other laws, or under any ruling or regulation of any governmental body or national securities exchange that the Board or the Company's Compensation Committee ("Committee") shall in its sole reasonable discretion determine to be necessary or advisable. (f) Certificates. As soon as practicable following the delivery date of the Shares subject to the Restricted Stock Units, the Company shall issue certificates in the Participant's name for such Shares. However, the Company shall not be liable to the Participant for damages relating to any delays in issuing the certificates to the Participant, any loss by the Participant of the certificates, or any mistakes or errors in the issuance of the certificates or in the certificates themselves 4. Legend on Certificates. The certificates representing the Shares issued to the Participant upon the vesting of the Restricted Stock Units shall be subject to such stop transfer orders and other restrictions as the Committee may deem reasonably advisable under the Plan or the rules, regulations, and other requirements of the Securities and Exchange Commission, any stock exchange upon which such Shares are listed, any applicable federal or state laws or the Company's Certificate of Incorporation and Bylaws, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions. 5. Transferability. Unless otherwise determined by the Committee, a Restricted Stock Unit may not be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by the Participant otherwise than by will or by the laws of descent and distribution, and any such purported assignment, alienation, pledge, attachment, sale, transfer or encumbrance shall be void and unenforceable against the Company or any Affiliate; provided that the designation of a beneficiary shall not constitute an assignment, alienation, pledge, attachment, sale, transfer or encumbrance. 6. Withholding. The Company or its Affiliate shall have the right to withhold from any payment due or transfer made with respect to the Restricted Stock Unit, any applicable withholding taxes in respect of the Restricted Stock Unit or any payment or transfer with respect to the Restricted Stock Unit or under the Plan and to take such action as may be necessary in the option of the Company to satisfy all obligations for the payment of such taxes. 7. Securities Laws. Upon the acquisition of any Shares pursuant to the vesting of the Restricted Stock Units, the Participant will make or enter into such written representations, warranties and agreements as the Committee may reasonably request in order to comply with applicable securities laws or with this Agreement. 8. Notices. Any notice under this Agreement shall be addressed to the Company in care of its General Counsel at the principal executive office of the Company and to the Participant at the address appearing in the personnel records of the Company for the Participant or to either party at such other address as either party hereto may hereafter designate in writing to the other. Any such notice shall be deemed effective upon receipt thereof by the addressee. 9. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without regard to conflicts of laws. 10. Restricted Stock Units Subject to the Plan. By entering into this Agreement the Participant agrees and acknowledges that the Participant has received and read a copy of the Plan. The Restricted Stock Units and the Shares received upon vesting are subject to the Plan. The terms and provisions of the Plan as it may be amended from time to time are hereby incorporated by reference. In the event of a conflict between any term or provision contained herein and a term or provision of the Plan, the applicable terms and provisions of the Plan will govern and prevail 11. Counterparts. This Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Any counterpart or other signature hereupon delivered by facsimile shall be deemed for all purposes as constituting good and valid execution and delivery of this Agreement by such party. IN WITNESS WHEREOF, this Agreement has been executed and delivered by the parties hereto. NALCO HOLDING COMPANY By: /s/ Stephen N. Landsman ------------------------------------------------ Its Vice President, General Counsel & Corporate Secretary /s/ Richard B. Marchese ---------------------------------------------------- Participant

Exhibit 10.1 FIRST AMENDMENT TO LIMITED PARTNERSHIP AGREEMENT OF FEDERAL/LION VENTURE LP THIS FIRST AMENDMENT TO LIMITED PARTNERSHIP AGREEMENT OF FEDERAL/LION VENTURE LP (this “Amendment”) is made effective as of January 1, 2006 by and among FEDERAL REALTY INVESTMENT TRUST, a Maryland real estate investment trust (“Federal”), FEDERAL/LPF GP, INC., a Delaware corporation (“Federal GP”), CLPF-FEDERAL, L.P. a Delaware limited partnership (Fund”) and CLPF-FEDERAL GP, LLC (Fund GP”), a Delaware limited liability company. RECITALS A. Federal, as a limited partner, Federal GP, as a general partner, the Fund, as a limited partner and Fund GP, as a general partner, are parties to that certain Limited Partnership Agreement of Federal/Lion Venture LP dated as of July 1, 2004 (“Original Partnership Agreement”). B. Federal, Federal GP, the Fund and Fund GP have agreed to modify certain terms and provisions of the Original Partnership Agreement as provided in this Amendment. NOW THEREFORE, for valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows. 1. Recitals/Definitions. The foregoing Recitals are hereby incorporated by this reference and made a substantive part hereof. All capitalized terms used in this Amendment, whether or not otherwise defined herein, shall have the meanings for such terms set forth in the Original Partnership Agreement. Further, from and after the date hereof, all references in the Original Partnership Agreement to the “Agreement” shall mean and refer to the Original Partnership Agreement as modified by this Amendment. 2. Effectiveness. Except as otherwise expressly provided in Paragraph 6 of this Amendment below, this Amendment and the terms and provisions set forth herein shall be effective and apply only to Qualified Properties acquired by the Partnership from and after January 1, 2006. All of the terms and provisions set forth in the Original Partnership Agreement, without regard to, or modification by, this Amendment, shall continue to apply to all Qualified Properties acquired by the Partnership prior to January 1, 2006. 3. Promote Amount. The definition of Promote Amount set forth in Section 1.1 of the Original Partnership Agreement is hereby modified as follows: (a) by deleting the reference to “8.75%” in the first sentence thereof and replacing it with “8.25%;” and (b) by deleting the reference to “2.1875%” in the third sentence thereof and replacing it with “2.0625%.” 4. Limitation on Partnership Indebtedness. Section 3.8(a) of the Original Partnership Agreement is hereby amended by deleting the first sentence thereof and replacing it with the following: The total debt (other than trade payables in the ordinary course of business) of the Partnership (including debt of any SP Subsidiary and any debt secured by any Qualified Property) shall not exceed sixty-five percent (65%) of the aggregate unreturned IRR Contributions made by the Partners to the Partnership which, when all Capital Commitments described on Schedule 2 attached hereto have been fully contributed, shall be $227,500,000 of maximum debt. -------------------------------------------------------------------------------- 5. Net Cash Flow from Sales. Section 7.1(c) of the Original Partnership Agreement is hereby deleted in its entirety and replaced with the following: (c) Net Cash from Sales. Except upon liquidation, each Partner shall have the right to receive, within thirty (30) days after the Partnership derives any Net Cash from Sales from a Qualified Property (each date upon which the Partnership distributes Net Cash from Sales being referred to herein as a “Sales Proceeds Distribution Date”), a distribution of such Net Cash from Sales determined as provided in this Section 7.1(c). On the Sales Proceeds Distribution Date, the Partnership shall allocate the Net Cash from Sales derived from a Qualified Property to the Partners as follows: (i) First, to the Promoted Limited Partner(s), pari passu and pro rata in accordance with the then outstanding balances of their respective Promote Accounts for the applicable Qualified Property to be applied toward the reduction of each such Promoted Limited Partner’s Promote Account for such Qualified Property, until the outstanding balance of the Promoted Limited Partner’s Promote Account for such Qualified Property has been reduced to zero; (ii) Second, to the Partners, pari passu and pro rata in accordance with the then outstanding balances of their respective Capital Contributions Accounts for such Qualified Property to be applied toward the reduction of such Capital Contributions Accounts, until the outstanding balance of each such Capital Contributions Account is reduced to zero; (iii) Third, to the Fund Partners, until the Fund Partners have received, collectively and in the aggregate pursuant to Sections 7.1(a), 7.1(b), 7.1(c)(i), 7.1(c)(ii), and this 7.1(c)(iii), amounts sufficient to provide the Fund Partners with an IRR equal to 9.0%; (iv) Fourth, to the Federal Partners, until the Federal Partners have received, collectively and in the aggregate pursuant to this Section 7.1(c)(iv), an amount equal to the product of (x) the Federal Partners’ collective Percentage Interests as of the Sales Proceeds Distribution Date, multiplied by (y) an amount equal to the aggregate amount distributed to the Fund Partners pursuant to Section 7.1(c)(iii) above divided by the aggregate Percentage Interests of the Fund Partners as of such Sales Proceeds Distribution Date; and (v) Fifth, to the Partners pro rata in accordance with their Percentage Interests (as such Percentage Interests may be adjusted from time to time in accordance with this Agreement), until the Fund Partners have received, collectively and in the aggregate pursuant to Sections 7.1(a), 7.1(b), 7.1(c)(i), 7.1(c)(ii), 7.1(c)(iii), and this 7.1(c)(v), amounts sufficient to provide the Fund Partners with an IRR equal to 10.0%; and (vi) Sixth, all remaining Net Cash from Sales from such Qualified Property shall be distributed pro rata (1) twenty percent (20%) to Federal and (2) eighty percent (80%) to the Partners pro-rata in accordance with their Percentage Interests (as such Percentage Interests may be adjusted from time to time pursuant to and in accordance with this Agreement). Notwithstanding anything to the contrary stated in this Section 7.1(c) above or in Section 7.2 below, if any Default Loans remain unpaid and outstanding as of any Sales Proceeds Distribution Date, then all Net Cash from Sales otherwise distributable to the Defaulting Partner who is the “borrower” under each such Default Loan on such Sales Proceeds Distribution Date pursuant to the foregoing provisions of this Section 7.1(c) shall be paid by the Partnership directly to the Non-Defaulting Partner who made such Default Loan until such Default Loan (including the   2 -------------------------------------------------------------------------------- principal thereof and accrued interest thereon) is paid in full, all in accordance with the terms and provisions of Section 5.1(e)(ii) hereof. Net Cash from Sales shall not be used to acquire Qualified Properties or make capital improvements on Qualified Properties unless consented to in writing in advance by the General Partners. 6. Notices. Section 12.1(b) of the Original Partnership Agreement is hereby amended by deleting the notice address for Shaw Pittman LLP. Notwithstanding anything to the contrary stated or implied in this Amendment, this Paragraph 6 will be effective and apply to all operations of the Partnership from and after the effective date of this Amendment and to all Qualified Properties (whether such Qualified Properties were acquired prior to or after the effective date of this Amendment). 7. Schedule 1. Schedule 1 to the Original Partnership Agreement is hereby amended by deleting the line item identified as “Projected Returns” and replacing it with the following: Projected Returns: 5.75% to 6.50% Cap Rates; 7.25% to 8.00% unleveraged IRR 8. Representations and Warranties. Each party hereto hereby makes the following representations and warranties to the other parties all of which are material and are made to induce such other parties to enter into this Amendment. (a) The execution and delivery of this Amendment and the performance and observance of the covenants to be performed and observed hereunder do not violate or constitute a default in any agreement to which the representing party is a party. (b) Such party (i) is duly formed or organized and validly existing and in good standing under the laws of the State of its formation or incorporation, as the case may be, and (ii) has full power, legal capacity and authority to execute and deliver this Amendment and the documents contemplated hereby. (c) This Amendment has been duly authorized, executed and delivered by such party and is enforceable against such party in accordance with its terms. 9. Binding Effect. This Amendment shall be binding upon, and shall inure to the benefit of, the parties hereto and their respective legal representatives, successors and assigns. 10. Conflicts. To the extent, if any, that a provision of this Amendment conflicts with or differs from any provision of the Original Partnership Agreement with respect to the Qualified Properties for which this Amendment is applicable, such provision of this Amendment shall prevail and govern for all purposes and in all respects. 11. Ratification. Except as expressly modified hereby, the Original Partnership Agreement is hereby ratified and affirmed for all purposes and in all respects. 12. Facsimile; Counterparts. Signatures to this Amendment transmitted by facsimile or telecopy shall be binding on the party transmitting such signatures and such party shall not use as a defense against the enforceability of this Amendment the fact that such signature so transmitted is not original. Notwithstanding the foregoing, each party hereby agrees to cooperate in the execution and delivery of original counterpart versions of this Amendment, which, when delivered shall replace and supersede any facsimile hereof. This Amendment may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument; provided, however, in no event shall this Amendment be effective unless and until signed by all parties hereto.   3 -------------------------------------------------------------------------------- IN WITNESS WHEREOF, this Amendment is executed effective as of the date first set forth above.   Federal GP   Federal FEDERAL/LPF GP, Inc., a Delaware Corporation   FEDERAL REALTY INVESTMENT TRUST, a Maryland real estate investment trust By:   /s/ Dawn M. Becker   By:   /s/ Dawn M. Becker   Dawn M. Becker     Dawn M. Becker   Vice President-General Counsel and Secretary     Executive Vice President-General Counsel and Secretary   Fund GP   Fund CLPF-FEDERAL GP, LLC, a Delaware limited liability company   CLPF-FEDERAL, L.P. a Delaware limited Partnership By:   CLPF-Federal, L.P., a Delaware limited partnership, its sole member   By:   CLPF-Lion/Federal LP, LLC, a Delaware limited liability company, its sole general partner By:   CLPF-Lion/Federal LP, LLC, a Delaware limited liability company, its sole general Partner   By:   Clarion Lion Properties Fund Holdings, L.P., a Delaware limited partnership, its sole member By:   Clarion Lion Properties Fund Holdings, L.P., a Delaware limited partnership, its sole member   By:   CLPF-Holdings, LLC, a Delaware limited liability company, its general partner By:   CLPF-Holdings, LLC, a Delaware limited Liability company, its general partner   By:   Clarion Lion Properties Fund Holdings REIT, LLC, a Delaware limited liability company, its sole member By:   Clarion Lion Properties Fund Holdings REIT, LLC, a Delaware limited liability company, its sole member   By:   Clarion Lion Properties Fund, LLC, a Delaware limited liability company, its managing member By:   Clarion Lion Properties Fund, LLC, a Delaware limited liability company, its managing member   By:   ING Clarion Partners, LLC, a New York limited liability company, its manager By:   ING Clarion Partners, LLC, a New York limited liability company, its manager     By:   /s/ Steve Hansen           Steve Hansen           Authorized Signatory   By:   /s/ Steve Hansen           Steve Hansen           Authorized Signatory         4

EXHIBIT 10.02 SEVERANCE AGREEMENT This SEVERANCE AGREEMENT is entered into as of this 22nd day of November, 2006, by and among Cape Fear Bank Corporation, a North Carolina corporation formerly known as Bank of Wilmington Corporation (the “Corporation”), Cape Fear Bank, formerly known as Bank of Wilmington, a North Carolina bank, and Larry W. Flowers, its Executive Vice President and Chief Credit Officer of the Corporation and the Bank (the “Executive”). WHEREAS, the Executive has made and is expected to continue to make substantial contributions to the profitability, growth, and financial strength of Cape Fear Bank Corporation and its subsidiary bank, Cape Fear Bank, a North Carolina-chartered bank, WHEREAS, Cape Fear Bank Corporation desires to assure itself of the current and future continuity of management and, establishing minimum severance benefits for certain officers and other key employees, including the Executive, desires to ensure that officers and other key employees are not practically disabled from discharging their duties if a proposed or actual change in control arises, WHEREAS, Cape Fear Bank Corporation wishes to provide additional inducement for the Executive to remain in the employ of the Bank, WHEREAS, Cape Fear Bank Corporation and the Executive intend that this Severance Agreement shall supersede and replace in its entirety the Change of Control Agreement dated as of March 22, 1999 by and between Bank of Wilmington and the Executive, as amended, and that from and after the date of this Severance Agreement the Change of Control Agreement dated as of March 22, 1999, as amended, shall be of no further force or effect, and WHEREAS, none of the conditions or events included in the definition of the term “golden parachute payment” that is set forth in section 18(k)(4)(A)(ii) of the Federal Deposit Insurance Act [12 U.S.C. 1828(k)(4)(A)(ii)] and in Federal Deposit Insurance Corporation Rule 359.1(f)(1)(ii) [12 CFR 359.1(f)(1)(ii)] exists or, to the best knowledge of Cape Fear Bank Corporation, is contemplated insofar as either of Cape Fear Bank Corporation or any of its subsidiaries is concerned. NOW THEREFORE, in consideration of these premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows. 1. CHANGE IN CONTROL SEVERANCE. (a) Involuntary Termination Without Cause or Voluntary Termination for Good Reason Within One Year after a Change in Control. Cape Fear Bank Corporation shall make a lump-sum payment to the Executive in an amount in cash   -------------------------------------------------------------------------------- equal to two times the Executive’s annual compensation if the Executive’s employment with Cape Fear Bank Corporation and subsidiaries is involuntarily terminated within 12 months after a Change in Control, except for termination under section 4 of this Severance Agreement, or if the Executive terminates employment with Cape Fear Bank Corporation and subsidiaries for Good Reason within 12 months after a Change in Control. Subject to section 17, the payment required under this section 1(a) is payable no later than three business days after the date the Executive’s employment terminates and shall not be reduced to account for the time value of money or discounted to present value. If the Executive terminates employment for Good Reason, the date of termination shall be the date specified by the Executive in the notice of termination. If the Executive is removed from office or if the Executive’s employment terminates before the Change in Control occurs but after discussions with a third party regarding a Change in Control commence, and if those discussions ultimately conclude with a Change in Control, then for purposes of this Severance Agreement the removal of the Executive or termination of the Executive’s employment shall be deemed to have occurred after the Change in Control. For purposes of this Severance Agreement, annual compensation means (x) the Executive’s annual base salary on the date of the Change in Control or on the date of the Executive’s employment termination (at whichever date the Executive’s current annual base salary is greater, but excluding any compensation earned in the Executive’s capacity as a director), plus (y) any bonus earned for the most recent whole calendar year before the year in which the Change in Control occurred or for the most recent whole calendar year before the year in which employment termination occurred (whichever is greater), regardless of whether the bonus is paid in the year earned or in a later calendar year. The term bonus means cash or non-cash compensation of the type that is required to be reported as bonus by the Securities and Exchange Commission’s rules governing tabular disclosure of executive compensation, specifically Regulation S-K Item 402 (17 CFR 229.402 (2006), currently Item 402(c)(2)(iv)). For purposes of this Severance Agreement, the term subsidiary means any entity in which Cape Fear Bank Corporation directly or indirectly beneficially owns 50% or more of the outstanding voting securities. (b) Additional Severance Benefits. In addition to the severance payment due under paragraph (a) of this section 1, if the Executive is entitled to a lump-sum severance payment under paragraph (a) after employment termination Cape Fear Bank Corporation shall (x) cause the Executive to become fully vested in any qualified and non-qualified plans, programs, or arrangements in which the Executive participated if the plan, program, or arrangement does not address the effect of a change in control, and (y) contribute or cause to be contributed to the Executive’s 401(k) plan account the matching and profit-sharing contributions, if any, that the Executive is entitled to based upon all W-2 income earned by the Executive for the plan year. 2. DEFINITION OF CHANGE IN CONTROL. For purposes of this Severance Agreement, the term Change in Control means any of the following events occur –   2 -------------------------------------------------------------------------------- (a) Merger: Cape Fear Bank Corporation merges into or consolidates with another corporation, or merges another corporation into Cape Fear Bank Corporation, 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 Cape Fear Bank Corporation immediately before the merger or consolidation. For purposes of this Severance Agreement, the term person means an individual, corporation, partnership, trust, association, joint venture, pool, syndicate, sole proprietorship, unincorporated organization, or other entity, (b) Acquisition of Significant Share Ownership: a report on Schedule 13D, Schedule TO, 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 the combined voting power of Cape Fear Bank Corporation’s voting securities (but this paragraph (b) shall not apply to beneficial ownership of voting shares held by a subsidiary in a fiduciary capacity or beneficial ownership of voting shares held by an employee benefit plan of Cape Fear Bank Corporation or a subsidiary), (c) Change in Board Composition: during any period of two consecutive years, individuals who constitute Cape Fear Bank Corporation’s board of directors at the beginning of the two-year period cease for any reason to constitute at least a majority thereof; provided, however, that – for purposes of this paragraph (c) – 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 (b) 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 (d) Sale of Assets: Cape Fear Bank Corporation sells to a third party substantially all of Cape Fear Bank Corporation’s assets. For purposes of this Severance Agreement, sale of substantially all of Cape Fear Bank Corporation’s assets includes sale of the shares or assets of Cape Fear Bank alone. 3. GOOD REASON. For purposes of this Severance Agreement, the term Good Reason means the occurrence of any of the following without the Executive’s written consent – (a) reduction of the Executive’s base salary, or (b) reduction of the Executive’s bonus, incentive, and other compensation award opportunities under Cape Fear Bank Corporation’s or subsidiary’s benefit plans, unless a company-wide reduction of all officers’ award opportunities occurs simultaneously, or termination of the Executive’s participation in any officer or employee benefit plan maintained by Cape Fear Bank Corporation or a subsidiary, unless the plan is terminated because of changes in law or loss of tax deductibility to Cape Fear Bank Corporation for contributions to the plan, or unless the plan is terminated as a matter of policy applied equally to all participants, or (c) assignment to the Executive of duties or responsibilities that are materially inconsistent with the Executive’s duties and responsibilities immediately before the Change in   3 -------------------------------------------------------------------------------- Control, or any other action by Cape Fear Bank Corporation or its successor that results in a material reduction or material adverse change in the Executive’s position, authority, duties, or responsibilities, or failure to nominate the Executive as a director of Cape Fear Bank Corporation if the Executive shall have been a director immediately before the Change in Control, or (d) failure to obtain an assumption of Cape Fear Bank Corporation’s obligations under this Severance Agreement by a successor to Cape Fear Bank Corporation, regardless of whether the entity becomes a successor as a result of a merger, consolidation, sale of assets, or other form of reorganization, or (e) relocation of Cape Fear Bank’s principal executive offices or requiring the Executive to change the Executive’s principal work location to any location that is more than 50 miles from the location of Cape Fear Bank’s principal executive offices on the date of this Severance Agreement. 4. TERMINATION FOR WHICH NO SEVERANCE BENEFITS ARE PAYABLE. (a) No Severance after Termination for Cause. Despite any provision of this Severance Agreement to the contrary, under no circumstance shall the Executive be entitled to severance benefits if the Executive’s employment terminates for Cause. For purposes of this Severance Agreement the term Cause means the Executive shall have committed any of the following acts – 1) Fraud, Embezzlement, Theft or Other Crime: an act of fraud, embezzlement, or theft while employed by Cape Fear Bank Corporation or a subsidiary, conviction of the Executive for or plea of no contest to a felony or conviction of or plea of no contest to a misdemeanor involving moral turpitude, or the actual incarceration of the Executive for 45 consecutive days or more, or 2) Negligence and Other Actions: gross negligence, insubordination, disloyalty, or dishonesty in the performance of the Executive’s duties as an officer of Cape Fear Bank Corporation or a subsidiary; wilful or reckless failure by the Executive to adhere to Cape Fear Bank Corporation’s or subsidiary’s written policies; intentional wrongful damage by the Executive to the business or property of Cape Fear Bank Corporation, including without limitation its reputation, which in Cape Fear Bank Corporation’s sole judgment causes material harm to Cape Fear Bank Corporation; breach by the Executive of fiduciary duties to Cape Fear Bank Corporation and its stockholders, whether in the Executive’s capacity as an officer or a director of Cape Fear Bank Corporation or a subsidiary, 3) Removal: removal of the Executive from office or permanent prohibition of the Executive from participating in Cape Fear Bank’s affairs by an order issued under section 8(e)(4) or (g)(1) of the Federal Deposit Insurance Act, 12 U.S.C. 1818(e)(4) or (g)(1), or 4) Disclosure of Trade Secrets: intentional wrongful disclosure of secret processes or confidential information of Cape Fear Bank Corporation or affiliates, which   4 -------------------------------------------------------------------------------- in Cape Fear Bank Corporation’s sole judgment causes material harm to Cape Fear Bank Corporation or affiliates, or 5) Termination for Cause under an Employment Agreement: any actions that have caused the Executive to be terminated for cause under any employment agreement existing on the date hereof or hereafter entered into between the Executive and Cape Fear Bank Corporation or a subsidiary, or 6) Exclusion from Fidelity Coverage: the occurrence of any event that results in the Executive being excluded from coverage, or having coverage limited for the Executive as compared to other executives of Cape Fear Bank Corporation or affiliates, under a blanket bond or other fidelity or insurance policy covering directors, officers, or employees. Definition of “Intentional”: For purposes of this Severance Agreement, no act or failure to act on the Executive’s part shall be deemed to have been intentional if it was due primarily to an error in judgment or negligence. An act or failure to act on the Executive’s part shall be considered intentional if it is not in good faith and if it is without a reasonable belief that the action or failure to act is in the best interests of Cape Fear Bank Corporation. Any act or failure to act based upon authority granted by resolutions duly adopted by the board of directors or based upon the advice of counsel for Cape Fear Bank Corporation shall be conclusively presumed to be in good faith and in the best interests of Cape Fear Bank Corporation (b) No Severance under this Severance Agreement for the Executive’s Death or Disability. Despite any contrary provision in this Severance Agreement, under no circumstance shall the Executive be entitled to severance benefits under this Severance Agreement if (x) the Executive dies while actively employed by Cape Fear Bank Corporation or a subsidiary, or (y) the Executive becomes totally disabled while actively employed by Cape Fear Bank Corporation or a subsidiary. For purposes of this Severance Agreement, the term totally disabled means that because of injury or sickness, the Executive is unable to perform the Executive’s duties. The benefits, if any, payable to the Executive or the Executive’s beneficiary(ies) or estate after death or disability shall be determined solely by such benefit plans or arrangements as Cape Fear Bank Corporation or a subsidiary may have with the Executive relating to death or disability, not by this Severance Agreement. 5. TERM OF AGREEMENT. The initial term of this Severance Agreement shall be for a period of three years, commencing November 22, 2006. On the first anniversary of the November 22, 2006 effective date of this Severance Agreement and on each anniversary thereafter this Severance Agreement shall be extended automatically for one additional year, unless Cape Fear Bank Corporation’s board of directors gives notice to the Executive in writing at least 90 days before the anniversary that the term of this Severance Agreement will not be extended. If the board of directors determines not to extend the term, it shall promptly notify the Executive. References herein to the term of this Severance Agreement mean the initial term and extensions of the initial term. If the board of directors decides not to extend the term of this Severance Agreement, this Severance Agreement shall nevertheless   5 -------------------------------------------------------------------------------- remain in force until its term expires. The board’s decision not to extend the term of this Severance Agreement shall not – by itself – constitute Good Reason and shall not give the Executive any rights under this Severance Agreement to claim an adverse change in position, compensation, or circumstances or otherwise to claim entitlement to severance benefits under this Severance Agreement. 6. THIS SEVERANCE AGREEMENT IS NOT AN EMPLOYMENT CONTRACT. The parties hereto acknowledge and agree that (x) this Severance Agreement is not a management or employment agreement and (y) nothing in this Severance Agreement shall give the Executive any rights or impose any obligations to continued employment by Cape Fear Bank Corporation or any subsidiary or successor of Cape Fear Bank Corporation. 7. WITHHOLDING OF TAXES. Cape Fear Bank Corporation may withhold from any benefits payable under this Severance Agreement all Federal, state, local or other taxes as may be required by law, governmental regulation or ruling. 8. SUCCESSORS AND ASSIGNS. (a) This Agreement Is Binding on Successors. This Severance Agreement shall be binding upon Cape Fear Bank Corporation and any successor to Cape Fear Bank Corporation, including any persons acquiring directly or indirectly all or substantially all of the business or assets of Cape Fear Bank Corporation by purchase, merger, consolidation, reorganization, or otherwise. But this Severance Agreement and Cape Fear Bank Corporation’s obligations under this Severance Agreement are not otherwise assignable, transferable, or delegable by Cape Fear Bank Corporation. By agreement in form and substance satisfactory to the Executive, Cape Fear Bank Corporation shall require any successor to all or substantially all of the business or assets of Cape Fear Bank Corporation expressly to assume and agree to perform this Severance Agreement in the same manner and to the same extent Cape Fear Bank Corporation would be required to perform if no such succession had occurred. (b) This Severance Agreement Is Enforceable by the Executive and Heirs. This Severance Agreement will inure to the benefit of and be enforceable by the Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributes, and legatees. (c) This Severance Agreement Is Personal in Nature and Is Not Assignable. This Severance Agreement is personal in nature. Without written consent of the other party, neither party shall assign, transfer, or delegate this Severance Agreement or any rights or obligations under this Severance Agreement except as expressly provided in this section 8. Without limiting the generality of the foregoing, the Executive’s right to receive payments hereunder is not assignable or transferable, whether by pledge, creation of a security interest, or otherwise, except for a transfer by Executive’s will or by the laws of descent and distribution. If the Executive attempts an assignment or transfer that is contrary to this section 8, Cape Fear Bank Corporation shall have no liability to pay any amount to the assignee or transferee. 9. GOVERNING LAW, JURISDICTION AND FORUM. This Severance Agreement shall be construed under and governed by the internal laws of the State of North Carolina, without giving effect to any conflict of laws provision or rule (whether of the State of North Carolina or   6 -------------------------------------------------------------------------------- any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of North Carolina. By executing this Severance Agreement, the Executive acknowledges that the Executive is subject to the jurisdiction of both the federal and state courts in the State of North Carolina. Any actions or proceedings instituted under this Severance Agreement shall be brought and tried solely in courts located in New Hanover County, North Carolina or in the federal court having jurisdiction in Wilmington, North Carolina. The Executive expressly waives the right to have any such actions or proceedings brought or tried elsewhere. 10. ENTIRE AGREEMENT. This Severance Agreement sets forth the entire agreement between Cape Fear Bank Corporation and the Executive concerning the subject matter. Any oral or written statements, representations, agreements, or understandings made or entered into before or contemporaneously with the execution of this Severance Agreement are hereby rescinded, revoked, and rendered null and void by the parties. This Severance Agreement supersedes and replaces in its entirety the Change of Control Agreement dated as of March 22, 1999, as amended, between the Executive and Bank of Wilmington, and from and after the date of this Severance Agreement the Change of Control Agreement dated as of March 22, 1999, as amended, shall be of no further force or effect. 11. NOTICES. All notices, requests, demands, and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered by hand or mailed, certified or registered mail, return receipt requested, with postage prepaid. Unless otherwise changed by notice, notice shall be properly addressed to the Executive if addressed to the address of the Executive on the books and records of Cape Fear Bank Corporation at the time of the delivery of such notice, and properly addressed to Cape Fear Bank Corporation if addressed to the Board of Directors, Cape Fear Bank Corporation, 1117 Military Cutoff Road, Wilmington, North Carolina 28405. 12. SEVERABILITY. In the case of conflict between any provision of this Severance Agreement and any statute, regulation, or judicial precedent, the latter shall prevail, but the affected provisions of this Severance Agreement shall be curtailed and limited solely to the extent necessary to bring them within the requirements of law. If any provision of this Severance Agreement is held by a court of competent jurisdiction to be indefinite, invalid, void or voidable, or otherwise unenforceable, the remainder of this Severance Agreement shall continue in full force and effect unless that would clearly be contrary to the intentions of the parties or would result in an injustice. 13. CAPTIONS AND COUNTERPARTS. The captions in this Severance Agreement are solely for convenience. The captions in no way define, limit, or describe the scope or intent of this Severance Agreement. This Severance Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same instrument. 14. NO DUTY TO MITIGATE. The Cape Fear Bank Corporation hereby acknowledges that it will be difficult and could be impossible (x) for the Executive to find reasonably   7 -------------------------------------------------------------------------------- comparable employment after employment termination, and (y) to measure the amount of damages the Executive may suffer as a result of termination. Additionally, Cape Fear Bank Corporation acknowledges that its general severance pay plans do not provide for mitigation, offset, or reduction of any severance payment received thereunder. Cape Fear Bank Corporation further acknowledges that the payment of severance benefits under this Severance Agreement is reasonable and shall be liquidated damages. The Executive shall not be required to mitigate the amount of any payment provided for in this Severance Agreement by seeking other employment. Moreover, the amount of any payment provided for in this Severance Agreement shall not be reduced by any compensation earned or benefits provided as the result of employment of the Executive or as a result of the Executive being self-employed after employment termination. 15. AMENDMENT AND WAIVER. This Severance Agreement may not be amended, released, discharged, abandoned, changed, or modified in any manner, except by an instrument in writing signed by each of the parties hereto. The failure of any party hereto to enforce at any time any of the provisions of this Severance Agreement shall not be construed to be a waiver of any such provision, nor affect the validity of this Severance Agreement or any part thereof or the right of any party thereafter to enforce each and every such provision. No waiver or any breach of this Severance Agreement shall be held to be a waiver of any other or subsequent breach. 16. PAYMENT OF LEGAL FEES. Cape Fear Bank Corporation is aware that after a Change in Control management could cause or attempt to cause Cape Fear Bank Corporation to refuse to comply with its obligations under this Severance Agreement, or could institute or cause or attempt to cause Cape Fear Bank Corporation to institute litigation seeking to have this Severance Agreement declared unenforceable, or could take or attempt to take other action to deny Executive the benefits intended under this Severance Agreement. In these circumstances, the purpose of this Severance Agreement would be frustrated. It is Cape Fear Bank Corporation’s intention that the Executive not be required to incur the expenses associated with the enforcement of rights under this Severance Agreement, whether by litigation or other legal action, because the cost and expense thereof would substantially detract from the benefits intended to be granted to the Executive hereunder. It is Cape Fear Bank Corporation’s intention that the Executive not be forced to negotiate settlement of rights under this Severance Agreement under threat of incurring expenses. Accordingly, if after a Change in Control occurs it appears to the Executive that (x) Cape Fear Bank Corporation has failed to comply with any of its obligations under this Severance Agreement, or (y) Cape Fear Bank Corporation or any other person has taken any action to declare this Severance Agreement void or unenforceable, or instituted any litigation or other legal action designed to deny, diminish, or to recover from the Executive the benefits intended to be provided to the Executive hereunder, Cape Fear Bank Corporation irrevocably authorizes the Executive from time to time to retain counsel of the Executive’s choice, at Cape Fear Bank Corporation’s expense as provided in this section 16, to represent the Executive in connection with the initiation or defense of any litigation or other legal action, whether by or against Cape Fear Bank Corporation or any director, officer, stockholder, or other person affiliated with Cape Fear Bank Corporation, in any jurisdiction. Notwithstanding any existing or previous attorney-client relationship between Cape Fear Bank Corporation and any counsel chosen by the Executive under this section 16, Cape Fear Bank Corporation irrevocably consents to the Executive entering into an attorney-client relationship   8 -------------------------------------------------------------------------------- with that counsel, and Cape Fear Bank Corporation and the Executive agree that a confidential relationship shall exist between the Executive and that counsel. The fees and expenses of counsel selected from time to time by the Executive as provided in this section shall be paid or reimbursed to the Executive by Cape Fear Bank Corporation on a regular, periodic basis upon presentation by the Executive of a statement or statements prepared by such counsel in accordance with such counsel’s customary practices, up to a maximum aggregate amount of $100,000, whether suit be brought or not, and whether or not incurred in trial, bankruptcy, or appellate proceedings. Cape Fear Bank Corporation’s obligation to pay the Executive’s legal fees under this section 16 operates separately from and in addition to any legal fee reimbursement obligation Cape Fear Bank Corporation may have with the Executive under any separate severance or other agreement. Despite any contrary provision of this Severance Agreement however, Cape Fear Bank Corporation shall not be required to pay or reimburse the Executive’s legal expenses if doing so would violate section 18(k) of the Federal Deposit Insurance Act [12 U.S.C. 1828(k)] and Rule 359.3 of the Federal Deposit Insurance Corporation [12 CFR 359.3]. 17. COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 409A. Cape Fear Bank Corporation and the Executive intend that their exercise of authority or discretion under this Severance Agreement shall comply with section 409A of the Internal Revenue Code of 1986. If when the Executive’s employment terminates the Executive is a specified employee within the meaning of section 409A of the Internal Revenue Code of 1986, and if any payments under this Severance Agreement will result in additional tax or interest to the Executive because of section 409A, then despite any contrary provision of this Severance Agreement the Executive will not be entitled to the payments until the earliest of (x) the date that is at least six months after termination of the Executive’s employment for reasons other than the Executive’s death, (y) the date of the Executive’s death, or (z) any earlier date that does not result in additional tax or interest to the Executive under section 409A. As promptly as possible after the end of the period during which payments are delayed under this provision, the entire amount of the delayed payments shall be paid to the Executive in a single lump sum. If any provision of this Severance Agreement does not satisfy the requirements of section 409A, the provision shall nevertheless be applied in a manner consistent with those requirements. If any provision of this Severance Agreement would subject the Executive to additional tax or interest under section 409A, Cape Fear Bank Corporation shall reform the provision. However, Cape Fear Bank Corporation shall maintain to the maximum extent practicable the original intent of the applicable provision without subjecting the Executive to additional tax or interest, and Cape Fear Bank Corporation shall not be required to incur any additional compensation expense as a result of the reformed provision.   9 -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the parties have executed this Severance Agreement as of the date first written above.   EXECUTIVE   CAPE FEAR BANK CORPORATION /s/ Larry W. Flowers   By:   /s/ Cameron Coburn Larry W. Flowers   Its:   President and Chief Executive Officer   10

  AGREEMENT   AGREEMENT made as of the 3rd day of February, 2006, by and between: Scott Raleigh with an address at 4400 Route 9, #1000, Freehold, New Jersey 07728 (“SELLER”);   and   David N. Baker and Joseph Abrams with an address at 41 Sutter Street, Suite 1075, San Francisco, CA 94014 (“PURCHASERS”).   R E C I T A L S:   FIRST, SELLER is the owner of 100,000 shares of common stock of 51149, Inc., a Delaware corporation (“51149”). SECOND, SELLER desires to sell all 100,000 of his issued and outstanding shares in 51149 to PURCHASERS in consideration of the following. NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements hereinafter set forth, the parties hereto agree as follows: 1.0 Transfer of Shares. SELLER hereby transfers and delivers all 100,000 of his issued and outstanding shares in 51149 to PURCHASERS in consideration of $36,000. Upon receipt of the consideration into the Anslow & Jaclin, LLP Attorney Trust Account, SELLER will immediately forward the 100,000 51149 shares to PURCHASERS in the following manner: David Baker-50,000 shares     --------------------------------------------------------------------------------     Joseph Abrams-50,000 shares   2.0  Representations and Warranties of SELLER. SELLER hereby represents and warrants to PURCHASERS that: 2.1  Authority. SELLER has full legal capacity to execute and deliver this Agreement, to perform his obligations hereunder and to consummate the transactions contemplated hereby. This Agreement has been duly executed and delivered by SELLER and constitutes a valid and binding instrument, enforceable in accordance with its terms. 2.2 Resignation. SELLER represents that he is the sole shareholder of 51149 and that PURCHASERS are purchasing all of the issued and outstanding shares of 51149. SELLER hereby agrees that upon receipt of the consideration set forth above, he is relinquishing all interest in the 100,000 shares of 51149 stock. In addition, upon execution of this agreement, SELLER shall resign as the sole officer and director of 51149. 2.3 October 31, 2005 10QSB. Seller agrees to cover all costs incurred by the Purchaser in the filing of 51149’s October 31, 2005 including, but not limited, to all accounting, legal and Edgar costs. 2.4  Compliance with Other Instruments. The execution, delivery and performance of this Agreement is in compliance with and does not conflict with or result in a breach of or in violation of the terms, conditions or provisions of any   --------------------------------------------------------------------------------   agreement, mortgage, lease or other instrument or indenture to which SELLER is a party or by which SELLER is bound. 2.5  Capitalization. As of the date of this Agreement, 51149 has 100,000,000 shares of common stock authorized, of which 100,000 shares (the shares being sold by SELLER to PURCHASERS under this Agreement) are issued and outstanding. Other than this Agreement, there are no options, warrants, or other agreements to which 51149 is a party relating to the issuance, sale, or transfer of any equity securities or other securities of 51149. The shares being sold by SELLER to PURCHASERS under this Agreement have been duly authorized and are validly issued, fully paid, and nonassessable. 2.6   Title to SELLER’S shares in 51149. SELLER is the sole legal and beneficial owner of its shares in 51149 and has good and marketable title thereto, free and clear of any liens, claims, rights and encumbrances. 2.7  No Claims; Indemnity.    There are currently no claims or lawsuits threatened or pending against 51149 or SELLER as the owner of the 51149 shares, and SELLER is unaware of any conditions or circumstances that would lead to or justify the filing of any claim or lawsuit. If, after the consummation of this transaction and the transfer of the 51149 shares from SELLER to PURCHASERS any claim or lawsuit shall be filed against 51149 or PURCHASERS (as the owner of the 51149 shares), arising   --------------------------------------------------------------------------------   out of any circumstances whatsoever prior to transfer of the shares, SELLER shall defend, indemnify and hold PURCHASERS harmless from and against any and all such claims or lawsuits or any awards or judgments granted thereunder. 3.0  Representations and Warranties of PURCHASERS. PURCHASERS hereby unconditionally represents and warrants to SELLER that: 3.1  Authority. Each PURCHASER has full legal capacity to execute and deliver this Agreement, to perform his obligations hereunder and to consummate the transactions contemplated hereby. This Agreement has been duly executed and delivered by PURCHASERS and constitutes a valid and binding instrument, enforceable in accordance with its terms. 3.2  Compliance with Other Instruments. The execution, delivery and performance of this Agreement is in compliance with and does not conflict with or result in a breach of or in violation of the terms, conditions or provisions of any agreement, mortgage, lease or other instrument or indenture to which PURCHASERS is a party or by which PURCHASERS are bound. 3.3 Rule 144 Restriction. PURCHASERS hereby agree that such shares are restricted pursuant to Rule 144 and therefore subject to Rule 144 resale requirements. 4.0  Notices. Notice shall be given by certified mail, return receipt requested, the date of notice being deemed the   --------------------------------------------------------------------------------   date of postmarking. Notice, unless either party has notified the other of an alternative address as provided hereunder, shall be sent to the address as set forth herein. 5.0  Governing Law. This Agreement shall be interpreted and governed in accordance with the laws of the State of New Jersey. 6.0  Severability. In the event that any term, covenant, condition, or other provision contained herein is held to be invalid, void or otherwise unenforceable by any court of competent jurisdiction, the invalidity of any such term, covenant, condition, provision or Agreement shall in no way affect any other term, covenant, condition or provision or Agreement contained herein, which shall remain in full force and effect. 7.0  Entire Agreement. This Agreement contains all of the terms agreed upon by the parties with respect to the subject matter hereof. This Agreement has been entered into after full investigation. 8.0   Invalidity.   If any paragraph of this Agreement shall be held or declared to be void, invalid or illegal, for any reason, by any court of competent jurisdiction, such provision shall be ineffective but shall not in any way invalidate or affect any other clause, Paragraph, section or part of this Agreement.   --------------------------------------------------------------------------------     9.0 Gender and Number. Words importing a particular gender mean and include the other gender and words importing a singular number mean and include the plural number and vice versa, unless the context clearly indicated to the contrary. 10.0 Amendments. No amendments or additions to this Agreement shall be binding unless in writing, signed by both parties, except as herein otherwise provided. 11.  No Assignments. Neither party may assign nor delegate any of its rights or obligations hereunder without first obtaining the written consent of the other party. 12.   Waiver of Counsel. PURCHASERS and SELLER hereby acknowledge that they have the right to obtain legal counsel for this transaction. Notwithstanding same, they hereby waive their rights to such legal counsel. In addition, both parties hereby acknowledge that Anslow & Jaclin, LLP represents 51149 and no other party in this transaction. It has drafted this agreement for convenience purposes only.           --------------------------------------------------------------------------------     IN WITNESS WHEREOF, and intending to be legally bound, the parties hereto have signed this Agreement by their duly authorized officers the day and year first above written. WITNESS SELLER:   ___________________________ By:/s/ Scott Raleigh SCOTT RALEIGH                         WITNESS PURCHASERS:     ___________________________ By: /s/ David Baker DAVID BAKER   ___________________________ By: /s/Joseph Abrams   JOSEPH ABRAMS            

Exhibit 10.01 Terminal Services Agreement No. 06-03-1098   This Terminal Services Agreement (“Agreement”) is executed September 20, 2006 between Valero Logistics Operations, L.P., a Delaware limited partnership with offices at One Valero Way, San Antonio, Texas 78249-1616 (“Terminal Company”), and Valero Marketing and Supply Company, a Delaware corporation with offices at One Valero Way, San Antonio, Texas 78249-1616 (“Customer”). Capitalized terms that are used, but not defined herein, will have the meaning assigned to them in Schedule A attached hereto.   Introduction   Koch Supply & Trading, L.P. (“Koch”) currently owns and operates a storage, blending, and terminaling facility that is located at or near St. James, St. James Parish, Louisiana (the “Terminal”). The Terminal presently includes several above-ground storage tanks, blending equipment for crude oil and other refinery feedstock (collectively, the “Products”), meters and other measurement equipment, a pipeline distribution network, including, without limitation, numerous pipeline connections to the various Third-Party Pipelines, and a marine dock that is capable of loading and unloading Products to and from various Vessels.   Terminal Company has entered into a Purchase and Sale Agreement (“PSA”) with Koch in order to acquire the Terminal.   Customer desires to contract with Terminal Company for, and the Terminal Company is willing to perform or provide, each of the Services in accordance with the terms of this Agreement.   Now, therefore, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Terminal Company and Customer agree as follows:   I. Term. The primary term of this Agreement will be for a period of five (5) years (“Initial Term”), commencing on the closing date of the PSA (“Effective Date”). Customer will have the option to extend the term of this Agreement for an additional five (5) years beyond the Initial Term (the “Renewal Term”), provided that Customer exercises this option by providing Terminal Company with notice of its intent to extend the term of the Agreement at least one (1) year prior to the expiration of the Initial Term. The Initial Term and the Renewal Term shall collectively be referred to herein as the “Term.”   II. Product.   A. Minimum Specifications. Customer will ensure that any and all of Customer’s Product delivered to the Terminal under the terms of this Agreement meets the following specifications:   Sulfur (percent by weight): maximum four percent (4.0%) API Gravity: minimum 20° and maximum 70° True Vapor Pressure: maximum 10.5 at liquid storage temperature while in storage at the Terminal Viscosity: maximum 420 SUS at 100° F and 1500 SUS at 60° F Pour Point: maximum 50° F (without pour depressant) Hydrogen Sulfide (in liquid phase): maximum 100 ppm (without HS scavenger) BS&W maximum of two percent (2.0%)     Page 1 of 26   -------------------------------------------------------------------------------- Terminal Company may refuse to accept any of Customer’s Product at the Terminal which does not meet the minimum product specifications set forth in Paragraph A of Section II, above. Under such circumstances, Terminal Company shall promptly notify Customer that the Terminal is unable to accept such Product; provided, however, Terminal Company will not unreasonably refuse to accept such Product. Upon request, Customer shall also promptly provide (or arrange to provide) Terminal Company with an appropriate material safety data sheet for each Product which is delivered to the Terminal by or at the request of Customer.   B. Additives. If pour depressant is required in order for any of Customer’s Product to meet the maximum pour point specification stated in Paragraph A, above, or if hydrogen sulfide scavenger is required in order for any of Customer’s Product to meet the maximum hydrogen sulfide specification stated in Paragraph A, above, then Customer will be responsible for obtaining and blending (or arrange for obtaining and/or blending) any additive into its Product (including, without limitation) pour depressant or hydrogen sulfide scavenger). Terminal Company will allow Customer, at no additional charge, (a) to install and maintain the necessary equipment and related improvements within the Terminal (collectively, the “Additive Equipment”), and (b) on an as-need-basis, to bring its own Representatives into the Terminal, in order to allow Customer to inject any pour depressant or hydrogen sulfide scavenger into its Product as it is discharged from any Vessel or received from any Third-Party Pipeline. Terminal Company shall not permit any third party to use any of the Additive Equipment (or any of the additive material contained therein) without the prior written consent of Customer.   III. Services.     In consideration of the fees and charges set forth in Section IV of this Agreement, upon the request of Customer, Terminal Company shall provide each of the Services listed below:   A. Receipts and Deliveries.   1. Receipt Methods. Throughout the Term, in accordance with the term of this Agreement and subject to the direction(s) of Customer, Terminal Company will receive Customer’s Product at or within the Terminal by: (a) Vessel, through the use of the one (1) ship berth and the two (2) barge berths located within the Terminal; (b) the Ship Shoal Pipeline, the ExxonMobil Empire Pipeline, and the LOCAP Pipeline; and (c) any other means to which the Parties agree from time-to-time.   2. Delivery Methods. Throughout the Term, in accordance with the term of this Agreement and subject to the direction(s) of Customer , Terminal Company will redeliver Customer’s Product from and out of the Terminal through each of the following methods or means: (a) Vessel, through the use of one ship berth and two barge berths; (b) the Capline Pipeline, the ExxonMobil Pipeline--SOLA 24”, the ExxonMobil Pipeline--North Line, and the LOCAP Pipeline; and (c) any other means to which the Parties agree from time-to-time.   3. Pipeline Specifications. The Capline Pipeline, Exxon Mobil Pipeline--SOLA 24”, Exxon Mobil Pipeline--North Line, LOCAP Pipeline, and any other pipeline to which the Parties agree that Customer’s Product may be delivered from the Terminal from time-to-time (individually, a “Delivery Pipeline” and collectively, the “Delivery Pipelines”) may each publish and impose minimum specifications on Product that they receive from terminals. Terminal Company will have no obligation to deliver any of Customer’s Product to any of the Delivery Pipelines that does not meet such pipeline’s applicable, minimum Product specifications. If the Terminal is barred from delivering any of Customer’s Product to a Delivery Pipeline for failing to meet the Delivery Pipeline’s applicable, minimum Product specifications, Terminal Company will promptly provide Customer with notice of such failure or rejection (“Bar Notice”), and Customer may terminate this Agreement, without penalty or being deemed in default thereof, by providing notice of termination to Terminal Company. If Customer does not exercise its right to terminate this Agreement in response to Bar Notice received in connection with any   Page 2 of 26   -------------------------------------------------------------------------------- Delivery Pipeline within sixty (60) days of the date it receives the Bar Notice, Customer’s option to terminate this Agreement based on the terms and conditions set forth in such Bar Notice with respect to such Delivery Pipeline will be waived.   4. Discharge Rate. Upon the request of Customer, Terminal Company will provide Customer with the necessary tanks, pumps, meters, equipment, facilities, and personnel within the Terminal in order to receive Customer’s Product from ships at the rate of 30,000 Barrels per hour.     B. Storage.   1. Non-Dedicated Storage. Upon the request of Customer or any of its Affiliates, Terminal Company will store Customer’s Product in non-dedicated storage at the Terminal. During the Term, Terminal Company will not limit the amount of time that Customer’s Product can remain in non-dedicated storage at the Terminal. Terminal Company shall not commingle any product (including, without limitation, Product) owned by any third-party customer with any of Customer’s Product being held in non-dedicated storage without Customer’s prior consent, such approval not to be unreasonably withheld, delayed, or conditioned. Furthermore, Terminal Company shall ensure that all such other third-party customers using the Terminal only deliver Product(s) which meet the specifications set forth in Section II, above, into non-dedicated storage with any of Customer’s Product.   2. Dedicated Storage. In order to provide Customer with additional rights to store Customer’s Product at the Terminal, if and as of the effective date when Valero Energy Corporation and Valero GP Holdings, LLC are no longer considered to be “related parties” under the guidance of United States generally accepted accounting principles, Customer will have the right to request that Terminal Company immediately allocate the following dedicated storage space to Customer at the Terminal:   Dedicated Storage Space Tank Shell Capacity 1 321,000 Barrels 2 321,000 Barrels 3 120,000 Barrels 4 109,000 Barrels 5 499,000 Barrels 6 499,000 Barrels 13 321,000 Barrels 25 216,000 Barrels 27 103,000 Barrels   If Terminal Company grants Customer’s request as provided for above, then, under such circumstances, Customer shall have the exclusive right to use the dedicated tankage specified above.   C.    Throughput Capacity. Upon the request of Customer, Terminal Company will throughput at least the Minimum Monthly Throughput Volume at the Terminal.   D. Blending.   1. Capability. Upon the request of Customer, Terminal Company will blend Customer’s Product at the Terminal. Terminal Company will provide Customer with the necessary tanks, pumps, meters, equipment, facilities, and personnel in order to blend at least 120,000 Barrels of Customer’s Product per day at the Terminal to Capline Pipeline’s typical product specification for Louisiana Light Sweet Crude.   Page 3 of 26   -------------------------------------------------------------------------------- During the Term, Terminal Company guarantees that it will maintain and blend crude oil at the Terminal in accordance with the same Blending Models. Upon Customer’s request, Terminal Company shall continuously operate the mixers 24 hours per day, 365 days per year, if reasonably necessary.   2. Blending Models. Within ten (10) days after the Effective Date, Terminal Company will provide Customer with completed and unaltered copies of and the non-exclusive right to use the petroleum blending models transferred by Koch to Terminal Company pursuant to the PSA including, without limitation, the following models: Specification Screening Model; Daily Specification Spreadsheet; and Tank Optimization Spreadsheet (collectively, the “Blending Models”).   3. Blending Instructions. Customer will provide the Terminal with written blending instructions for any of Customer’s Products. Customer will be responsible for developing written blending instructions that achieve the desired blend. Customer will not provide Terminal Company with blending instructions that result in a blend that infringes on the intellectual property rights claimed by any third party, including, without limitation, the rights claimed by any third party under patent.   E. Sampling and Testing. On a confidential basis, Terminal Company will perform the following on-site testing, and associated sampling, at the Terminal, at no additional charge, in order to determine whether Customer’s blended Product meets the Delivery Pipeline’s minimum specification: sulfur; API gravity; RVP; and BS&W. At Customer’s request and expense, Terminal Company will arrange for an independent inspector, selected by Customer, to perform any off-site testing on Customer’s Product. Any testing performed by Terminal Company or by any independent inspector arranged by Terminal Company, at Customer’s request, will be performed in accordance with the then-current ASTM procedures. Terminal Company will promptly provide Customer with a complete and unaltered copy of any testing reports produced or obtained by or at the request of Terminal Company regarding Customer’s Product. All such testing reports that are generated under this Agreement shall be deemed Customer’s proprietary and confidential business information and shall not be disclosed, in any form or format, by Terminal Company or any of its Representatives to any third party without Customer’s prior written consent except as necessary to: enforce Terminal Company’s rights under this Agreement; to respond in any legal proceeding (including, without limitation, any deposition, interrogatory, subpoena, or civil investigative demand); and to defend against any allegation by a Delivery Pipeline that Terminal Company has failed to meet the Delivery Pipeline’s applicable, minimum Product specifications.   F. Capabilities. Terminal Company will, at a minimum, maintain the capabilities of the Terminal to receive, store, measure, test, transport, blend, and redeliver Customer’s Product at least as such capabilities were maintained by Koch or any of its Affiliates during the period of time immediately preceding the Effective Date, including, without limitation, the capabilities to receive and redeliver Customer’s Product at least at the same rates and pressures as such capabilities immediately prior to the Effective Date.   G. Emissions.   1. Loading. Terminal Company will provide Customer with the right, and the dock and dock space, cargo arms, hoses, piping, valves, and other related equipment and improvements necessary, to load Customer’s Product out of the Terminal by barge that is subject to 77.8 tons of VOC emissions per year, which is equivalent to redelivering 2,400,000 Barrels of Louisiana Light Sweet Crude, with an average RVP of 9.6, by barge per year without a marine vapor control unit.   2. Throughput. Terminal Company will provide Customer with the right, and the dock and dock space, cargo arms, hoses, piping, valves, tank space, and other related equipment and improvements   Page 4 of 26   -------------------------------------------------------------------------------- necessary, to throughput 4,000,000 Barrels per month of neat Saharan crude oil with an average RVP of 9.6, at the Terminal.   3. Marine Vapor Control Unit. Terminal Company will use all commercially reasonable efforts to install, commission for start-up, and commence operation of a marine vapor control unit for barge loadings at the Terminal on or before December 31, 2007.   H. Inventory Reports. On a daily basis, Terminal Company shall provide Customer with: a current inventory report for all of Customer’s Product, regardless of whether such is being held in non-dedicated storage or dedicated storage or as tank bottoms or line fill; and copies of all shore meter tickets and Third Party Pipeline meter tickets generated or received by Terminal Company during the preceding day.   I. Hours of Operation. Terminal Company will provide to Customer all of the Services specified in this Agreement, including, without limitation, the receipt, storage, measurement, movement, blending, mixing, and redelivery of Customer’s Product, 24 hours per day, 365 days per year.   J. Service Guaranty. Terminal Company will continue to perform or provide the same or substantially similar level, volume, content, and quality of Services that Koch performed for or provided for Customer in the six (6) month period immediately preceding the Effective Date. At a minimum, this includes, each of the following:   (1)          Terminal Company will continuously operate and maintain the Terminal including, without limitation, all of its pipelines, pipeline connections, meters, pumps, blending equipment, tanks, and the dock, in good working order and repair.   (2)          Terminal Company will ensure that the Terminal will be able to receive and deliver Customer’s Products to and from the Third-Party Pipelines (subject to any conditions or restrictions imposed by the operator of any such system) at the following minimum rates:   Third-Party Pipeline Rate Capline Pipeline (delivery) 35,000 Barrels per hour Ship Shoal Pipeline (receipt) 3,000 Barrels per hour ExxonMobil Pipeline-Empire (receipt) 7,000 Barrels per hour LOCAP Pipeline (receipt) 36,000 Barrels per hour LOCAP Pipeline (delivery) 36,000 Barrels per hour ExxonMobil Pipeline-SOLA 24” (delivery) 14,000 Barrels per hour ExxonMobil Pipeline-North Line (delivery) 8,000 Barrels per hour   IV. Fees.   A. Minimum Throughput Charge. Customer will pay Terminal Company $1,175,000.00 per month as the minimum throughput charge (“Minimum Throughput Charge”). The Minimum Throughput Charge covers the cost and expense for each of the Services which are listed in sub-paragraphs A(1), A(2), A(4), B(1), B(2), C, D(1), E, F, G, H, and I of Section III, above, which are performed, provided, or conducted either by or on behalf of Terminal Company, at Customer’s request, in accordance with the terms of this Agreement including, without limitation, receipts and deliveries by Vessel and Third-Party Pipelines. Notwithstanding anything contained in this Agreement to the contrary, should, at any time during the Term, Customer not be able to deliver any of its Product at normal operating rates to any of the Third Party Pipelines for at least seven (7) consecutive days as a result of the acts, omissions, or negligence of Terminal   Page 5 of 26   -------------------------------------------------------------------------------- Company, its Affiliates, or any of their Representatives, then the Minimum Throughput Charge will be abated (on a daily, pro rata basis) until such terminal operating capacity is regained.   B. Excess Throughput Charge. Customer will pay Terminal Company eight cents ($0.08) per Barrel for each Barrel of Customer’s Product received at the Terminal in excess of the Minimum Monthly Throughput Volume (“Excess Throughput Charge”).   C. Blending. Customer will pay Terminal Company three cents ($0.03) per Barrel for each Barrel of Customer’s Product which is blended at the Terminal at Customer’s request (“Blending Fee”). The Blending Fee will include the transfer of Customer’s Product between tanks anywhere within the Terminal for the purpose of blending. “Blending” means the intentional commingling of two or more different grades of Customer’s Product at Customer’s request, but “blending” excludes crude oil naturally interfacing with crude oil within tank bottoms, where such commingling is not reasonably commercially avoidable and its purpose is not to increase the value of either the tank bottoms or the crude oil. Tank bottoms will be excluded from the quantity of Customer’s Product blended for the calculation of the Blending Fee.   D. Transfers. The movement of any of Customer’s Product through any portion of the Terminal which is not (a) blended within the Terminal at Customer’s request, or (b) physically transferred to any third-party customer which does not lease tankage within the Terminal, shall be at no additional charge. Otherwise, Customer will pay Terminal Company three cents ($0.03) per Barrel for each Barrel of Customer’s Product physically transferred by Customer to another customer’s tank at the Terminal at Customer’s request.   E. Holdover Charge. If, through no fault of either the Terminal or Terminal Company (including, without limitation, its Representatives), Customer does not remove its Product from the Terminal on or before the date this Agreement expires or terminates, Customer will pay Terminal Company, on a per diem basis, a holdover charge of five cents ($0.05) per Barrel for each Barrel of Customer’s Product which remains within the Terminal above the minimum operating level of a tank until the last day that all such Product is removed from the Terminal, in addition to the pro rata share of the Minimum Throughput Charge for the affected tank.   F. Escalation. All charges under this Agreement will automatically escalate annually on the anniversary date of the Agreement by eighty percent (80%) of the percentage increase in the Consumer Price Index for All Urban Consumers, South Region, All Items (“CPI-U”) as published by the U.S. Department of Labor, Bureau of Labor Statistics. The percentage increase in the CPI-U means the percentage increase in the CPI-U over the twelve (12) calendar months immediately preceding the applicable escalation date.   V. Non-Compete. The PSA contains certain non-competition provisions regarding the blending of crude oil (the “Non-Compete”). During the Initial Term:   (A) Terminal Company will promptly provide notice to Customer whenever Terminal Company becomes aware of any violation of the Non-Compete; and   (B) Upon Customer’s written request, Terminal Company will promptly and diligently take any and all appropriate action to enforce the Non-Compete, subject to the following:   (1) Terminal Company will engage outside legal counsel that is acceptable to Customer for the enforcement of the Non-Compete, but Terminal Company would otherwise control the enforcement of the Non-Compete;   (2) Customer would be responsible for reimbursement of all reasonable and necessary costs, fees, and expenses incurred by Terminal Company in enforcing the Non-Compete (collectively, “Expenses”),   Page 6 of 26   -------------------------------------------------------------------------------- including, without limitation, attorney’s fees, court costs, costs of investigation, and travel costs, but Customer would not be obligated to reimburse Terminal Company for the salaries, wages, and benefits of Terminal Company’s own employees; and   (3) If Terminal Company has a monetary recovery against Koch or any of Koch’s Affiliates from enforcing the Non-Compete (whether based on a settlement or a judgment), any proceeds would first be applied to the payment of the Expenses, with the balance divided equally between Terminal Company and Customer.   VI. Notices. To be effective, all notices which are either required or requested under this Agreement will be in writing and delivered either: (A) by overnight courier to the address set forth below; or (B) by fax to the number set forth below, and confirmed by certified U.S. mail, return receipt requested, to the address set forth below. Notice addresses or fax numbers may be changed upon notice at least ten (10) days in advance of the effective date of the change.   To Terminal Company: To Customer: Valero Logistics Operations, L.P. Valero Marketing and Supply Company Attn: Vice President, Marketing & Business Development Attn: Vice President, Supply Domestic Desk One Valero Way One Valero Way San Antonio, TX 78249-1616 San Antonio, TX 78249-1616 Fax: (210) 370-5020 Fax: (210) 345-5907   VII. Schedules and Exhibits. The following schedules and exhibits are attached to and incorporated into this Agreement, as such may be amended from time to time with the mutual consent of the Parties: Schedule A—General Terms and Conditions; Schedule B—Marine Terms and Conditions; Exhibit 1—Vetting Procedure; and Exhibit 2—Dock Specifications.   VIII. Conditions Precedent. The obligations of the Parties under this Agreement are subject to the following conditions precedent: the approval of this Agreement by the boards of directors of Valero Energy Corporation and Customer; and the closing of Terminal Company’s purchase of the Terminal from Koch under the PSA on or before February 1, 2006.     Valero Logistics Operations, L.P. By Valero GP, Inc., Its General Partner     By: /s/ Curtis V. Anastasio     Name: Curtis V. Anastasio Title: CEO & President     Valero Marketing and Supply Company     By: /s/ Joseph W. Gorder     Name: Joseph W. Gorder Title: Executive Vice President           Page 7 of 26   --------------------------------------------------------------------------------   Schedule A General Terms and Conditions   1. Definitions. The following definitions will apply to the Agreement:   “AAA” is defined in Section 12.5 of this Schedule A.   “Additive Equipment” is defined in Paragraph B of Section II of the Agreement.   “Affiliate” means any entity that directly or indirectly controls, is controlled by, or is under common control with the referenced entity, including, without limitation, the referenced entity’s parents and their general partners. In the definition, “control” means the power to direct the management and policies of an entity, directly or indirectly, whether through the ownership of voting securities, by contract, or otherwise.   “Agreement” is defined in the preamble of the Terminal Services Agreement to which this Schedule A is attached, as such agreement may be modified from time to time by the Parties.   “API” means American Petroleum Institute, including its successor, if any.   “ASTM” means ASTM International, formerly known as the American Society for Testing and Materials.   “Bar Notice” is defined in Paragraph A of Section III of the Agreement.   “Barrel” and “BBL” means 42 Gallons when measured at 60° F.   “Blending Fee” is defined in Paragraph C of Section IV of the Agreement.   “Blending Models” is defined in sub-paragraph D.(2) of Section III of the Agreement.   “BS&W” means bottom sediment, water, and other residual matter generated from the storage of Product.   “Business Hours” means 8:00 AM to 4:00 PM local time at the Terminal, Monday through Friday, excluding holidays observed by Terminal Company   “Contractor” means any contractor or subcontractor accessing the Terminal on behalf of, at the request of, or for the benefit of Customer.   “Contract Year” means each consecutive 12-month period during the Term. The first Contract Year of the Agreement begins on the Effective Date.   “CPI-U” is defined in Paragraph F of Section IV of the Agreement.   “Customer” is defined in the preamble of the Agreement, and includes its successors and permitted assigns.   “Delivery Pipeline” and “Delivery Pipelines” are both defined in sub-paragraph A.(3) of Section III of the Agreement.   “Effective Date” is defined in Section I of the Agreement.     Page 8 of 26   -------------------------------------------------------------------------------- “Emergency” means an explosion, fire, flood, release, spill, discharge, or the occurrence, condition, or reasonable anticipation of an occurrence or condition, which might (a) threaten life, property, or the environment, or (b) adversely and materially impact the normal operation of any portion of the Terminal.   “ETA” means estimated time of arrival at South West Pass.   “Excess Throughput Charge” is defined in Paragraph B of Section IV of the Agreement.   “Expenses” is defined in sub-paragraph 2 of Paragraph B that is contained in Section V of the Agreement.   “Force Majeure” means any cause beyond the reasonable control of the Party to which it applies, including, without limitation, including acts of God, acts of government, acts of public enemies, acts of terrorists, accidents, explosions, fire, flood, strikes, labor disputes, civil unrest, war, breakdowns of machinery, or shortages of power.   “Gallon” and “GAL” means 231 cubic inches.   “Hazardous Material” means any substance, material or waste, that is regulated by Law as hazardous or toxic, as a pollutant or as a contaminate, or with words of a similar meaning including, without limitation, petroleum, petroleum products, ethanol, bio-diesel, gasoline additives, distillate additives, and methyl tertiary butyl ether.   “Initial Term” is defined in Section I of the Agreement.   “Law” means any and all applicable federal, state, and local codes, constitutions, decrees, directives, laws, licenses, ordinances, injunctions, orders, permits, regulations, requirements, rules, and statutes which have been implemented, and are enforced, by any judicial, regulatory, administrative, or governmental agency, authority, body, commission, or department that has proper jurisdiction over the subject matter in question.   “Liabilities” means actions, claims, causes of action, costs, demands, damages, expenses, fines, lawsuits, liabilities, losses, obligations, and penalties including, without limitation, court costs, defense costs, and reasonable attorneys’ fees.   “Loss Allowance” is defined in Section 12.1 of this Schedule A.   “Minimum Monthly Throughput Volume” means Four Million (4,000,000) Barrels of Product per month.   “Minimum Throughput Charge” is defined in Paragraph A of Section IV of the Agreement.   “Non-Compete” is defined in Section V of the Agreement.   “Party” means Terminal Company or Customer and “Parties” means Terminal Company and Customer.   “Platts” is defined in Section 12.2 of this Schedule A.   “Product” is defined in the Introduction of the Agreement.   “Product Loss” is defined in Section 12.1 of this Schedule A.   “Renewal Term” is defined in Section I of the Agreement.     Page 9 of 26   -------------------------------------------------------------------------------- “Representatives” means officers, directors, employees, agents, and other representatives of the referenced entity and its Affiliates.   “Rules” is defined in Section 12.5 of this Schedule A.   “Services”             means, collectively, each of the duties and obligations required of Terminal Company which are set forth under Section III of the Agreement including, without limitation, the receipt, delivery, storage, blending, sampling, and testing of Customer’s Products in accordance with the terms of the Agreement.   “Tank” is defined in Section 6.2 of this Schedule A.   “Tanks” is defined in Section 6.2 of this Schedule A.   “Term” is defined in Section I of the Agreement.   “Terminal” is defined in the Introduction to the Agreement.   “Terminal Company” is defined the preamble of the Agreement, and includes its successors and permitted assigns.   “Third Party Pipeline” means, individually, any of the following pipelines: the Ship Shoal Pipeline, the Capline Pipeline, the ExxonMobil Empire Pipeline, the LOCAP Pipeline, the ExxonMobil Pipeline-SOLA 24”, the ExxonMobil Pipeline-North Line, and any other pipeline to which the Parties agree that Customer’s Product may be delivered to or redelivered from the Terminal from time-to-time.   “Third Party Pipelines” means, collectively, all of the following pipelines: the Ship Shoal Pipeline, the Capline Pipeline, the ExxonMobil Empire Pipeline, the LOCAP Pipeline, the ExxonMobil Pipeline-SOLA 24”, the ExxonMobil Pipeline-North Line, and any other pipeline to which the Parties agree that Customer’s Product may be delivered to or redelivered from the Terminal from time-to-time.   “Vessel” means any ship, barge, or other watercraft delivering or receiving Product at the Terminal on behalf of, at the request of, or for the benefit of Customer.   2.            Terminal. Upon the request of Customer, Terminal Company will perform each of the Services for Customer at the Terminal, including, without limitation, the receipt, storage, measurement, sampling, testing, blending, and redelivery of Customer’s Product by the means stated in the Agreement; and such regulatory compliance reporting that Terminal Company is required by Law in order to perform as the Terminal operator. Terminal Company will promptly provide Customer with a copy of any regulatory compliance report filed by Terminal Company regarding Customer’s Product upon request by Customer. Terminal Company will provide the labor and supervision necessary to perform and provide the Services contemplated by the Agreement. Terminal Company will also provide and maintain the equipment necessary to perform the Services contemplated by the Agreement.   Except as set forth in this paragraph below, Terminal Company will not and will not allow any of its Representatives to add any substance to Customer’s Product. The foregoing prohibition will not be deemed to prohibit services: (i) requested by Customer; (ii) that Customer consents to the addition in writing; or (iii) that are required by Law.   3.            Quantity. The quantity of Customer’s Product received and delivered at the Terminal will be measured in accordance with the then-current ASTM procedures including, without limitation, temperature correction to 60° Fahrenheit. Customer may witness, and/or appoint an inspector reasonably acceptable to   Page 10 of 26   -------------------------------------------------------------------------------- Terminal Company to witness, measurements taken by Terminal Company. Terminal Company may witness, and/or appoint an inspector reasonably acceptable to Customer to witness, measurements taken by an independent inspector appointed by Customer.   3.1         Pipeline. The quantity of Customer’s Product received or delivered at the Terminal by Third-Party Pipeline will be   measured and determined by one of the following methods in order of preference: (a) an API approved custody meter located at the Terminal;  (b) if the meter fails or is not available, hand gauges of static shore tanks by an independent inspector appointed by Customer, at Customer’s expense, that is reasonably acceptable to the Terminal Company; or (c) if Customer does not nominate an independent inspection company, the Terminal Company’s static hand gauges of Terminal’s tanks. All hand gauges are to be obtained following the latest API guidelines. In the absence of fraud or manifest error in connection with any such measurements, the measurements will be binding on the Parties.   3.2         Vessel. Terminal Company will measure the quantity of Customer’s Product received and delivered at the Terminal by Vessel by U.S. API approved shore meter. Customer, at Customer’s expense, may appoint an independent inspector reasonably acceptable to Terminal Company to measure the quantity of Customer’s Product by gauging the Terminal’s tanks. In the absence of fraud or manifest error, the Terminal Company’s shore meter measurements of the quantity of Customer’s Product received and delivered at the Terminal by Vessel will be binding on the Parties. If there is fraud or manifest error in the shore meter measurement of the quantity of Customer’s Product received or delivered at the Terminal by Vessel, the independent inspector’s tank gauge measurements will be binding on the Parties. If there is fraud or manifest error in the shore meter measurement of the quantity of Customer’s Product received or delivered at the Terminal by Vessel, and if there is no measurement by an independent inspector on which to rely, the quantity of Customer’s Product received or delivered at the Terminal by Vessel will be measured by Terminal Company gauging the Terminal’s tanks, and such measurement will be binding on the Parties, absent fraud or manifest error.   3.3         Line Verification. If the Terminal’s shore meters are inoperable, fullness of shore pipelines will be verified by an independent inspector appointed by Customer, at Customer’s expense, according to the then-current API guidelines or procedures prior to any Vessel loading or discharging any of Customer’s Product.   3.4         Discrepancies. If there is ever a material discrepancy in the measurements for any of Customer’s Products recorded by the Parties and/or their Representatives, the Parties shall work diligently and in good faith to resolve any such discrepancy.   4. Delivery and Receipt.   4.1         Pipeline. Terminal Company will receive and deliver Customer’s Product by one of the Third-Party Pipelines designated by Customer 24 hours per day, seven days per week. Customer will use commercially reasonable efforts notify the local management of the Terminal in writing of pipeline nominations at least five (5) days prior to the expected time of receipt or redelivery, and Customer will use commercially reasonable efforts to notify the local management of the Terminal in writing of any change in the time of receipt or redelivery as soon as Customer becomes aware of a change. Pipeline receipts and deliveries will be subject to approval by Terminal Company, and Terminal Company will not unreasonably withhold, condition, or delay approval.   4.2         Vessel. Customer will deliver Customer’s Product to and receive Customer’s Product from the Terminal by Vessel in accordance with the procedures set forth in Schedule “B”, and Terminal Company will apply the procedures set forth in Schedule “B” uniformly to all customers of the Terminal.     Page 11 of 26   -------------------------------------------------------------------------------- 5.            Non-Dedicated Storage. This Section 5 will apply to the storage of Customer’s Product which is being held in non-dedicated storage. Customer will provide its then-current pro rata share of the tank bottoms (including, without limitation, the amount of Product required for a floating roof to remain continuously afloat) and line fill used by Terminal Company for the storage and handling of the Product at the Terminal. Customer’s pro rata share will be determined by Terminal Company and is subject to change based on Customer’s percentage of total working capacity in use of the non-dedicated storage. Subject to the provisions of Section 21 of this Schedule “A”, within forty-five (45) days of the expiration or termination of this Agreement, Terminal Company will remove all of Customer’s Product at the Terminal, including, without limitation, that amount of Customer’s Product allocated to Customer’s pro rata share of the tank bottoms and line fill, and deliver it to the Vessel or Delivery Pipeline designated by Customer.   6.            Dedicated Storage. Subject to the provisions of sub-paragraphs B(2) of Section III of the Agreement, this Section 6 will apply to the storage of Customer’s Product in dedicated storage.   6.1           Minimum Working Capacity. Customer will provide the tank bottoms (including, without limitation, if applicable, the amount of Product required for a floating roof to remain continuously afloat) required for the storage of Customer’s Product and a pro rata share of the line fill used by Terminal Company for the handling of the Product at the Terminal based on Customer’s percentage of total working capacity in use at the Terminal. Subject to the provisions of Section 21 of this Schedule “A”, within forty-five (45) days of the expiration or termination of this Agreement, Terminal Company will remove all of Customer’s Product at the Terminal, including, without limitation, that amount of Customer’s Product allocated to Customer’s pro rata share of the tank bottoms and line fill, and deliver it to the Vessel or Delivery Pipeline designated by Customer.   6.2         Tank Cleaning. The first time that a tank (whether non-dedicated or dedicated), that is used to store and/or blend Customer’s Product (individually a “Tank” and collectively, the “Tanks”), is cleaned during the Term of this Agreement, the Terminal Company will be responsible for the cost of the removal and disposal of BS&W from the Tank and for the cost of cleaning the Tank; thereafter, Customer will be responsible for the actual and reasonable costs incurred by Terminal Company in removing and disposing of BS&W from the Tanks and for the cost of cleaning the Tanks if the cleaning is conducted under the following circumstances: (a) when requested by Customer; (b) when an inspection mandated by Rule 653 of the API guidelines is required; and (c) upon the expiration or termination of this Agreement. Except as otherwise provided in this Section 6.2, the Terminal Company will be responsible for the cost of the removal and disposal of BS&W from the Tank and for the cost of cleaning the Tank whenever a Tank is cleaned during the Term of this Agreement.   7.            Subcontracting. Customer may not allow a third party to use the storage space allocated to Customer at the Terminal, if any, including, without limitation, by transferring title to Customer’s Product to anyone (other than another customer at the Terminal or an Affiliate of Customer) while in storage at the Terminal without the prior written consent of Terminal Company. If Terminal Company consents to the use of the storage space allocated to Customer by a third party: (a) Customer will continue to be liable for all charges incurred in connection with all Services within the Terminal requested by such third party; and (b) Customer will be liable for the acts and omissions of the third party, the acts and omissions of its Representatives, and the acts and omission of its Contractors, and Vessels and their respective Representatives in the same capacity and to the same extent that Customer is liable for is own acts and omission, the acts and omissions of its Representatives, and the acts and omission of the Vessels and their respective Representatives in accordance with the terms and conditions of this Agreement.   8. {Intentionally Left Blank}     Page 12 of 26   -------------------------------------------------------------------------------- 9.            Additional Services. If Terminal Company performs any services at Customer’s request other than the Services, or if Terminal Company performs any services other than the Services because Customer’s Product does not comply with the specifications required by Law or the Agreement, Customer will pay Terminal Company the cost of such services plus an administrative fee that is equal to ten percent (10%) of such cost. If Terminal Company makes any improvements to the Terminal at the request and expense of Customer, Terminal Company will own the improvements; provided, however, Terminal Company will not own any such improvements which are leased from a third party.   10.          Maintenance. Terminal Company may take any Tank out of service during the Term in order to perform inspections, maintenance, or repairs. Except for any Emergency where providing advance notice is not practicable, Terminal Company will provide Customer with at least sixty (60) days prior written notice of any such tank maintenance which impacts any non-dedicated or dedicated storage space (including, without limitation, any blending tanks) being used by Customer. If the Tank in which non-dedicated storage for Customer’s Product is provided is taken out of service: (a) Terminal Company shall provide Customer with other non-dedicated storage space within the Terminal which is substantially the same in terms of space and operational capability as the tankage being taken out of service; or (b) Customer’s obligation to pay a Minimum Throughput Charge will be reduced to the extent that Terminal Company cannot perform or provide the Services.   11.          Warranty. Terminal Company warrants that it (including, without limitation, its Representatives) will use reasonable care in the performance of the Services. Terminal Company will have custody of Product: (a) from the time it: (i) passes the flange connecting the delivery line of the delivering Vessel; or (ii) passes the custody meter of the applicable Delivery Pipeline; (b) to the time it: (i) passes the flange connecting the Terminal’s redelivery line to the receiving Vessel; (ii) passes from the Terminal’s loading arm to the receiving Vessel; or (iii) passes the custody meter of the applicable Third Party Pipeline. Except as expressly provided in the Agreement or any Schedule attached thereto (including this Schedule A), neither Terminal Company nor Customer makes any representations or warranties, express or implied. Terminal Company and Customer disclaim any implied or statutory warranties, including, without limitation, any warranty of merchantability or fitness for a particular purpose.   12. Limitation of Liability.   12.1       Loss Allowance. Terminal Company will only be liable for any unidentified loss of Customer’s Product in excess of one-quarter of one percent (0.25%) of Customer’s Product delivered to the Terminal during a calendar year (collectively, the “Loss Allowance”); and the Loss Allowance will be construed to limit the Terminal Company’s liability for the actual loss of any of Customer’s Product constituting unidentified loss of Customer’s Product (“Product Loss”) and not to authorize Terminal Company to take Customer’s Product for Terminal Company’s benefit or for the benefit of others. Terminal Company will reconcile Product Loss and Customer’s Product gains at the end of each calendar year.   All gains of Customer’s Product delivered to the Terminal shall belong to Customer; provided, however, any gains of Customer’s Product during a calendar year shall be offset against losses of Customer’s Product during the same calendar year.   12.2       Product Loss or Damage. Terminal Company will only be liable to Customer for any unidentified loss of or damage to Customer’s Product to the extent resulting from Terminal Company’s (a) failure to use reasonable care in the performance of the Services, (b) negligence, or (c) willful misconduct. Terminal Company’s liability arising out of Product Loss will not exceed fair market value for an equivalent quantity of undamaged Product less (except in the case of loss of Product) the fair market salvage value for the contaminated, damaged, or degraded Product. Fair market value will be   Page 13 of 26   -------------------------------------------------------------------------------- determined by the Platt’s Oilgram Price Report (“Platt’s”) average price for the month in which the Product Loss occurred. “Average price” means the mean of the high and low prices for each day of the month for which Platt’s posts prices. If Platt’s does not post a price for the Product, the Parties will agree on another recognized and reliable indicator of fair market value.   12.3       Consequential Damages. Except as expressly provided in this Section 12.3, neither Party will be liable to the other Party for any of the following damages arising out of or in connection with the Agreement: consequential, indirect, incidental, exemplary, punitive, or special damages, including, without limitation, lost profits, lost business opportunities, or loss of use, regardless of how caused and regardless of the theory of recovery. Without limiting the foregoing limitation of liability, Terminal Company will not be liable to Customer for demurrage regardless of how caused and regardless of the theory of recovery unless and except to the extent Customer incurs demurrage as a direct result of Terminal Company’s negligence or willful misconduct. The foregoing limitation of liability for lost profits is not intended to exculpate either Party from liability for any measure of damages that is expressly provided in the Agreement or for charges due under the Agreement.   12.4       Timing for Claims. Customer must make any claims for the contamination, damage, degradation, or loss of Customer’s Product by notice to Terminal Company within sixty (60) days of the date that Customer knew or should have known of the contamination, damage, degradation, or loss, and Customer irrevocably waives any claim for which the required notice is not provided within the required time. Terminal Company must make any claims for the contamination, damage, degradation, or loss of Product by notice to Customer within sixty (60) days of the date that Terminal Company knew or should have known of the contamination, damage, degradation, or loss, and Terminal Company irrevocably waives any claim for which the required notice is not provided within the required time.     12.5 Dispute Resolution.   (a) Negotiation. The Parties will first attempt to resolve any dispute arising out of or in connection with this Agreement promptly by negotiation between executives who have the authority to settle the controversy. A Party may give the other Party written notice of any dispute not resolved in the normal course of business. The notice will state that it is given to invoke the dispute resolution procedure outlined in this Section. Within fifteen (15) days after delivery of the notice, the receiving Party will submit to the other Party a written response. The notice and the response will include (i) a statement of the party’s position and a summary of arguments supporting that position; and (ii) the name and title of the executive who will represent that party and of any other person who will accompany the executive. Within thirty (30) days after delivery of the disputing party’s notice, the executives of both Parties will meet at a mutually acceptable time and place in San Antonio, Texas, and thereafter as often as they reasonably deem necessary, to attempt to resolve the dispute. All negotiations pursuant to this Section are confidential and will be treated as compromise and settlement negotiations for purposes of the applicable rules of evidence. (b) Mediation. If a dispute has not been resolved within thirty (30) days of the meeting of the Party’s executives, or if the executives fail to meet within thirty (30) days of the disputing Party’s notice, and the parties do not otherwise agree to extend the time for negotiation, either Party may initiate mediation of the dispute by giving the other Party written notice setting forth-such Party’s request to submit the dispute to mediation. The Parties will have thirty (30) days from the date the mediation notice is received by the other Party to agree upon a mediator. If the Parties are unable to agree, the mediator will be selected by the American Arbitration Association (“AAA”) on motion by either party. The mediation will be conducted in San Antonio, Texas.     Page 14 of 26   -------------------------------------------------------------------------------- (c) Arbitration. If a dispute is not resolved within forty-five (45) days of the initial mediation session, and the Parties do not otherwise agree to extend the time for mediation, either Party may initiate arbitration of the dispute by giving the other Party written notice setting forth such Party’s request to submit the dispute to arbitration. The dispute will be decided by a single arbitrator chosen by the mutual agreement of the Parties. The arbitrator will determine the dispute according to the Commercial Arbitration Rules of the AAA (“Rules”). The Expedited Procedures in the Rules, the substantive law of the State of Texas, and the Federal Rules of Procedure and Evidence will apply to the arbitration. If the Parties cannot agree on the selection of an arbitrator within forty five (45) days after either Party requests arbitration, then the arbitrator will be selected by AAA on motion by either Party. The decision of the arbitrator will be final and binding on both Parties. The arbitration will be conducted in San Antonio, Texas.   13. Indemnity.   13.1       Mutual Indemnification. To the fullest extent permitted by Law and except as specified otherwise elsewhere in the Agreement:   (a)          Customer shall defend, indemnify and hold harmless Terminal Company, its Affiliates and Representatives from and against any loss, damage, claim, suit liability, judgment and expense (including attorneys’ fees and other costs of litigation) arising out of injury, disease or death of any persons, damage to or loss of any property, or fines or penalties to the extent caused by or resulting from negligence of Customer, its Affiliates, Representatives or Contractors, in the exercise of any of the rights granted hereunder or otherwise in connection with the operations contemplated by this Agreement, except to the extent that such injury, death, damage to or loss of property or fine or penalty may be caused by or resulting from negligence on the part of Terminal Company, its Affiliates, Representatives or Contractors.   (b)          Terminal Company shall defend, indemnify and hold harmless Customer, its Affiliates and Representatives from and against any loss, damage, claim, suit, liability, judgment and expense (including attorneys’ fees and other costs of litigation) arising out of injury, disease or death of any persons, damage to or loss of any property or fines or penalties caused by or resulting from the negligence of Terminal Company, its Affiliates, its Representatives or its Contractors, in the performance of this Agreement, except to the extent that such injury, death, damage to or loss of property may be caused by or resulting from negligence on the part of Customer, its Affiliates, Representatives or Contractors.   13.2       Notice and Defense. Terminal Company or Customer, as soon as practicable after receiving notice of any suit brought against it within this indemnity, will furnish to the other Party full particulars and shall render all reasonable assistance requested by the other Party in the defense.   13.3       Survival. The release, indemnity, defense, and hold harmless obligations expressed in the Agreement will survive the termination of the Agreement for those Liabilities of which a Party receives notice from the other Party during the Term or within one (1) year of the termination of the Agreement.   14.       Insurance. Terminal Company will not insure the Product. If Customer desires to insure the Product while it is in Terminal Company’s custody, Customer will bear the cost of the insurance.   15.       Default. A Party will be in default if it: (a) breaches the Agreement, and the breach is not cured within fifteen (15) days receiving written notice of such default (or alleged default) from the other Party specifying the nature of the breach; (b) becomes insolvent; or (c) files or has filed against it a petition in bankruptcy, for reorganization, or for appointment of a receiver or trustee. In the event of default, the non-defaulting Party may terminate the Agreement upon notice to the defaulting Party. For the avoidance of   Page 15 of 26   -------------------------------------------------------------------------------- doubt, Terminal Company’s failure to perform any of the Services for any reason other than Force Majeure will be deemed a breach of the Agreement to which Subsection (a) of this Section 15 applies.   16. Force Majeure.   16.1       Terminal Company. Terminal Company will not be in default or liable for any failure to perform that is caused by Force Majeure. Force Majeure will not excuse Terminal Company’s failure to perform caused by the Terminal Company’s failure to exercise reasonable diligence in the maintenance of the Terminal. Customer’s obligation to pay a Minimum Throughput Charge will be reduced to the extent that Terminal Company cannot perform any of the Services. If Terminal Company is unable to perform or provide any of the Services for more than forty-five (45) consecutive days as a result of Force Majeure, Customer may terminate the Agreement upon notice to Terminal Company.   16.2       Customer. Customer will not be in default or liable for any failure to perform that is caused by Force Majeure; provided, however, Force Majeure will not excuse: (a) Customer’s failure to pay Terminal Company any fees incurred for Services performed or provided under the Agreement at Customer’s request, including, without limitation, any Minimum Throughput Charge which are not otherwise being disputed in good faith by Customer; and (b) Customer’s delivery of Product to the Terminal that does not meet the minimum Product specifications required by the Agreement.   16.3       Notice. If a Party is unable to perform as a result of Force Majeure, the non-performing Party will provide the other Party with notice within forty-eight hours of the occurrence of the Force Majeure. Any such notice will state the nature of the Force Majeure and the anticipated duration of the resulting non-performance. The non-performing Party will use all commercially reasonable efforts to cure the non-performance as soon as practicable and will provide weekly updates to the other Party regarding the status of such efforts.   18.          Compliance. Both Terminal Company and Customer will comply with Law in the performance of the Agreement. If Terminal Company is required by any Law enacted on or after the Effective Date to incur any new or increased expense to perform or provide any of the Services, Terminal Company will provide Customer with notice as far in advance of the effective date of compliance as is practicable. The notice will state Customer’s pro rata share of such expense and the effective date of compliance. Prior to the effective date of compliance, Customer will elect whether to pay its pro rata share of such expense by notice to Terminal Company If Customer elects not to pay its pro rata share of such expense, Terminal Company may terminate the Agreement upon sixty (60) days’ notice of such termination to Customer.   19.         Taxes and Assessments. Customer will pay all taxes and assessments assessed against Product, all taxes and assessments assessed against any other property of Customer at the Terminal, and its pro-rata share of all taxes and assessments assessed against Terminal Company (except for income taxes, franchise taxes and real estate taxes on the Terminal) with respect to the Services contemplated by the Agreement. The taxes and assessments to be paid by Customer include any import fee, customs duty, value added tax, sales tax, excise tax, ad valorem tax, spill tax, pollution control tax, and emissions fee. Except as otherwise provided in the Agreement, Terminal Company will pay all taxes and assessments arising out of the performance of the Services contemplated by the Agreement.   20. Fees.   20.1       Invoicing and Payment. Terminal Company will invoice Customer monthly, in advance, for the Minimum Throughput Charge, and monthly, in arrears, for any other amounts owed by Customer to Terminal Company under the Agreement. Customer will pay the amount of each invoice by ACH debit, without setoff or deduction, twenty (20) days from Customer’s receipt of the invoice. Customer will be   Page 16 of 26   -------------------------------------------------------------------------------- assessed a late charge of one and one-half percent (1.5%) interest per month or the highest rate permitted by Law, whichever is less, for any invoice not paid within twenty (20) days of Customer’s receipt of the invoice. Customer’s obligations to pay for Services performed or provided will survive the termination of the Agreement. Terminal Company’s acceptance of payment for any Service performed or provided after the termination of the Agreement will not be deemed a renewal of the Agreement. If Customer, reasonably and in good faith, disputes any amount invoiced by Terminal Company, Customer will: pay the undisputed amount of the invoice when due, and provide Terminal Company with notice stating the nature of the dispute on or before the due date of the invoice.   20.2       Transfers. If Customer receives Product from a third party at the Terminal through an in-tank transfer, the volume of Product received will be treated as a delivery to the Terminal for calculation of the Minimum Throughput Charge and the Excess Throughput Charge, if applicable.   20.3       Audit. Customer will have the right, upon reasonable notice, to review for compliance with the terms of the Agreement, (a) the movement of Customer’s Products into, through, and out of the Terminal, (b) the relevant portion of all books, records, and information kept by or on behalf of Terminal Company that reasonably relate to Customer’s rights and obligations under the Agreement, and (c) any other fees and/or costs charged by Terminal Company or any of its Affiliates, Representatives, or Contractors pursuant to the Agreement including, without limitation, matters that require the direct reimbursement by Customer. Terminal Company will retain all such books and records for a period of two (2) years from the date the Services are rendered. Customer may audit such books and records at Terminal Company’s property where such books and records are stored. Any such audit will be at Customer’s expense and will take place during Business Hours.   21.         Liens. Customer warrants that it has title to its Product at the time it is delivered to the Terminal and that, to the best of its knowledge, no third party claims an interest in such Product at the time it is delivered to the Terminal. Terminal Company will have a warehouseman’s lien upon any Product while in the Terminal for any amounts owed to Terminal Company and which are not otherwise being disputed in accordance with Section 20.1, above, that have not been paid when due whether incident to the Product then in the Terminal or otherwise. If a warehouse receipt is required under Law for such a lien to arise, the Agreement will be deemed to be the warehouse receipt for all Products at the Terminal. Customer will provide notice to Terminal Company if title to any Product at the Terminal is transferred to a third Party or if a third Party otherwise claims an interest in the Product at the Terminal, and the notice will state the name and business address of the third party and the interest claimed.   22.          Terminal Access. Customer reserves the right, at its sole cost, risk, and expense, to have one or more of its Representatives or Contractors enter upon and have access to the Terminal in order to observe the receipt, store, blending, measurement, sampling, testing, transportation, re-delivery, and/or handling of any of Customer’s Products received or delivered under the Agreement. Customer also has the right, but not the obligation, to have (a) loss control representatives attended all Vessel and tank sampling and measuring, and (b) pollution safety advisor to attend all Vessels loading or discharging within the Terminal. Terminal Company may require any such Contractor to execute an access agreement and to provide proof of insurance prior to receiving access to the Terminal. Terminal Company may deny access to the Terminal to any Vessel or Contractor and to any of Customer’s Representatives who, in Terminal Company’s reasonable opinion, pose an unreasonable risk of injury to the Terminal, its personnel, the public, or the environment.   23.          Relationship of the Parties. As between Terminal Company and Customer, control of the Terminal will rest exclusively with Terminal Company. Terminal Company will be an independent contractor with respect to the performance of the Services contemplated by the Agreement. The Agreement will not be construed to form a partnership or joint venture between the Parties.     Page 17 of 26   -------------------------------------------------------------------------------- 24.          Title. Title to Customer’s Product will not pass to Terminal Company, unless and until: Terminal Company exercises its rights to sell the Product as a result of Customer’s failure to remove the Product from the Terminal as provided in Section 8 of this Schedule A; or Terminal Company forecloses on the lien provided by Section 21 of this Schedule A.   25. Miscellaneous.   25.1               No Waiver. No waiver of any right under the Agreement at any time will serve to waive of the same right at any future date.   25.2               Amendment. No amendment to the Agreement will be effective unless made in writing and signed by an authorized officer of both Parties.   25.3               Severability. If a provision of the Agreement is unenforceable under Law, that provision will be enforced to the maximum extent permitted by Law. The remaining provisions of the Agreement will continue in full force and effect.   25.4               Assignment. Neither Party may assign any of its respective rights, duties, or obligations provided for under the Agreement, in whole or in part, without the prior written consent of the other Party. Any purported assignment of the Agreement in violation if this Section 25.4 will be void.   25.5               Conflict of Interest. Neither Party will pay any commission, fee, or rebate to an employee of the other Party or favor an employee of the other Party with any gift or entertainment of significant value.   25.6               Governing Law and Jurisdiction. The Agreement will be governed and construed in accordance with the laws of the State of Texas, without reference to the choice of law principles thereof. Any disputes arising out of the Agreement will be subject to the exclusive jurisdiction of the courts of the State of Texas located in Bexar County, Texas.   25.7               Conflict of Documents. If there is any conflict between the Agreement and this Schedule A, the Agreement will control. If there is a conflict between this Schedule A and Schedule B, this Schedule A will control.   25.8               Counterparts. The Agreement may be executed in one or more counterparts, each of which will be deemed an original and part of one and the same document.   25.9               Entire Agreement. The Agreement represents the entire agreement of the Parties with respect to the matters contemplated by the Agreement.   25.10             Construction. The following rules of construction will govern the interpretation of the Agreement: (a) “days,” “months,” and “years” will mean calendar days, months and years unless otherwise indicated; (b) “including” does not limit the preceding word or phrase; (c) section titles do not affect interpretation; (d) “hereof,” “herein,” and “hereunder” and words of similar meaning refer to the Agreement as a whole and not to any particular provision of the Agreement; and (e) no rule of construction interpreting the Agreement against the drafter will apply.   —End of Schedule A—   Page 18 of 26   -------------------------------------------------------------------------------- Schedule B Marine Terms and Conditions   1. Nomination Procedures.   1.1 Customer will provide Terminal Company with nominations for all intended Vessel receipts and deliveries at the Terminal no later than the twenty-fifth (25th) day of the month prior to the month of intended arrival date. Customer will provide Terminal Company with nominations for five (5) day nomination windows for ships and three (3) day nomination windows for barges. Terminal Company will advise Customer within twenty-four (24) hours if the nominated windows are acceptable. If a Vessel is nominated after the twenty-fifth (25th) of the month prior to the month of intended arrival date or if a Vessel misses its nominated window, the Terminal Company will work with Customer to receive the Vessel as soon as possible within a nomination window that does not interfere with previously nominated ships or barges.   1.2 Terminal Company will have the right, but not the obligation, to vet ships and ocean-going barges prior to accepting a nomination. If Terminal Company vets a ship or ocean-going barge: Terminal Company will use the vetting procedure in Exhibit 1; Terminal Company will provide the ship or ocean-going barge (or the ship’s or ocean-going barge’s agent) with a vetting questionnaire as soon as the ship or ocean-going barge is nominated; and, provided that the ship or ocean-going barge (or the ship’s or ocean-going barge’s agent) promptly completes the vetting questionnaire, Terminal Company will accept or reject the nomination within twenty-four (24) hours of receiving the nomination. Terminal Company will not unreasonably refuse a ship’s or ocean-going barge’s nomination; provided, however, Terminal Company may refuse a ship’s or ocean-going barge’s nomination if: the ship or ocean-going barge does not comply with applicable U.S. Coast Guard regulations; the ship or ocean-going barge does not comply with the International Safety Guide for Oil Tankers and Terminals; the ship or ocean-going barge does not maintain the insurance required under Section 6 of this Schedule B; or because of the safety record of the ship or ocean-going barge.   1.3 All nominations and notices under this Schedule B will be sent by fax or by e-mail to the scheduling personnel at the Terminal, and Terminal Company with provide Customer with the contact information for the scheduling personnel at the Terminal on or before the Effective Date. The scheduling and vetting personnel at the Terminal will be on-call 24 hours per day, 365 days per year.   2. Ship Nominations.   2.1 For ships, Customer will send a nomination to Terminal Company at least five (5) days prior to a ship’s expected arrival and will designate a three-day ETA window. Nominations will include the following information:     • The name of the vessel   • The Product type and volume to be discharged (GSV, temperature of cargo, API of cargo)   • Updated expected arrival time   • Vessel DWT and expected draft   • Name of inspector (if applicable)   • Certificate of quality analysis as determined by an independent inspector (if available)   Nominations will be accepted and confirmed on a first-come, first-served basis.   2.2 Ships must conform with the following limitations:     Maximum Deadweight Tonnes: 100,000 Metric Tonnes     Page 19 of 26   --------------------------------------------------------------------------------   Maximum Length Over All: 850 feet   Maximum Draft * 40 Feet (subject to river stage)   *When Donaldsonville, LA exceeds 25 feet river stage, assist tugs may be required by Terminal Company, and will be for the account of Customer.   2.3 Customer will ensure that the nominated ship (or the agent for the ship) reports to the Terminal by radio or telephone daily 72, 48, and 24 hours prior to estimated arrival and provide updated arrival date and time. Customer will ensure that the nominated ship (or the agent for the ship) will provide updates of the ship’s position: upon reaching mouth of Mississippi River; after changing pilots at New Orleans, and two hours before arriving at the Terminal. The nominated ship issues notice of readiness on arrival at the customary anchorage or when made fast in the berth. The nominated ship will be berthed as soon as possible upon arrival, provided arrival is within accepted and confirmed window.   3. Barge Nominations.   3.1 For barges, Customer will send a nomination to Terminal Company three (3) days prior to a barges’ expected arrival. Nominations will include the following information:     • The name of tow/tug nominated.   • The name of barges nominated.   • The expected date to tender notice of readiness to load/unload at Terminal.   • The product type and volume (GSV)   • Name of inspector (if applicable)   • Certificate of quality analysis as determined by an independent inspector (if available)   Barge windows will be accepted and confirmed on a first-come, first-serve basis.   3.2 Customer will provide the Terminal with twenty-four hours’ (24) notice of the estimated arrival time of the barge. Customer will provide the Terminal with final notice of estimated arrival time at least four (4) hours prior to arrival at dock. The nominated barge will be berthed as soon as possible upon arrival, provided arrival is within accepted and confirmed window.   4.            Priority. Terminal Company will berth ships and barges on a first-come-first-served basis; provided, however, ocean-going ships will have priority over barges. Terminal Company will not use the one (1) ship berth and two (2) barge berths in operation of at the Terminal on the Effective Date to receive cargo for anyone other than a customer of the Terminal.   5.            Pollution Prevention.    Customer will ensure that all ships delivering or receiving Product at the Terminal on behalf of, at the request of, or for the benefit of Customer participate in the International Tankers Owners Pollution Federation. Customer will ensure that all barges delivering or receiving Product at the Terminal on behalf of, at the request of, or for the benefit of Customer have secured and carry a current U.S. Coast Guard Certificate of Financial Responsibility (Water Pollution).   6.            Insurance.           Customer will ensure that Vessels carry the liability and pollution insurance required by Law. In addition, Customer will ensure all ships delivering or receiving Product at the Terminal on behalf of, at the request of, or for the benefit of Customer carry protection and indemnity insurance in an amount not less than $100,000,000.00 per occurrence, that all barges delivering or receiving Product at the Terminal on behalf of, at the request of, or for the benefit of Customer carry protection and indemnity insurance in an   Page 20 of 26   -------------------------------------------------------------------------------- amount not less than $5,000,000.00 per occurrence, and that all Vessels carry hull and machinery insurance in an amount not less than the full market value of the Vessel.   7.            Compliance.       Customer will ensure that Vessels comply with the Law, including all applicable U.S. Coast Guard regulations and federal, state, and local environmental regulations (including any permitting requirements).   8.            Emissions.          If marine vapor emissions control is required by Law at the Terminal, including the Terminal’s permits, Customer will ensure that Vessels have the manifolds and other equipment necessary to connect to the Terminal’s marine vapor emissions control unit.   9.            Services.             Except as otherwise provided in the Agreement, Terminal Company will not provide any services to Vessels, including piloting, towage, line handling, gauging and booming. If Terminal Company provides any service to a Vessel at Customer’s request for which a fee is not specifically set forth in the Agreement, Customer will pay Terminal Company for the service in accordance with Section 9 of Schedule A to the Agreement.   10.          Berth.   The dimensions and capabilities of the berths at the Terminal are described in Exhibit 2. Terminal Company represents and warrants that the berths designated for Vessels at the Terminal are safe, meaning that: (a) subject to the draft limitation stated above, there are no latent natural hazards at any of the berths; (b) subject to the dimensional limitation stated above, the berths are capable of accommodating the Vessels nominated; and (c) Terminal Company will use reasonable care in maintaining the cargo transfer equipment at the berths to prevent injury and damage to persons, property, and the environment. Terminal Company makes no representation or warranty regarding the safety of any channel, anchorage or other waterway used in approaching or departing from the designated berth. Terminal Company makes no warranty regarding dangers to Vessels from Force Majeure. Customer will ensure that all Vessels meet the dimensional limitations of the berth provided by Terminal Company, Terminal Company may require a Vessel to vacate a berth to prevent injuries to persons, damage to property, or harm to the environment.   —End of Schedule B—   Page 21 of 26   -------------------------------------------------------------------------------- Exhibit 1 Vessel Vetting Procedure   Upon request, a nominated Vessel (or the Vessel’s agent) will complete the following questionnaire and submit it to the scheduling personnel at the Terminal for review:   Valero LP Marine Facility Vetting Worksheet   Please answer all questions using printed capital letters. If a question does not apply to your vessel, please mark it N/A. Please include any applicable international dialing codes for telephone and fax numbers. If the space provided is not sufficient for a full answer, please provide a full answer at the end of this questionnaire or on the back of this questionnaire, and reference the question number in your answer. The person responsible for completing this questionnaire must provide his/her name, contact information, and signature in the space provided.   This questionnaire will be used for evaluating your vessel’s current nomination. In responding, the party completing this questionnaire represents and warrants on behalf of the vessel and its owners that the statements made herein are true and complete, recognizing that the terminal operator will rely on these statements when determining whether to accept the vessel’s nomination. An acceptance of your vessel’s current nomination does not guarantee acceptance of any future nominations.                      Date Questionnaire Completed Day-Month-Year 1.0 GENERAL   1.1 Name of vessel   1.2 Previous names and date changed   1.3 Flag   1.4 Current owners / date   1.5 Current operators / date   1.6 Name and contact information, email & phone, for person that will respond to vessel issues   2.0 VESSEL PARTICULARS   2.1 Type (Tanker, OBO, Barge, other – specify)   2.2 Hull type (full double hull, double bottom, double side, other – specify)   2.3 * Length overall (LOA)   2.4 * Beam   2.5 * Expected Draft While at Valero Facility   2.6 Bow to Center of Manifold (BCM)   2.7 Distance from manifold to water, ballast / loaded   2.8 * Distance from manifold to water at departure       Page 22 of 26   --------------------------------------------------------------------------------   2.9 Does vessel have a vapor recovery system in good working order?   2.10 Is vessel a Segregated Ballast Tanker (SBT)? If not explain ballast system.   2.11 Does vessel have an inert gas system in good working order?   2.12 What is the inert gas system type (boiler flue, nitrogen generator)?   2.13 What is the capacity of the inert gas system:   2.14 What type deck seal does the inert gas system have (wet, semi-dry, dry)?   3.0 OFFICERS AND CREW   3.1 Does the Company conduct background checks for all vessel personnel?   3.2 Are all officers who are responsible for oil transfer operations able to speak and understand effectively in English?   4.0 DOCUMENTATION   4.1 * Does vessel meet all local, state, federal, and International regulations for intended voyage?   4.2 * What is the date of expiration of vessel’s USCG Certificate of Compliance, or Certificate of Inspection (COC or COI)?   4.3 * Will the vessel have a COC / or COI renewal or annual exam this voyage?   4.4 * If answer to 4.3 is yes, is there any reason that vessel may not pass the exam?   4.5 Has Vessel’s Operator been accepted by U.S. Customs as a certified member of Customs Trade Partnership Against Terrorism (C-TPAT), Free and Secure Trade (FAST), the Business Anti-Smuggling Coalition (BASC) or other internationally-recognized security initiative?   4.6 Does the Vessel’s Operator participate in any security program being administered by any Customs Administration? If yes, specify.   4.7 Does the Vessel’s Operator have written security procedures and conduct periodic checks to ensure security compliance?   4.8 * What is the date of expiration of vessel’s International Ship Security Certificate?   4.9 What is the name of the vessel’s Classification Society?   4.10 What is the name of the vessel’s P&I club for pollution?   4.11* What is the vessel’s P&I pollution coverage amount (US dollars)? Valero LP requirement: Minimum for vessel’s ($100,000,000) Minimum for barge’s ($ 5,000,000)       Page 23 of 26   --------------------------------------------------------------------------------   4.12 Is the vessel a member of ITOPF (International Tanker Owners Oil Pollution Federation)?   4.13* Are all applicable certificates of financial responsibility valid?   4.14 What Condition Assessment Program (CAP) ratings does vessel have? Give category and rating. (vessels 15 years or older)   4.15 What organization issued the CAP ratings?   4.16 When were the CAP ratings issued?   4.17 Who is the owner’s Qualified Individual (QI) for OPA 90? What is the QI’s telephone number?   4.18 Who is the Oil Spill Response Organization’s U.S. contractor? What is the contractor’s telephone number?   5.0 PORT STATE / CLASS   5.1 Does vessel have any outstanding Port State Control requirements? If yes, explain   5.2 Give details of other incidents / casualties vessel has been involved in during the past 36 months (event, date, location, and status).   6.0 MISCELLANEOUS   6.1 Does vessel comply with OCIMF Mooring Guidelines?   6.2 * Are vessel’s anchors and ground system in good working condition?   6.3 * Are mooring winches, winch brakes, mooring wires, mooring ropes, fair leads and chocks in good working order?     Person responsible for completing this questionnaire:   Printed Name: ______________________________________   Signature: ______________________________________   Title: ______________________________________   Company: ______________________________________   Phone Number: ______________________________________   Email Address: ______________________________________           Page 24 of 26   -------------------------------------------------------------------------------- Exhibit 2 Berth Dimensions and Capabilities   Dock Maximum Draft* Maximum Size Flow Rate (BPH) Metering Prover #1—Barge 12 feet 4 barge tow each with 300’ length 7,500 One, 10” turbine with sampler 24” bi-directional #2—Ship and Barge 40 feet 100,000 DWT, 850’, stern center manifold < 385’ 35,000 Three, 10” turbine with sampler 30” bi-directional   Dock No. 1   Equipped with 3 x 8 inch chicksans feeding into 5 x 12 inch and 1 x 16 inch pipelines leading to the tank farm. The pipelines to the tank farm are not all active at this time due to lack of use. The deactivated lines include 3 x 12 inch pipelines which leaves 2 x 12 inch and 1 x 16 inch line presently in use at this dock.   Located on the south side of the marine terminal, Dock No. 1 is used exclusively for barge cargo transfer. The reported water depth at this facility is 12-15 feet which is consistent with the 30,000 to 35, 000 barrel inland barges that frequent this berth. The dock is reported to be capable of handling barges of up to 50,000 barrels with maximum length of 300 feet but such a vessel would in all likelihood exceed by draft the available water depth. As with the other berths at the Koch Pipeline Terminal, periodic dredging is needed to maintain water depths. Such dredging is generally conducted about every 4 years.   Dock No. 1 Structure: All steel pipe structure and cement reinforced steel pipe pilings   This cargo transfer facility is a standard “T” jetty design. The structure consists of a loading platform equipped with 3 x 8 inch chicksans all of which were removed, dismantled, overhauled and painted in 2003. Barges berth alongside the loading platform and secure to moorings positioned along the length of the platform. Two vertical pilings positioned north and south of the platform serve as breasting structures maintaining a clearance between the barge and the platform structure. The platform structure consists of four vertical pipe pilings with cross piping supports capped with a cement working surface. All equipment, (other than secured pipelines) are reported to be in good working order. Out of service lines have been “pigged” (displaced), inerted with nitrogen and capped for long term preservation. The general condition of this cargo transfer berth appears to be very good and there is minimal rust of any kind since it was recently painted in 2003. The maximum flow rate at this berth is 7,500 bbls/hr and it is also equipped with 1-10 inch turbine meters with sampler and a 24” bi-directional prover.   Dock No. 2: Equipped with 3 x 16 inch chicksans and 1 x 8 inch chicksan on the main platform all of which feeds into 1 x 30 inch, 2 x 20 inch, 1 x 12 inch, and 1 x 8 inch pipeline to the tank farm. Pipelines to the tank farm are not all active. Secured pipelines include 1 x 20 inch, 1 x 12 inch, and 1 x 8 inch line. Therefore remaining active lines include 1 x 20 inch and 1 x 30 inch line.   Dock No. 2 is the active tanker berth at this time and is (as mentioned) capable of handling vessels of up to 100,000 dwt with a maximum length of 850 feet. This is compatible with an aframax tanker which frequents this berth generally delivering parcels of 500,000 bbls per discharge. Barges may also utilize this berth if necessary. Again, Koch Pipeline Terminal maintains a 40 feet draft at the berth even though channel draft   Page 25 of 26   -------------------------------------------------------------------------------- may be 45 feet. Dredging operations are conducted about every 4 years at the berth. Dock No. 2 is positioned just south of Dock No. 5 but just north of the barge dock No. 1.   Dock No. 2 Structure: All steel pipe structure and cement reinforced steel pipe pilings   Dolphin # 1: Serves as the breast line mooring station for tankers at this berth. Support structure consists of four main “vertical” pipe pilings (angled inward) with cross piping supports and a cement cap surface upon which three quick release mooring hooks and capstan is located. All equipment reportedly is fully operational. Some rust spots visible but only rust stains and or surface rust at this time.   Dolphin #2: Serves as the breasting dolphin forward of the main platform and as the forward spring line mooring station for the tanker at this berth. The fendering system is of relatively modern compression type design using timer facing against ships hull. The support structure consists of nine main vertical pipe pilings with cross supports capped with a steel grating surface. This dolphin is equipped with three quick release hooks and a capstan all reportedly in good working order. Numerous rust stains and surface rust observed but little or no sub surface rust apparent.   Main Loading Platform: This cement capped steel structure supports the 3 x 16 inch and 1 x 8 inch chicksans and related equipment. The support structure consists of ten vertical pipe pilings with cross piping supports capped with a cement working surface. Within the last year a new hydraulics system has been installed at this platform. Additionally, the platform is equipped with an auto ground indicating system ensuring proper grounding maintained with the vessel at all times and an auto sump pump system that pumps the sump tank ashore at high level. Two gangways are provided, one for tankers and one for barges. There is minimal rust on this platform and all equipment (other than the secured pipelines to the tank farm) is reported to be fully operational and appears in good condition. Again there are numerous minor rust spots but primarily surface only. The maximum rate of discharge permitted is 35,000 barrels per hour and up to 100 psi at the manifold. This dock is also equipped with 3 – 10 inch turbine meters with sampler and a 30 inch bi-directional prover.     Page 26 of 26    

  Exhibit 10.21 Jo-Ann Stores, Inc. November 22, 2005 Mr. David Bolen Dear Dave: The purpose of this letter is to set forth the agreement we have reached with respect to the termination of your employment with Jo-Ann Stores, Inc., as Executive Vice President, Merchandising and Marketing, and the payments and benefits to be made available to you in connection with your separation, and various related matters. For purposes of this agreement the following definitions shall apply:           Transition Period:   The period of time between Sunday, October 2, 2005 and your last day worked   Separation Date:   Your last day worked as determined by the Company, but no later than December 31, 2005   Salary Continuation Period:   The 30 months succeeding December 31, 2005 We have agreed as follows:   1.   Your employment as EVP, Merchandising and Marketing, of Jo-Ann Stores will end no later than December 31, 2005, and you will cease to be an employee of Jo-Ann Stores as of the end of the business day on your Separation Date. Until the Separation Date, you will continue to be an active employee with regard to salary, benefits and expenses.     2.   Following your Separation Date, Jo-Ann Stores will make the following payments and will provide the following benefits to you:   (a)   Jo-Ann Stores will pay you an amount equal to your current base salary of $428,000 for 18 months payable in 39 bi-weekly installments as defined by your employment agreement dated July 30, 2001.         In consideration of your acceptance of the terms of this agreement, the Company further agrees to pay you an additional $214,000 for 12 months payable in 26 biweekly installments commencing on the 19th month following the Separation Date and ending after the 30th month following the Separation Date.     (b)   You will not be eligible to participate in any payout under the FY2005, FY2006 or FY2007 Management Incentive Plan (MIP). Additionally, you will not be eligible to receive any incentives that may be awarded during the Transition Period.     (c)   Insurance:   --------------------------------------------------------------------------------     1.   Jo-Ann Stores will provide to you continued coverage under the Jo-Ann Stores Benefit Plan through the earlier of (i) 30 months from your Separation Date, and (ii) the date you first become eligible for health and hospitalization insurance coverage provided by another employer. To the extent coverage for all Jo-Ann Stores’ employees is contributory; you agree to contribute to the cost of coverage on the same terms applicable to continuing employees of Jo-Ann Stores. The Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1985 provides you with specific rights concerning the continuation of your medical coverage; alternative coverage under this paragraph does not extend the maximum coverage period under that statute. COBRA will be offered to you at the time of an appropriate triggering event.     2.   Your current group term life insurance coverage will continue through (i) the earlier of 30 months from your Separation Date, or (ii) the date on which you first become eligible for life insurance coverage provided by any other employer. To the extent coverage for Jo-Ann Stores employees is contributory; you agree to contribute to the cost of coverage on the same terms applicable to continuing employees of Jo-Ann Stores.     3.   Disability insurance will cease on your Separation Date. However, you do have the option to continue Long-Term Disability coverage if you currently have it. Further information will be sent to you upon request.     4.   Your rights under the Supplemental Life Insurance Program (Split Dollar) will cease as governed under the provisions of that plan, based on a termination of employment, effective as of the Separation Date.     5.   Your rights under the Supplemental Retirement Benefit Plan will cease as governed under the provisions of that plan based on a termination of employment and will be effective as of the Separation Date.   (d)   We will pay all accrued and unused Paid Time Off contemporaneously with the first pay date after the Separation Date.   3.   By special consent of the Board of Directors, you will have 90 days from the Separation Date to exercise any stock options that were vested as of that Separation Date. No additional options will vest during this 90-day period. All restricted stock awards are cancelled as of your Separation Date and certificates must be retuned to the EVP, Human Resources within 10 days of that date.     4.   Jo-Ann Stores will continue to provide your car allowance through the earlier of 30 months from the Separation Date or the date on which you become eligible for a car or car allowance provided by any other employer.     5.   Jo-Ann Stores will provide you with Executive Level outplacement services at the Company’s expense through Ratliff and Taylor until you obtain subsequent employment.   --------------------------------------------------------------------------------     6.   You agree that beyond your Separation Date, you will have no other demands for reimbursable expenses or claims of any kind against the Company, and the signing of this agreement and the terms hereunder satisfy all obligations Jo-Ann Stores has with you.     7.   This Agreement, during its first 18 months, shall inure to the benefit of and be enforceable by you and each of your personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees, and legatees. If you die while any amount would still be payable to you hereunder had you continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement, to your Beneficiary. If you have not named a Beneficiary, then such amounts shall be paid to your devisee, legatee, or other designee, or if there is no such designee, to you estate. You may designate one or more persons or entities as the primary and/or contingent Beneficiaries of any benefits owing to you under this Agreement. Such designation must be in the form of a signed writing acceptable to the Company. You may make or change such designation at any time.     8.   You further agree that in the event of you death after the initial 18 months of salary continuation, all obligations cease and no further payments on your behalf will be made to your beneficiaries or estate.     9.   Further, you agree that, if you secure employment, during the transition period or during the salary continuation period, you will immediately contact the EVP, Human Resources. Upon obtaining employment, the balance of any money that you may be eligible to receive may be paid in a lump sum amount. All other benefits, other than salary continuation, described in Item 2, Page 1 of this letter, will discontinue effective your first day of benefit eligibility with a new employer.     10.   You agree not to divulge to persons, other than designated employees of the Company, any confidential information gathered or learned in the scope of your employment with the Company. Confidential information includes, but is not limited to, information in oral, written or recorded form regarding business plans, trade or business secrets, Company financial records, performance results of stores, product categories or marketing vehicles, supplier contracts or relationships, contents of this Agreement or any other information of similar nature, unless to your attorneys, financial planners or family or in order to enforce the terms hereof. “Confidential Information” shall not include information which: (i) becomes available broadly to persons outside the Company other than as a result of disclosure by you; (ii) becomes available to you on a non-confidential basis from a source other than the Company, provided such source is not in breach of any confidentiality or similar agreement in disclosing such information to you; (iii) you are required to disclose pursuant to law, court order, or subpoena, provided you give the Company advance written notice of the required disclosure; or (iv) was known to you prior to your employment with the Company.     11.   To the extent that you have any doubt, either now or in the future, as to whether information you possess is confidential or personal, you should contact Alan Rosskamm, CEO, or his successor for clarification before divulging or using such information. You understand and agree that such information divulged to third parties or your unauthorized use of it would cause Jo-Ann Stores serious competitive harm and is a violation of this agreement.   --------------------------------------------------------------------------------     12.   You agree to return immediately all Company credit cards, Company telephone credit cards, keys, key cards, discount cards, equipment except your Blackberry and laptop computer for which ownership shall be transferred to you, and all Jo-Ann Stores related documents, materials and property that you have in your possession and not to make or retain any copies thereof without authorization from the EVP, Human Resources.     13.   During the salary continuation period, you agree as follows:   (a)   You will not have any financial or other interests in nor become involved, directly as a proprietor, partner, shareholder, officer, employee, consultant, agent or in any other capacity, with any person, firm or legal entity engaged in any significant extent within the United States in the business of multi-unit retailing of fabrics and/or crafts. “Multi-unit retailing” is defined as in excess of five stores and “significant extent” is defined as any entity where revenues in fabrics and crafts exceed 5% of the total revenues of the entity. Additionally, you agree that for any entity where revenues are less than 5% of total revenues, you will not have a role in that entity that directly impacts the fabric and/or crafts business. The obligations of this paragraph shall extend to all subsidiaries, related and affiliated entities, franchises, partnerships, joint ventures and successors in interest or assigns of the persons, firms or legal entities in multi-unit retailing of fabrics and/or crafts resulting from a merger, acquisition, divestiture, change in control, name change or any other reason and shall not affect or extinguish any of the obligations of this paragraph.     (b)   You will not have any financial or other interests in nor become involved, either directly or indirectly or as a proprietor, partner, shareholder, officer, employee, consultant, agent or in any other capacity, with any person, firm or legal entity, in that portion of the entity that is involved in the sale in the continental United States of products to any of the persons, firm or legal entities engaged in multi unit retailing (as defined above) of fabrics and/or crafts without the express written consent and approval of Alan Rosskamm, CEO or his successor of Jo-Ann Stores, such consent may be granted or withheld at his sole discretion. The obligations of this paragraph shall extend to all subsidiaries related and affiliated entities, franchises, partnerships, joint ventures and successors in interest or assigns of the persons, firm or legal entities of any multi-unit retailer of fabrics and/or crafts. Any change in the persons, firms or legal entities of any multi-unit retailer of fabrics and/or crafts resulting from a merger, acquisition, divestiture, change in control, name change or any other reason and shall not affect or extinguish any of the obligations of this paragraph.     (c)   Notwithstanding the foregoing, we agree that you may purchase and hold for investment less than two percent (2%) of the shares of any corporation whose shares are regularly traded on a national securities exchange or in the over-the-counter market.     (d)   You will not recruit or solicit for employment any active Jo-Ann Stores’ employees or seek to induce any employee of Jo-Ann Stores to terminate his or her employment with Jo-Ann Stores.   --------------------------------------------------------------------------------     14.   You agree to release and forever discharge the Company, its parent, and all its affiliated corporations and their directors, officers, agents and associates from any and all actions and causes of actions with respect to any aspect from your employment by, or separation of employment from, the Company, including, but not limited to, any claims under the Age Discrimination in Employment Act, or any other federal, state or local statute dealing with age, race, sex and other types of discrimination in employment. We agree that you have not released the Company with respect to claims necessary to enforce this agreement or claims put forth under the current Directors and Officers Insurance or indemnifications currently found in the Company’s charter or any rights vested under the Jo-Ann Stores Stock Option Plan.     15.   You agree to cease acting as an associate or agent of the Company as of the Separation Date and you further agree to indemnify and hold the Company harmless from any and all claims which arise from any such actions occurring after Separation Date. In addition, the Company holds you harmless from any and all claims of any kind or nature except acts of actual fraud, theft or embezzlement resulting from your employment or in your role as an agent of the Company. The Company agrees to maintain the current coverage of Directors and Officers insurance and indemnification under its charter for any claims which may arise from acts during your tenure.     16.   The Company’s obligation to make the payments and provide the benefits provided for herein shall be absolute and unconditional, and shall not be affected by any circumstances, including, without limitation, any offset, counterclaim, recoupment, defense, or other right which the Company may have against you or anyone else. All amounts payable by the Company hereunder shall be paid without notice or demand. Each and every payment made hereunder by the Company shall be final, and the Company shall not seek to recover all or any part of such payment from you or from whomsoever may be entitled thereto, for any reasons whatsoever, except as provided for in paragraph 20 of this agreement.     17.   The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation, or otherwise) of all or substantially all of the business and/or assets of the Company to expressly assume and agree to perform the Company’s obligations under this Agreement in the same manner and to the same extent that the Company would be required to perform them if no such succession had taken place, Failure of the Company to obtain such assumption and agreement prior to the effective date of any such succession shall be a breach of this Agreement. All payments under this Agreement shall be made solely from the general assets of the Company (or from a grantor trust, if any, established by the Company for purposes of making payment under this Agreement and other similar agreements), and you shall have the rights of an unsecured general creditor of the Company with respect thereto.     18.   You shall not be obligated to seek other employment in mitigation of the amounts payable or benefits to be provided under any provision of this Agreement, and the obtaining of any such other employment shall in no event effect any reduction of the Company’s obligations to make the payments or provide any benefits as required under this Agreement, except to the limited extent provided above in cases where a subsequent employer provides medical insurance and/or group term life insurance coverage or an automobile benefit.   --------------------------------------------------------------------------------     19.   To the extent not preempted by the laws of the United States, the laws of the State of Ohio, applicable to contracts made and to be performed wholly within that state, shall be the controlling law in all matters relating to this Agreement.     20.   It is further agreed that if either party breaks any of the promises made in this Agreement, it will be considered a breach that could result in the offending party being responsible for all damages that arise from any such breach. In addition, these damages could include the return or forfeiture of all Company funds and benefits provided under this Agreement. Damages could also include all attorneys’ fees and costs incurred by the non-breaking party because of the breach. In the event either party believes the other has breached any of the promises in this Agreement, each agrees to provide detailed written notice of that breach. Once notices are received the breaking party has 30 days to attempt to cure the breach and/or to respond to comments. We further agree that this Agreement will not be considered breached until the 30 day time period has passed to respond to written comments and take my corrective action which the breaking party deems could solve the alleged breach, if any. Notice(s) under this section should be sent by hand delivery or certified mail, return receipt requested to the following:           i. If to the Employee:   Mr. David Bolen       (Address on file)           ii. If to the Company:   EVP, Human Resources       Jo-Ann Stores, Inc.       5555 Darrow Road       Hudson, Ohio 44236   21.   Unless prohibited by law, the Company shall pay all legal fees, costs of arbitration and/or litigation, prejudgment interest, and other expenses incurred by you in good faith as a result of the Company’s refusal to provide the benefits to which you deem yourself to be entitled under this Agreement, as a result of the Company’s contesting the validity, enforceability, or interpretation of this Agreement, or as a result of any conflict between the parties pertaining to this Agreement, provided, however, that the Company shall be reimbursed by you for all such fees and expenses if, but only if, it is ultimately determined by a court of competent jurisdiction or by the arbitrators, as the case may be, that you had no reasonable grounds for the position propounded by you in the arbitration and/or litigation (which determination need not be made simply because you fail to succeed in the arbitration and/or litigation).     22.   Subject to the following, any dispute or controversy arising under or in connection with this Agreement shall be settled by mandatory arbitration (in lieu of litigation), conducted before a panel of thee arbitrators sitting in a location selected by you within 50 miles from Hudson, Ohio, in accordance with the rules of the American Arbitration Association then in effect. Any dispute which arises with respect to your alleged violation of the prohibition on competition or any other restriction contained in Paragraph 13 of this Agreement shall be settled by judicial proceedings (in any court of competent jurisdiction with respect to such dispute or claim). Except as provided above for claims or disputes under Paragraph 13 judgment may be entered on the award of the arbitrator in any court having proper jurisdiction.   --------------------------------------------------------------------------------     23.   Neither party will make any statements, either orally, in writing or otherwise, or in any way disseminate or cause to be disseminated any information, concerning the other party or its affiliated persons or entities, or such other party’s business practices, character or methods of operation, which, in form or substance, harms, disparages, or otherwise casts an unfavorable light upon such other party’s reputation, standing in the business community, or standing in the community as a whole.     24.   You shall refer any prospective employers or others desiring a reference to the CEO or EVP, HR who will provide all prospective employers of, or others requesting a reference regarding, with a positive reference which highlights your progression through the Company and your tangible accomplishments. The Company shall utilize its best efforts to ensure that no employees other than the CEO or EVP HR respond to any reference inquiries and that all such inquiries are directed to the CEO or EVP HR.     25.   This Agreement may not be changed orally and contains the entire agreement of the parties and supersedes all prior understandings oral or written between you and the Company. Dave, to make sure you understand the details and terms of this Agreement and that your decision to enter into this Agreement is voluntary, we advise you to consult with an attorney prior to signing this document and your signature below acknowledges that you have done so or voluntarily waived that right. If the details and terms are acceptable to you, please sign the bottom of this Agreement and return it to me no later than 21 days from the date of receipt of this Agreement. By law, after you sign this Agreement, you have seven days from that date during which you may change you mind and revoke it. To revoke this Agreement, you must clearly communicate your decision to me at our corporate office within the seven-day period. As discussed, the Company is under no duty or obligation to make this special allowance, and is doing so solely as consideration for your entering into this Agreement.               Sincerely,                   JO-ANN STORES, INC.                   By:       /s/ Alan Rosskamm                   Alan Rosskamm         Chairman, President and CEO                   Dated:       November 22, 2005                   AGREED TO:                   By:       /s/ David Bolen                   David Bolen                   Dated:       November 22, 2005      

[trilogylogo.jpg]   Letter of Engagement CKRUSH, INC. April 24, 2006 The following sets forth the agreement for the engagement of Trilogy Capital Partners, Inc. (“Trilogy”) by Ckrush, Inc. (“CKRH” or the “Company”): Term and Termination Twelve months, commencing as of the date set forth above (the “Initial Term”), and terminable thereafter by either party upon 30 days’ prior written notice.     Objective The development and implementation of a proactive marketing program to increase the awareness of CKRH and generate a significant increase in liquidity and market capitalization. In addition, upon request, Trilogy will advise CKRH in business development and strategic advisory services.     The Program Trilogy will structure and implement a marketing program designed to create extensive financial market and investor awareness for CKRH to drive long-term shareholder support. The core drivers of the program will be to inform potential institutional and retail investors of CKRH’s business and stimulate interest in investment in the Company’s stock through a proactive sales and marketing program emphasizing technology-driven communications, and leveraging CKRH’s image to attract additional long term investors and to create additional opportunities in M&A and Business Development. As share price is affected by various factors, Trilogy can give no assurance that the marketing program will result in an increase in CKRH’s stock price.   Trilogy understands that during any period in which the Company is in “registration” for a public offering of securities by the Company under the Securities Act of 1933, and during the distribution of such securities, the Company’s investor relations and marketing efforts will be severely limited. However, it will be the responsibility of the Company (with the advice of its securities counsel) to determine what investor relations and financial marketing efforts are permissible and non-permissible during such periods, and Trilogy will follow the direction of the Company and its securities counsel.         --------------------------------------------------------------------------------     Responsibilities Trilogy will structure and implement the program described above in accordance with a marketing plan provided to CKRH. Trilogy will work in conjunction with the Company’s management, securities counsel, investment bankers, auditors and marketing director, and under supervision of executive management. Trilogy will designate a principal account representative to CKRH responsible for this engagement. The content is as follows:   ·  Campaign Development and Execution ·  Press Announcements: drafting, approval and distribution ·  Database Development and Management ·  Image Analysis: recommendations and implementation ·  Messaging: institutional and retail ·  Online presentations: drafting and production responsibilities ·  Website Overhaul - installation and maintenance of auto IR program ·  Email messaging: targets: Retail and Institutional/Other databases ·  Media, including Interactives and PowerPoints ·  Direct Mail: shareholder, media, CKRH relationship universe ·  Public Relations ·  Capital Conferences   Trilogy will not publish or publicly release any press release or other document (“IR Documents”) regarding the Company that has not been approved in writing by the Company. The Company assumes responsibility for the accuracy and completeness of all IR Documents and the compliance of such Documents with applicable laws, rules and regulations. The Company agrees that Trilogy has no obligation or duty to and does not guaranty the accuracy or completeness of the IR Documents.     Fees $12,500 per month, with first payment due on execution, payable by wire transfer of funds to the account designated by Trilogy.     Equity Compensation CKRH has concurrently herewith issued to Trilogy 5,000,000 Warrants. Each Warrant represents the right to purchase one share of Common Stock for $0.15 per share at any time through the third year following issuance. The Company agrees to file a Registration Statement with the Securities and Exchange Commission registering the resale of the shares underlying the Warrants no later than forty-five (45) days from the date of this Agreement.         2 --------------------------------------------------------------------------------     Marketing Budget To support the financial marketing program, CKRH acknowledges that it will incur certain third party marketing costs. Trilogy will not incur these costs on behalf of the Company except with the approval of the Company or pursuant to a budget approved by the Company (which budget shall not be less than $200,000). The Company shall have no obligation to reimburse Trilogy for any third party marketing cost that exceeds the approved budget or is otherwise not approved by the Company. The Company understands that prompt payment of these costs is vital to the on-going investor relations program, and therefore shall pay these costs promptly upon invoice to Trilogy (to enable Trilogy to promptly reimburse these third parties). The Company shall indemnify and hold Trilogy harmless from any losses, claims, costs, expenses, liabilities and damages which Trilogy becomes subject to arising from the failure to timely pay these third party marketing costs.     Indemnification The Company agrees to provide the indemnification set forth in “Exhibit A” attached hereto.     Corporate Obligations The obligations of Trilogy under this Agreement are solely corporate obligations, and no officer, director, employee, agent, shareholder or controlling person of Trilogy shall be subject to any personal liability whatsoever to any person, nor will any such personal claim be asserted by or on behalf of the Company, with respect to breach of the terms of this Agreement. This provision does not limit or restrict in any way claims with respect to any matters other than breach of the terms of this Agreement.     Additional Services If Trilogy is called upon to render services directly or indirectly relating to the subject matter of this Agreement, beyond the services contemplated above (including, but not limited to, production of documents, answering interrogatories, giving depositions, giving expert or other testimony, whether by agreement, subpoena or otherwise), the Company shall pay to Trilogy a reasonable hourly rate for the persons involved for the time expended in rendering such services, including, but not limited to, time for meetings, conferences, preparation and travel, and all related costs and expenses and the reasonable legal fees and expenses of Trilogy’s counsel.     Survival of Certain Provisions The Sections entitled “Indemnification” (including “Exhibit A”), “Corporate Obligations” and “Additional Services” shall survive any termination of this Agreement and Trilogy’s engagement pursuant to this Agreement. In addition, termination shall not affect any right of Trilogy’s to compensation accrued through the date of termination and for reimbursement of expenses (including third party marketing costs). Any termination of this Agreement by the Company prior to the end of the Initial Term, other than in the event of a material breach of the Agreement by Trilogy which Trilogy has not cured or corrected within 15 days of written notice of the breach, or any termination by Trilogy as a result of non-payment or other material breach by the Company (including the failure to pay third-party marketing costs), shall not terminate Trilogy’s right to the fees through the entire Initial Term (as Trilogy’s time and commitment are expected to be greater in the first part of its engagement).     Services/Costs The compensation paid to Trilogy under this Agreement will cover all costs for Trilogy personnel. Travel costs for Trilogy personnel, in addition to certain third-party costs, will be borne by the Company. Trilogy will provide reasonable documentation to support such reimbursement claims. Trilogy will not incur, individually or in the aggregate, any reimbursable cost of $500 or more without the written approval of the Company. These costs do not included third-party marketing costs under “Marketing Budget.”     Attorneys’ Fees If any action or proceeding is brought to enforce or interpret any provision of this Agreement, the prevailing party shall be entitled to recover as an element of its costs, and not its damages, reasonable attorneys’ fees to be fixed by the court.     Governing Law California, without giving effect to the principles of conflicts of law thereof.   AGREED AND ACCEPTED:    Ckrush, Inc.    Trilogy Capital Partners, Inc.        By -------------------------------------------------------------------------------- Jeremy Dallow    By -------------------------------------------------------------------------------- Paul Karon President   President           3 --------------------------------------------------------------------------------   EXHIBIT A Indemnification Provisions Ckrush, Inc. (the “Company”) unconditionally, absolutely and irrevocably agrees to and shall indemnify and hold harmless Trilogy Capital Partners, Inc. (“Trilogy”) and its past, present and future directors, officers, affiliates, counsel, shareholders, employees, agents, representatives, contractors, successors and assigns (Trilogy and such persons are collectively referred to as the “Indemnified Persons”) from and against any and all losses, claims, costs, expenses, liabilities and damages (or actions in respect thereof) arising out of or related to any action, suit, proceeding or claim asserted by any person other than the Company against an Indemnified Person related to or as a result of this Agreement, and/or any actions taken or omitted to be taken by an Indemnified Party in connection with this Agreement (“Indemnified Claim”). Without limiting the generality of the foregoing, such indemnification shall cover losses, claims, costs, expenses, liabilities and damages imposed on or incurred by the Indemnified Persons, directly or indirectly, relating to, resulting from, or arising out of; (i) any misstatement of fact or omission of fact, or any inaccuracy in any information provided or approved by the Company in connection with the engagement, including information in any SEC filing, press release, website, marketing material or other document, whether or not the Indemnified Persons relied thereon or had knowledge thereof; and (ii) any and claims of third parties providing marketing services to the Company. In addition, the Company agrees to reimburse the Indemnified Persons for legal or other expenses reasonably incurred by them in respect of each Indemnified Claim at the time such expenses are incurred. Notwithstanding the foregoing, the Company shall not be obligated under the foregoing for any loss, claim, liability or damage that is finally determined by a court with proper jurisdiction to have resulted primarily from the willful misconduct or bad faith of the Indemnified Person or the willful breach by Trilogy of this Agreement.     4    

  Exhibit 10.44 RESTRICTED STOCK AWARD AGREEMENT           THIS AGREEMENT (the “Agreement”) is made effective as of [GRANT DATE] (the “Grant Date”), between ITC Holdings Corp., a Michigan corporation (hereinafter called the “Company”), and [NAME], a member of the Board who is not an employee of the Company, hereinafter referred to as the “Grantee”. Capitalized terms not otherwise defined herein shall have the same meanings as in the Plan (as defined below).           WHEREAS, the Company desires to grant the Grantee shares of Common Stock, pursuant to the terms and conditions of this Agreement (the “Restricted Stock Award”) and the Amended and Restated 2003 Stock Purchase and Option Plan for Key Employees of the Company and Its Subsidiaries (the “Plan”) (the terms of which are hereby incorporated by reference and made a part of this Agreement).           WHEREAS, the Board has determined that it would be to the advantage and best interest of the Company and its shareholders to grant the shares of Common Stock provided for herein to the Grantee in connection with the director compensation policy for members of the Board that are not employees of the Company, and has advised the Company thereof and instructed the undersigned officer to grant said Restricted Stock Award;           NOW, THEREFORE, in consideration of the mutual covenants herein contained and other good and valuable consideration, receipt of which is hereby acknowledged, the parties hereto do hereby agree as follows:           1. Grant of the Restricted Stock. Subject to the terms and conditions of the Plan and the additional terms and conditions set forth in this Agreement, the Company hereby grants to the Grantee                     1            shares of Common Stock (hereinafter called the “Restricted Stock”). The Restricted Stock shall vest and become nonforfeitable in accordance with Section 2 hereof.           2. Vesting.           The Restricted Stock shall become 100% vested and nonforfeitable upon the earliest to occur of (i) the three year anniversary of the Grant Date, (ii) the date the Grantee ceases to be a member of the Board other than due to removal from the Board for cause, and (iii) a Change of Ownership.           If, prior to the Restricted Stock becoming 100% vested and nonforfeitable pursuant to Section 2(a) hereof, the Grantee is removed as a member of the Board for cause, the Grantee shall forfeit the Restricted Stock without consideration therefor.           3. Certificates.           (a) Certificates evidencing the Restricted Stock shall be issued by the Company and shall be registered in the Grantee’s name on the stock transfer books of the Company promptly after the date hereof, but shall remain in the physical custody of the Company or its   1   Number of shares to be determined by dividing $45,000 by the closing price per share of Common Stock reported on the New York Stock Exchange for the Grant Date. 1 --------------------------------------------------------------------------------   designee at all times prior to the vesting of such Restricted Stock pursuant to Section 2. The Grantee hereby acknowledges and agrees that the Company shall retain custody of such certificate or certificates until the restrictions imposed by Section 2 on the Common Stock granted hereunder lapse. As a condition to the receipt of this Restricted Stock Award, the Grantee shall deliver to the Company a stock power, duly endorsed in blank, relating to the Restricted Stock. No certificates shall be issued for fractional shares.           (b) As soon as practicable following the vesting of the Restricted Stock pursuant to Section 2, certificates for the Restricted Stock which shall have vested shall be delivered to the Grantee or to the Grantee’s legal guardian or representative along with the stock powers relating thereto.           4. Rights as a Stockholder. The Grantee shall be the record owner of the Restricted Stock unless or until such Restricted Stock is forfeited pursuant to Section 2 hereof or is otherwise sold or disposed of as permitted under Section 6 of this Agreement, and as record owner shall be entitled to all rights of a common stockholder of the Company (including, without limitation, the payment of any dividends on the shares of Restricted Stock).           5. Legend on Certificates. The Restricted Shares shall contain a legend stating that they are subject to transfer restrictions and shall be subject to such stop transfer orders and other restrictions as the Board may deem reasonably advisable under the Plan or the rules, regulations, and other requirements of the Securities and Exchange Commission, any stock exchange upon which such Restricted Shares are listed, any applicable federal or state laws and the Company’s Articles of Incorporation and Bylaws, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions.           6. Transferability. The Restricted Stock may not, at any time prior to becoming vested pursuant to Section 2 or thereafter, be transferred, sold, assigned, pledged, hypothecated or otherwise disposed of unless such transfer, sale, assignment, pledge, hypothecation or other disposition complies with the provisions of this Agreement.           7. Securities Laws. The Company may require the Grantee to make or enter into such written representations, warranties and agreements as the Committee may reasonably request in order to comply with applicable securities laws or with this Agreement. The granting of the Restricted Stock hereunder shall be subject to all applicable laws, rules and regulations and to such approvals of any governmental agencies as may be required.           8. Grantee’s Continued Service on the Board. Nothing contained in this Agreement or in any other agreement entered into by the Company and the Grantee guarantees that the Grantee will continue to serve as a member of the Board for any specified period of time.           9. Change in Capitalization. If, prior to the time the restrictions imposed by Section 2 on the Restricted Stock granted hereunder lapse, the Company shall be reorganized, recapitalized or restructured, consolidated or merged with another corporation, or otherwise undergo a significant corporate event, (a) the Restricted Stock may be adjusted or cancelled and (b) any stock, securities or other property exchangeable for Common Stock pursuant to such reorganization, recapitalization, restructuring, consolidation, merger or other corporate event, shall be deposited with the Company and shall become subject to the restrictions and conditions of this Agreement to the same extent as if it had been the original property granted hereby, all pursuant to Sections 8 and 9 of the Plan. 2 --------------------------------------------------------------------------------             10. Payment of Taxes. The Grantee shall have full responsibility, and the Company shall have no responsibility, for satisfying any liability for any federal, state or local income or other taxes required by law to be paid with respect to such Restricted Stock, including upon the vesting of the Restricted Stock. In connection with the foregoing, the Grantee may, at his or her option, elect to recognize the fair value of the Restricted Stock upon the Grant Date pursuant to Section 83 of the Internal Revenue Code of 1986, as amended. The Grantee is hereby advised to seek his own tax counsel regarding the taxation of the grant of Restricted Stock made hereunder.           11. Limitation on Obligations. The Company’s obligation with respect to the Restricted Stock granted hereunder is limited solely to the delivery to the Grantee of shares of Common Stock on the date when such shares are due to be delivered hereunder, and in no way shall the Company become obligated to pay cash in respect of such obligation. This Restricted Stock Award shall not be secured by any specific assets of the Company or any of its Subsidiaries, nor shall any assets of the Company or any of its subsidiaries be designated as attributable or allocated to the satisfaction of the Company’s obligations under this Agreement. In addition, the Company shall not be liable to the Grantee for damages relating to any delays in issuing the share certificates to him (or his designated entities), any loss of the certificates, or any mistakes or errors in the issuance of the certificates or in the certificates themselves.           12. Notices. Any notice to be given under the terms of this Agreement to the Company shall be addressed to the Company in care of its Secretary, and any notice to be given to the Grantee shall be addressed to him at the address given beneath his signature hereto. By a notice given pursuant to this Section 12, either party may hereafter designate a different address for notices to be given to him. Any notice that is required to be given to the Grantee shall, if the Grantee is then deceased, be given to the Grantee’s personal representative if such representative has previously informed the Company of his status and address by written notice under this Section 12. Any notice shall have been deemed duly given when enclosed in a properly sealed envelope or wrapper addressed as aforesaid, deposited (with postage prepaid) in a post office or branch post office regularly maintained by the United States Postal Service           13. Governing Law. The laws of the State of Michigan shall govern the interpretation, validity and performance of the terms of this Agreement regardless of the law that might be applied under principles of conflicts of laws.           14. Restricted Stock Award Subject to Plan. The Restricted Stock Award shall be subject to all terms and provisions of the Plan, to the extent applicable to the Restricted Stock. In the event of any conflict between this Agreement and the Plan, the terms of the Plan shall control.           15. Signature in Counterparts. This Agreement may be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. [Continued on next page.] 3 --------------------------------------------------------------------------------        IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the Grant Date.                   ITC HOLDINGS CORP.                       By:                                         Name:                           Title:                                         GRANTEE                                 [NAME]         4

AMENDMENT TO EMPLOYMENT AGREEMENT THIS AMENDMENT TO EMPLOYMENT AGREEMENT is executed as of March 19, 2006 by and between SBS Technologies, Inc. ("Company") and David H. Greig ("Employee"). WHEREAS, Company and Employee entered into a certain Employment Agreement dated July 29, 2003 (the "Employment Agreement"); and WHEREAS, Company and Employee wish to amend the terms of the Employment Agreement; FOR GOOD AND VALUABLE CONSIDERATION, the receipt and sufficiency of which is hereby acknowledged, Company and Employee agree as follows: Amendment of Employment Agreement . The first sentence of Section 1 of the Employment Agreement is hereby deleted and the following sentence is hereby substituted in its place: "Company employs Employee for the period beginning on the date of this Employment Agreement as set forth below, and ending June 30, 2007, or upon discharge or resignation of Employee in accordance with the terms of this Agreement (the "Employment Period")." Miscellaneous . Except as expressly modified by this Amendment, the terms and conditions of the Employment Agreement shall remain in full force and effect. EXECUTED as of the date set forth above. COMPANY: SBS Technologies, Inc. By: /s/ Clarence W. Peckham Clarence W. Peckham, CEO EMPLOYEE: /s/ David H. Greig David H. Greig

Exhibit 10.2 CITADEL BROADCASTING CORPORATION AMENDED AND RESTATED 2002 LONG-TERM INCENTIVE PLAN STOCK OPTION AGREEMENT REFERENCE NUMBER: 002 1. GRANT OF OPTION. 1.1 Option. On the terms and conditions set forth in this Stock Option Agreement and each Notice of Stock Option Grant (the “Notice”) referencing this Agreement, Citadel Broadcasting Corporation (“Company”) grants to [FULL NAME] (the “Optionee”) on the Date of Grant an option to purchase at the Option Price a number of Shares, all as set forth in the Notice. Each such Notice, together with this referenced Agreement, shall be a separate option governed by the terms of this Agreement and the Plan. This option is intended to be an ISO or a Nonstatutory Option, as provided in the Notice. 1.2 Plan. This option is granted under and subject to the terms of the Citadel Broadcasting Corporation Amended and Restated 2002 Long Term Incentive Plan (“Plan”), which is incorporated herein by this reference. Capitalized terms not otherwise defined herein shall have the meaning ascribed to such term in the Plan. 2. NO TRANSFER OR ASSIGNMENT OF OPTION. Except as otherwise provided in this Agreement or permitted by the Committee, this option and the rights and privileges conferred hereby shall not be sold, pledged or otherwise transferred (whether by operation of law or otherwise) and shall not be subject to sale under execution, attachment, levy or similar process. 3. DEFINITIONS. 3.1 “Affiliate” shall mean, with respect to any Person, any other Person which, directly or indirectly, is in control of, or is controlled by, or is under common control with, such Person. 3.2 “Board of Directors” shall mean the Board of Directors of the Company, as constituted from time to time or, if a Committee has been appointed, such Committee. 3.3 “Cause” shall mean (i) the occurrence of any of the events set forth in Section 9.1 or 9.2, or (ii) the Optionee’s having (A) grossly neglected his or her assigned duties or (B) engaged in willful misconduct resulting in, or reasonably likely to result in, material and demonstrable damage to the Company, unless the Optionee is subject to the terms of an employment agreement which includes a definition of “cause”, in which case such definition shall apply for purposes of the Plan. 3.4 “Code” shall mean the Internal Revenue Code of 1986, as amended from time to time. -------------------------------------------------------------------------------- 3.5 “Committee” shall mean a committee of the Board of Directors, as described in Section 1.2 of the Plan. 3.6 “Company” shall mean Citadel Broadcasting Corporation, a Delaware corporation, and its subsidiaries, including any successor thereto by merger, consolidation, acquisition of substantially all the assets thereof, or otherwise. 3.7 “Consultant” shall mean a person who performs bona fide services for the Company, a Parent or a Subsidiary as a consultant or advisor, excluding Employees and Directors. 3.8 “Date of Grant” shall mean the date specified in the Notice. 3.9 “Director” shall mean a member of the Board of Directors who is not an Employee. 3.10 “Disability” shall mean that the Optionee is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment as determined by the Board of Directors in its sole discretion. 3.11 “Employee” shall mean any individual who is a common-law employee of the Company, a Parent or a Subsidiary. 3.12 “Fair Market Value” shall mean on any date means (a) the closing price in the primary trading session for a Share on such date on the stock exchange, if any, on which Shares are primarily traded (or if no shares were traded on such date, then on the most recent previous date on which any shares were so traded), (b) if clause (a) is not applicable, the closing price of the Shares on such date on The Nasdaq Stock Market at the close of the primary trading session (or if no shares were traded on such date, then on the most recent previous date on which any shares were so traded) or (c) if neither clause (a) nor clause (b) is applicable, the value of a Share for such date as established by the Committee, using any reasonable method of valuation. 3.13 “ISO” shall mean an incentive stock option described in Section 422(b) of the Code. 3.14 “Legal Representative” shall mean the guardian, executor, administrator or other legal representative of the Optionee. All references herein to the Optionee shall be deemed to include references to the Optionee’s Legal Representative, if any, unless the context otherwise requires. 3.15 “Nonstatutory Option” shall mean a stock option not described in Sections 422(b) or 423(b) of the Code. 3.16 “Optionee” shall mean the person named in the Notice. 3.17 “Option Price” shall mean the amount for which one Share may be purchased upon exercise of this option, as specified in the Notice.   2 -------------------------------------------------------------------------------- 3.18 “Parent” shall mean any company (other than the Company) in an unbroken chain of companies ending with the Company, if each of the companies other than the Company owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other companies in such chain. A company that attains the status of a Parent on a date after the execution of this Agreement shall be considered a Parent commencing as of such date. 3.19 “Person” shall mean means an individual, a company, a partnership, an association, a trust or any other entity or organization, including a government or political subdivision or an agency or instrumentality thereof. 3.20 “Plan” shall mean the Citadel Broadcasting Corporation Amended and Restated 2002 Long-Term Incentive Plan, as it may be amended or restated from time to time. 3.21 “Purchase Price” shall mean the Option Price multiplied by the number of Shares with respect to which this option is being exercised. 3.22 “Restricted Share” shall mean a Share that is subject to a Right of Repurchase. 3.23 “Right of Repurchase” shall mean the Company’s right of repurchase described in Section 7. 3.24 “Securities Act” shall mean the Securities Act of 1933, as amended. 3.25 “Service” shall mean service as an Employee, Director or Consultant. 3.26 “Share” shall mean one share of common stock, par value $0.01 per share, of the Company. There shall be included within the term Share any common stock now or hereafter authorized to be issued, and any and all securities of any kind whatsoever of the Company which may be issued after the date hereof in respect of, or in exchange for, shares of common stock. 3.27 “Subsidiary” shall mean any company (other than the Company) in an unbroken chain of companies beginning with the Company, if each of the companies other than the last company in the unbroken chain owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other companies in such chain. A company that attains the status of a Subsidiary on a date after the execution of this Agreement shall be considered a Subsidiary commencing as of such date. 3.28 “Transferee” shall mean any person to whom the Optionee has directly or indirectly transferred any Share acquired under this Agreement. 4. RIGHT TO EXERCISE. 4.1 Exercisability. Subject to the conditions set forth in this Agreement, all or part of this option may be exercised prior to its expiration at the time or times set forth in the Notice or this Agreement. To the extent the Notice permits, the Optionee may exercise this option to purchase Shares for which the Optionee is not yet vested. If exercised for Shares that have not yet vested, such Shares shall be subject to the Right of Repurchase as described in Section 7.   3 -------------------------------------------------------------------------------- 4.2 Exercise Period. The option may be exercised (to the extent the option is exercisable pursuant to the Notice at such time) at any time. 4.3 Accelerated Vesting; Forfeiture. The Committee may, in its discretion, provide in the Notice for accelerated vesting or forfeiture of the Shares subject to this option. 4.4 $100,000 Limitation. If this option is designated as an ISO in the Notice, then the Optionee’s right to exercise this option shall be deferred to the extent (and only to the extent) that this option would not be treated as an ISO solely by reason of the $100,000 annual limitation under Section 422(d) of the Code, except that the Optionee’s right to exercise this option shall no longer be deferred if (i) the Company is subject to a Change in Control before the Optionee’s Service terminates, (ii) the Company, or any surviving company, or its parent does not continue this option, and (iii) any surviving company or its parent does not assume this option or does not substitute an option with substantially the same terms for this option. 5. EXERCISE PROCEDURE. 5.1 Notice of Exercise. The Optionee or the Optionee’s Legal Representative may exercise this option by giving written notice to the Company specifying the election to exercise this option, the number of Shares for which it is being exercised and the form of payment. Exhibit A is an example of a “Notice of Exercise”. The Notice of Exercise shall be signed by the person exercising this option. In the event that this option is being exercised by the Optionee’s Legal Representative, the notice shall be accompanied by proof (satisfactory to the Company) of the Legal Representative’s right to exercise this option. The Optionee or the Optionee’s Legal Representative shall deliver to the Company, at the time of giving the notice, payment in a form permissible under Section 5.5 for the full amount of the Purchase Price. 5.2 Issuance of Shares. (a) After receiving a proper notice of exercise and an undated stock power with respect to any Shares subject to this option that have not yet vested, the Company shall cause to be issued a certificate or certificates for the Shares as to which this option has been exercised, registered in the name of the person exercising this option (or in the names of such person and his or her spouse as community property or as joint tenants with right of survivorship). Not less than one hundred Shares may be purchased at any one time upon any exercise of this option, unless the number of Shares so purchased constitutes the total number of Shares then purchasable under this option. (b) All certificates representing any Shares subject to this option that have not yet vested shall have endorsed thereon (i) any appropriate legends that may be, in the judgment of the Company, necessary or desirable in order to achieve compliance with the United States Securities Act of 1933, as amended, or the securities laws of any state or any other law and (ii) the following legend: “The shares represented by this certificate are subject to certain restrictions pursuant to an agreement between Citadel Broadcasting Corporation and the registered holder, a copy of which is on file at the principal office of Citadel Broadcasting Corporation.”   4 -------------------------------------------------------------------------------- 5.3 Section 83(b) Election. To the extent the Optionee is permitted by the terms of the Notice to exercise a Nonstatutory Option for Shares that are not vested, Section 83 of the Code provides that the Optionee is not subject to federal income tax upon such exercise until the Right of Repurchase with respect to the Shares purchased lapses. If the Optionee chooses, the Optionee may make an election under Section 83(b) of the Code, which would cause the Optionee to recognize income in the amount of the excess (if any) of the Fair Market Value of the Shares acquired (determined as of the date the Option is exercised) over the Purchase Price. A Section 83(b) election must be filed with the Internal Revenue Service within thirty (30) days after the date of exercise — even if no tax is payable because the Fair Market Value of the Restricted Shares on the date the Option is exercised equals the Purchase Price paid. The form for making a Section 83(b) election is attached as Exhibit C. The Optionee acknowledges that it is the Optionee’s sole responsibility to timely file the Section 83(b) election and that failure to file a Section 83(b) election within the applicable thirty (30) day period may result in the recognition of ordinary income when the Right of Repurchase lapses. 5.4 Withholding Requirements. The Company may withhold any tax (or other governmental obligation) as a result of the exercise of this option and/or the filing of a Section 83(b) election, as a condition to the exercise of this option, and the Optionee shall make arrangements satisfactory to the Company to enable it to satisfy all such withholding requirements. The Optionee shall also make arrangements satisfactory to the Company to enable it to satisfy any withholding requirements that may arise in connection with the vesting or disposition of Shares purchased by exercising this option. 5.5 Payment for Shares. Payment of the Purchase Price shall be made by delivery to the Company of a certified or bank check payable to the order of the Company or cash by wire transfer or other immediately available funds to an account designated by the Company. 6. TERM AND EXPIRATION. 6.1 Basic Term. Subject to earlier termination in accordance with this Agreement, this option shall expire on the expiration date set forth in the Notice. 6.2 Termination of Service. Except as may be agreed between the Committee and the Optionee, if the Optionee’s employment by the Company shall have ceased for any reason whatsoever (including by reason of death, permanent disability or adjudicated incompetency) (“Terminated” or a “Termination”), irrespective of whether the Optionee receives, in connection with the Termination, any severance or other payment from the Company under any employment agreement or otherwise (such Optionee being referred to herein as a “Terminated Optionee”), then (i) to the extent that the Option is not exercisable pursuant to the Notice at the date of such Termination, this option shall terminate on and shall be of no further force and effect from and after the date of such Termination, and (ii) to the extent that the option is exercisable pursuant to the Notice at the date of such Termination (the “Exercisable Portion of the Option”), the Optionee shall have the right, at his or her option, to exercise the Exercisable Portion of the Option in whole or in part one time at any time within 60 days after the date of such Termination, but in no event after the expiration of the term of the option, and, until exercised, the Exercisable Portion of the Option shall continue to be subject to the terms of this Agreement. To the extent that the Terminated Optionee does not exercise the Exercisable Portion of the option within the 60-day exercise period provided for in this Section 6.2, the unexercised portion   5 -------------------------------------------------------------------------------- of the Exercisable Portion of the option shall terminate and shall be of no further force and effect from and after the final date on which the Terminated Optionee could have so exercised the Exercisable Portion of the option. 6.3 Leaves of Absence. For any purpose under this Agreement, Service shall be deemed to continue while the Optionee is on a bona fide leave of absence, if such leave was approved by the Company in writing or if continued crediting of Service for such purpose is expressly required by the terms of such leave or by applicable law (as determined by the Company). 6.4 Notice Concerning ISO Treatment. If this option is designated as an ISO in the Notice, it ceases to qualify for favorable tax treatment as an ISO to the extent it is exercised (i) more than three (3) months after the date the Optionee ceases to be an Employee for any reason other than death or permanent and total disability (as defined in Section 22(e)(3) of the Code), (ii) more than twelve (12) months after the date the Optionee ceases to be an Employee by reason of such permanent and total disability or (iii) after the Optionee has been on a leave of absence for more than ninety (90) days, unless the Optionee’s reemployment rights are guaranteed by statute or by contract. 7. RIGHT OF REPURCHASE. 7.1 Right of Repurchase. To the extent this option is exercised for Shares that are not vested, the Shares so acquired initially shall be Restricted Shares and shall be subject to a right (but not an obligation) of repurchase by the Company. The Optionee shall not transfer, assign, encumber or otherwise dispose of any Restricted Shares. If the Optionee transfers any Restricted Shares, then this Section 7 shall apply to the Transferee to the same extent as to the Optionee. 7.2 Exercise Notice. In the event the Company wishes to exercise its Right of Repurchase, the Company shall provide the Optionee with sixty (60) days prior written notice of its intent to exercise its right. A sample Right of Repurchase Exercise Notice is attached hereto as Exhibit D. Such notice shall contain the price per Share which shall be the repurchase price, described in subsection 7.4 below, and all other terms and conditions of the offer (including, without limitation, the proposed consummation date of the repurchase). The repurchase price shall be paid in cash or by canceling of indebtedness as the Company, in its sole discretion, shall determine. 7.3 Lapse of Repurchase Right. The Right of Repurchase shall lapse with respect to the Shares subject to this option in accordance with the vesting schedule described in the Notice. In addition, the Right of Repurchase shall lapse and all remaining Restricted Shares shall become vested if (i) the Company is subject to a Change in Control before the Optionee’s Service terminates and (ii) the Right of Repurchase is not assigned to the successor entity that retains the Optionee’s Service immediately after the Change in Control or to such entity’s parent or subsidiary. 7.4 Repurchase Price. If the Company exercises the Right of Repurchase, it shall pay the Optionee an amount for each of the Restricted Shares being repurchased equal to the lower of (i) the Fair Market Value for each Share or (ii) the Purchase Price.   6 -------------------------------------------------------------------------------- 7.5 Additional Shares or Substituted Securities. In the event of the declaration of a stock dividend, the declaration of an extraordinary dividend payable in a form other than stock, a spin-off, a stock split, an adjustment in conversion ratio, a recapitalization or a similar transaction affecting the Company’s outstanding securities without receipt of consideration, any new, substituted or additional securities or other property (including money paid other than as an ordinary cash dividend) which are by reason of such transaction distributed with respect to any Shares subject to this Section 7 into which such Shares thereby become convertible shall immediately be subject to this Section 7. 7.6 Termination of Rights as Shareholder. If the Company makes available, at the time and place and in the amount and form provided in this Agreement, the consideration for the Shares to be purchased in accordance with this Section 7, then after such time the person from whom such Shares are to be purchased shall no longer have any rights as a holder of such Shares (other than the right to receive payment of such consideration in accordance with this Agreement). Such Shares shall be deemed to have been purchased in accordance with the applicable provisions hereof, whether or not the certificate(s) therefor have been delivered as required by this Agreement. 8. LEGALITY OF INITIAL ISSUANCE. No Shares shall be issued upon the exercise of this option unless and until the Company has determined that: (i) The Company and the Optionee have taken any actions required to register the Shares under the Securities Act or to perfect an exemption from the registration requirements thereof; (ii) Any applicable listing requirement of any stock exchange or other securities market on which Stock is listed has been satisfied; and (iii) Any other applicable provision of state or federal law has been satisfied. 9. PROHIBITED ACTIVITIES. 9.1 Prohibition. The Optionee agrees that (i) the Optionee will not at any time during the Optionee’s employment (other than in the course of such employment) with the Company or any Affiliate thereof, or after a Termination, disclose or furnish to any other Person or use for the Optionee’s own or any other Person’s account any Confidential or Proprietary Information, (ii) if the Optionee is Terminated, the Optionee will not for three years following such Termination directly or indirectly solicit for employment, including without limitation recommending to any subsequent employer the solicitation for employment of, any employee of the Company or any Affiliate thereof, (iii) the Optionee will not at any time during the Optionee’s employment with the Company or any Affiliate thereof or after a Termination publish or make any disparaging statements about the Company, any Affiliate or any of their directors, officers or employees, under circumstances where it is reasonably foreseeable that the statements will be made public (a disparaging statement is a communication which, if made public, would tend to malign the business or reputation of the Person about whom such statement   7 -------------------------------------------------------------------------------- is made), and (iv) the Optionee will not breach the provisions of Section 2 hereof (any activity prohibited by clause (i), (ii), (iii) or (iv) of this Section 9.1 being referred to as a “Prohibited Activity”). “Confidential or Proprietary Information” shall mean any non-public information about the Company or any Affiliate thereof which was acquired during the Optionee’s employment with the Company or any Affiliate thereof and which has or is reasonably likely to have competitive value to the Company or any Affiliate thereof. 9.2 Right to Terminate Option. The Optionee understands and agrees that the Company is granting to the Optionee an option to purchase Shares hereunder to reward the Optionee for the Optionee’s future efforts and loyalty to the Company and its Affiliates by giving the Optionee the opportunity to participate in the potential future appreciation of the Company. Accordingly, if, at any time during which any portion of the Option (including the Exercisable Portion of the Option) is outstanding, (i) the Optionee engages in any Prohibited Activity or any act otherwise constituting Cause, or (ii) the Optionee engages in any Competitive Activity (as hereinafter defined), or (iii) the Optionee is convicted of a crime against the Company or any of its Affiliates, then, in addition to any other rights and remedies available to the Company, the Company shall be entitled, at its option, to terminate the option (including the Exercisable Portion of the option), or any unexercised portion thereof, which shall then be of no further force and effect. “Competitor” shall mean any Person that is engaged in owning, operating or acquiring directly or indirectly (through a company, trust, partnership or other Person) a Radio Broadcasting Business that operates in the same market as and competes directly or indirectly with a Radio Broadcasting Business which, at the time the Optionee is Terminated, is owned or operated by the Company or any of its Subsidiaries or which the Company or any of its Subsidiaries intends to own, operate or acquire (which intention was disclosed to the Optionee prior to or in connection with his or her Termination). The determination as to whether or not any Radio Broadcasting Business competes directly or indirectly with the Company or any of its Subsidiaries shall be made by the Company in its reasonable discretion. “Competitive Activity” shall mean engaging in any of the following activities: (i) serving as a director of any Competitor; (ii) directly or indirectly (A) controlling any Competitor or (B) owning any equity or debt interests in any Competitor (other than equity or debt interests which are publicly traded and do not exceed 2% of the particular class of interests then outstanding) (it being understood that, if any such interests in any Competitor are owned by an investment vehicle or other entity in which the Optionee owns an equity interest, a portion of the interests in such Competitor owned by such entity shall be attributed to the Optionee, such portion determined by applying the percentage of the equity interest in such entity owned by the Optionee to the interests in such Competitor owned by such entity); (iii) directly or indirectly soliciting, diverting, taking away, appropriating or otherwise interfering with any of the customers or suppliers of the Company or any Affiliate of the Company; or (iv) employment by (including serving as an officer or director of), or providing consulting services to, any Competitor; provided, however, that if the Competitor has more than one discrete and readily distinguishable part of its business, employment by or providing consulting services to any Competitor shall be Competitive Activity only if (X) his or her employment duties are at or involving the part of the Competitor’s business that competes with any of the businesses   8 -------------------------------------------------------------------------------- conducted by the Company or any of its Subsidiaries (the “Competing Operations”), including serving in a capacity where any Person at the Competing Operations reports to the Optionee, or (Y) the consulting services are provided to or involve the Competing Operations. For purposes of this definition, the term “Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of any Competitor, whether through the ownership of equity or debt interests, by contract or otherwise. “Radio Broadcasting Business” shall mean any business which (i) owns or operates one or more radio stations or (ii) owns or operates any internet or digital audio broadcasting business if such business also owns or operates, or is Affiliated with an owner or operator of, one or more radio stations. 10. OTHER RESTRICTIONS ON TRANSFER. 10.1 Securities Law Restrictions. Regardless of whether the offering and sale of Shares under the Plan have been registered under the Securities Act or have been registered or qualified under the securities laws of any state, the Company at its discretion may impose restrictions upon the sale, pledge or other transfer of such Shares (including the placement of appropriate legends on stock certificates or the imposition of stop-transfer instructions) if, in the judgment of the Company, such restrictions are necessary or desirable in order to achieve compliance with the Securities Act or the securities laws of any state or any other law. 10.2 Optionee Undertaking. The Optionee agrees to take whatever additional action and execute whatever additional documents the Company may deem necessary or advisable to carry out or effect one or more of the obligations or restrictions imposed on either the Optionee or upon the Restricted Shares pursuant to the provisions of this Agreement. 10.3 Investment Intent. The Optionee represents and agrees that as of the Date of Grant, the Shares to be acquired upon exercising this option will be acquired for investment, and not with a view to the sale or distribution thereof. If the sale of Shares under the Plan is not registered under the Securities Act but an exemption is available which requires an investment representation or other representation, the Optionee shall represent and agree at the time of exercise that the Shares being acquired upon exercising this option are being acquired for investment, and not with a view to the sale or distribution thereof, and shall make such other representations as are deemed necessary or appropriate by the Company and its counsel. 11. ADJUSTMENT OF SHARES. Unless otherwise set forth in the Notice, if there is any change in the stock subject to this option or in the corporate structure of the Company, through merger, consolidation, division, share exchange, combination, reorganization, recapitalization, stock dividend, stock split, spinoff, split up, extraordinary dividend, dividend in kind or other similar change in the corporate structure or distribution to shareholders, a reclassification, or any similar occurrence, the terms of this option (including, without limitation, the number and kind of Shares subject to this option and the Option Price) may be adjusted by the Committee in its sole discretion pursuant to the terms of the Plan. The Committee’s adjustment shall be final and binding for all purposes of the Plan and this Agreement.   9 -------------------------------------------------------------------------------- 12. MISCELLANEOUS PROVISIONS. 12.1 Rights as a Shareholder. Neither the Optionee nor the Optionee’s Legal Representative shall be deemed to be the holder of, or to have any of the rights of a holder with respect to, any Shares subject to this option until: (i) the option shall have been exercised in accordance with the terms of this Agreement and the Optionee shall have paid the full purchase price for the number of shares in respect of which the option was exercised and any withholding taxes due, (ii) the Optionee shall have delivered to the Company a fully executed and undated stock power with respect to any Shares that have not yet vested, (iii) the Company shall have issued the Shares to the Optionee, and (iv) the Optionee’s name shall have been entered as a stockholder of record on the books of the Company. Upon the occurrence of all of the foregoing events, the Optionee shall have full ownership rights with respect to such shares, subject to the provisions of Section 7 hereof. 12.2 No Retention Rights. Nothing in this option or in the Plan shall confer upon the Optionee any right to continue in Service for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Company (or any Parent or Subsidiary employing or retaining the Optionee) or of the Optionee, which rights are hereby expressly reserved by each, to terminate his or her Service at any time and for any reason, with or without Cause. 12.3 Notification. All notices and other communications hereunder shall be in writing and unless otherwise provided herein, shall be deemed to have been given when received by the party to whom such notice is to be given at its address set forth below, or such other address for the party as shall be specified by notice given pursuant hereto: If to the Company, to: Citadel Broadcasting Corporation City Center West, Suite 400 7401 West Lake Mead Boulevard Las Vegas, Nevada 89128 Attention: Secretary If to the Optionee or the Optionee’s Legal Representative, to such Person at the address as reflected in the records of the Company. 12.4 Entire Agreement. This Agreement, the Notice of Grant and the Plan constitute the entire agreement, and supersede all prior agreements and understandings, oral and written, between the parties hereto with respect to the option granted hereby. 12.5 Modification of Agreement. This Agreement may be modified, amended or supplemented by written agreement of the parties hereto; provided, that the Company may modify, amend or supplement this Agreement in a writing signed by the Company without any further action by the Optionee if such modification, amendment or supplement does not adversely affect the Optionee’s rights hereunder. 12.6 Severability. The invalidity or unenforceability of any provision of this Agreement in any jurisdiction shall not affect the validity or enforceability of the remainder of this Agreement in that jurisdiction or the validity or enforceability of this Agreement, including that provision, in any other jurisdiction. If any provision of this Agreement is held unlawful or unenforceable in any respect, such provision shall be revised or applied in a manner that renders it lawful and enforceable to the fullest extent possible.   10 -------------------------------------------------------------------------------- 12.7 Waiver. The failure of the Company in any instance to exercise the Right of Repurchase shall not constitute a waiver of any other repurchase rights that may subsequently arise under the provisions of this Agreement or any other agreement between the Company and the Optionee. No waiver of any breach or condition of this Agreement shall be deemed to be a waiver of any other or subsequent breach or condition whether of like or different nature. 12.8 Assignment. The Company may assign the Right of Repurchase to any person or entity selected by the Board of Directors, including, without limitation, one or more shareholders of the Company. 12.9 Successors and Assigns. The provisions of this Agreement shall inure to the benefit of, and be binding upon, the Company and its successors and assigns and upon the Optionee, the Optionee’s assigns and the Legal Representatives, heirs and legatees of the Optionee’s estate, whether or not any such person shall have become a party to this Agreement and have agreed in writing to be join herein and be bound by the terms hereof. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by the Optionee without the prior written consent of the Company. 12.10 Headings. The headings and captions contained herein are for convenience only and shall not control or affect the meaning or construction of any provision hereof. 12.11 Resolution of Disputes. Any dispute or disagreement which may arise under, or as a result of, or which may in any way relate to, the interpretation, construction or application of this Agreement shall be determined by the Committee, in good faith, whose determination shall be final, binding and conclusive for all purposes. 12.12 Specific Performance. The parties hereto acknowledge that there will be no adequate remedy at law for a violation of any of the provisions of this Agreement and that, in addition to any other remedies which may be available, all of the provisions of this Agreement shall be specifically enforceable in accordance with their respective terms. 12.13 Consent to Jurisdiction. Each party hereby irrevocably and unconditionally consents to submit to the exclusive jurisdiction of the courts of the State of New York and of the United States of America, in each case located in the County of New York, for any actions, suits or proceedings arising out of or relating to this Agreement, the Option or the Plan and the transactions contemplated hereby and thereby (“Litigation”) (and agrees not to commence any Litigation except in any such court), and further agrees that service of process, summons, notice or document by U.S. registered mail to such party’s respective address set forth in Section 12.3 hereof shall be effective service of process for any Litigation brought against such party in any such court. Each party hereby irrevocably and unconditionally waives any objection to the laying of venue of any Litigation in the courts of the State of New York or of the United States of America, in each case located in the County of New York, and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any Litigation brought in any such court has been brought in an inconvenient forum.   11 -------------------------------------------------------------------------------- EXHIBIT A SAMPLE NOTICE OF EXERCISE Citadel Broadcasting Corporation 7201 W. Lake Mead Blvd. Suite 400 Las Vegas, Nevada 89128 Attn: Corporate Secretary To the Corporate Secretary: I hereby exercise my stock option granted under the Citadel Broadcasting Corporation Amended and Restated 2002 Long-Term Incentive Plan (the “Plan”) and notify you of my desire to purchase the shares that have been offered pursuant to the Plan and related Option Agreement as described below. I shall pay for the shares by delivery of a check payable to Citadel Broadcasting Corporation (the “Company”) in the amount described below in full payment for such shares plus all amounts required to be withheld by the Company under state federal or local law as a result of such exercise or shall provide such documentation as is satisfactory to the Company demonstrating that I am exempt from any withholding requirement. This notice of exercise is delivered this      day of              (month)          (year).   No. Shares to be Acquired   Type of Option   Option Price   Total   Nonstatutory       Incentive     Estimated Withholding   Nonstatutory only         Amount Paid     Very truly yours,   Signature of Optionee Optionee’s Name and Mailing Address       Optionee’s Social Security Number     1 -------------------------------------------------------------------------------- EXHIBIT B STOCK POWER FOR VALUE RECEIVED the undersigned hereby sell(s), assign(s) and transfer(s) unto Citadel Broadcasting Corporation (the “Company”),                      (            ) shares of the common stock, par value $0.01 per share, of the Company standing in his/her/their/its name on the books of the Company represented by Certificate No.                      herewith and do(es) hereby irrevocably constitute and appoint                                  his/her/their/its attorney-in-fact, with full power of substitution, to transfer such shares on the books of the Company.   Dated:                                Signature:                                    Print Name and Mailing Address               Instructions: Please do not fill in any blanks other than the signature line and printed name and mailing address. Please print your name exactly as you would like your name to appear on the issued stock certificate. The purpose of this assignment is to enable the Company to exercise the Repurchase Right without requiring additional signatures on your part.   1 -------------------------------------------------------------------------------- EXHIBIT C SECTION 83(b) ELECTION This statement is being made under Section 83(b) of the Internal Revenue Code, pursuant to Treas. Reg. Section 1.83-2.   (1) The taxpayer who performed the services is:   Name:       Address:             Social Security Number:         (2) The property with respect to which the election is being made is                      shares of the common stock, par value $0.01 per share, of Citadel Broadcasting Corporation.   (3) The property was issued on                     .   (4) The taxable year in which the election is being made is the calendar year         .   (5) The property is subject to a right of repurchase pursuant to which the issuer has the right to acquire the property at the lower of fair market value or the original purchase price, at any time prior to the vesting date. The issuer’s repurchase right lapses in a series of installments over a         -year period ending on                     , 200  .   (6) The fair market value at the time of transfer (determined without regard to any restriction other than a restriction which by its terms will never lapse) is $             per share.   (7) The amount paid for such property is $             per share.   (8) A copy of this statement was furnished to the Company for whom taxpayer rendered the services underlying the transfer of property.   (9) This statement is executed on                                         .           Spouse (if any)     Taxpayer This election must be filed with the Internal Revenue Service Center with which taxpayer files his or her Federal income tax returns and must be made within thirty (30) days after the execution date of the Notice of Exercise. This filing should be made by registered or certified mail, return receipt requested. You should retain two (2) copies of the completed form for filing with your Federal and state tax returns for the current tax year and an additional copy for your records.   1 -------------------------------------------------------------------------------- EXHIBIT D RIGHT OF REPURCHASE EXERCISE NOTICE [Date]     Re: Exercise of Right of Repurchase Dear Optionee: The Company wishes to exercise its Right of Repurchase under the Citadel Broadcasting Corporation Amended and Restated 2002 Long-Term Incentive Plan (“Plan”) and buy back from you shares of common stock of the Company that you acquired upon the exercise of one or more stock options granted to you pursuant to the Plan under the terms described below:   Date of Initial Option Grant   Shares to be Repurchased   FMV of one Share   Purchase Price per Share   Repurchase Price                               Total   Other Terms Shares shall be repurchased on [insert date]. The Company shall pay the repurchase price to you by delivery of payment by check on or within two (2) days following such date. Once the payment is made available to you, you shall no longer be considered a shareholder with respect to those shares. *    *    * Should you have any additional questions, please contact [insert contact person and contact information].   1

  Exhibit 10.2 L E A S E               LANDLORD:   JLP-LYNNHAVEN VA LLC         1798 FREBIS AVENUE         COLUMBUS OH 43206-0410       TENANT:   DSW INC.         4150 EAST FIFTH AVENUE         COLUMBUS, OHIO 43219       PREMISES:   Approximately 20,660 square feet at         Lynnhaven East Shopping Center         Virginia Beach, Virginia   --------------------------------------------------------------------------------   TABLE OF CONTENTS               Page   SECTION 1. PREMISES     3     SECTION 2. LANDLORD’S AND TENANT’S WORK     3     SECTION 3. TERM     5     SECTION 4. MINIMUM RENT     6     SECTION 5. PERCENTAGE RENT     8     SECTION 6. TITLE ENCUMBRANCES; LANDLORD REPRESENATATIONS, WARRANTIES AND COVENANTS     9     SECTION 7. RIGHT TO REMODEL     10     SECTION 8. UTILITIES     11     SECTION 9. GLASS     11     SECTION 10. PERSONAL PROPERTY     11     SECTION 11. RIGHT TO MORTGAGE     12     SECTION 12. SUBLEASE OR ASSIGNMENT     12     SECTION 13. COMMON AREAS     13     SECTION 14. OPERATION OF COMMON AREAS     13     SECTION 15. COMMON AREA MAINTENANCE, TENANT’S SHARE     14     SECTION 16. EMINENT DOMAIN     15     SECTION 17. TENANT’S TAXES     16     SECTION 18. RISK OF GOODS     16     SECTION 19. USE AND OCCUPANCY     16     SECTION 20. NUISANCES     18     SECTION 21. WASTE AND REFUSE REMOVAL     19     SECTION 22. DAMAGE AND DESTRUCTION OF PREMISES     19     SECTION 23. LANDLORD REPAIRS     20     SECTION 24. TENANT’S REPAIRS     20     SECTION 25. COVENANT OF TITLE AND PEACEFUL POSSESSION     21     SECTION 26. TENANT’S AND LANDLORD’S INSURANCE; INDEMNITY     21     SECTION 27. REAL ESTATE TAXES     24     SECTION 28. TENANT’S INSURANCE CONTRIBUTION     25     SECTION 29. FIXTURES     25     SECTION 30. SURRENDER     25     SECTION 31. HOLDING OVER     26     SECTION 32. NOTICE     26     SECTION 33. DEFAULT     26     SECTION 34. WAIVER OF SUBROGATION     28     SECTION 35. LIABILITY OF LANDLORD; EXCULPATION     29     SECTION 36. RIGHTS CUMULATIVE     29     SECTION 37. MITIGATION OF DAMAGES     29     SECTION 38. SIGNS     29     SECTION 39. ENTIRE AGREEMENT     30     SECTION 40. TENANT’S PROPERTY     30     SECTION 41. BINDING UPON SUCCESSORS     30     SECTION 42. HAZARDOUS SUBSTANCES     30     SECTION 43. TRANSFER OF INTEREST     31     SECTION 44. ACCESS TO PREMISES     31     SECTION 45. HEADINGS     32   i --------------------------------------------------------------------------------                 Page   SECTION 46. NON-WAIVER     32     SECTION 47. SHORT FORM LEASE     32     SECTION 48. ESTOPPEL CERTIFICATE     32     SECTION 49. TENANT’S REIMBURSEMENT     32     SECTION 50. TENANT’S TERMINATION RIGHT     33     SECTION 51. NO BROKER     33     SECTION 52. UNAVOIDABLE DELAYS     33     SECTION 53. TIMELY EXECUTION OF LEASE     33     SECTION 54. ACCORD AND SATISFACTION     33     SECTION 55. WAIVER OF JURY TRIAL     34     SECTION 56. LEASEHOLD FINANCING     34   LIST OF EXHIBITS: EXHIBIT “A” SITE PLAN EXHIBIT “B” LEGAL DESCRIPTION EXHIBIT “C” LANDLORD’S WORK EXHIBIT “D” TENANT’S WORK EXHIBIT “E” EXISTING USE EXCLUSIVES AND PROHIBITED USES EXHIBIT “F” SIGNAGE EXHIBIT “G” TENANT IMPROVEMENTS EXHIBIT “H” INTENTIONALLY DELETED EXHIBIT “I” SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT ii --------------------------------------------------------------------------------   L E A S E      THIS AGREEMENT OF LEASE, made this 27th day of November, 2006, by and between JLP-LYNNHAVEN VA LLC, a Virginia limited liability company (hereinafter referred to as “Landlord”), with offices at 1798 Frebis Avenue, Columbus, Ohio 43206-3764, and DSW INC., an Ohio corporation (hereinafter referred to as “Tenant”) with offices at 4150 East Fifth Avenue, Columbus, Ohio 43219. W I T N E S S E T H: SECTION 1. PREMISES      (a) Landlord, in consideration of the rents to be paid and covenants and agreements to be performed by Tenant, does hereby lease unto Tenant premises comprised of approximately 20,660 square feet of leasable space with an address of 2701 North Mall Drive, # 102, Virginia Beach, Virginia 23452 (the “Premises”) in the shopping center owned by Landlord containing approximately 100,000 square feet of leasable space on approximately 15 acres and commonly known as Lynnhaven East Shopping Center, in the City of Virginia Beach, Boroughs of Lynnhaven and Princess Anne and State of Virginia (the “Center”). The location, size, and area of the Premises and of the Center are substantially as shown on Exhibit “A” attached hereto and made a part hereof (the “Site Plan”). A legal description of the Center is attached hereto as Exhibit “B” and made a part hereof. The approximate dimensions of the Premises shall be 100’ x 200’ plus any additional square footage for Tenant’s loading dock and/or receiving area.      (b) The square footage specified in Section 1(a) shall be certified to Tenant by Landlord’s architect prior to the Rent Commencement Date (defined in Section 3(b) below). Tenant shall have ninety (90) days from the receipt of such certification to verify or object to Landlord’s measurement. If Tenant objects to Landlord’s measurement within said ninety (90) day period, the parties shall work together in good faith to resolve the differing square footage calculations. In computing the square footage of the Premises, the Premises shall be measured from the exterior surface of exterior walls and the middle of interior walls, excluding the square footage of any mechanical and utility rooms, escalators, elevators, stairs and any other common area space located within the Premises. If the square footage of the Premises as verified and confirmed by Tenant pursuant to this Section 1(b) is less than the size specified in Section 1(a), Base Rent (defined in Section 4(a) below) and other charges shall be proportionately adjusted, but the foregoing shall not be construed as permitting a material variance in dimensions or area.      (c) Landlord covenants that the Center is or shall be developed in accordance with the Site Plan and that it shall be used as a retail shopping center throughout the term of this Lease. Landlord shall not take or consent to any action which materially adversely affects access to, visibility of, parking for or use of the Premises. Notwithstanding the foregoing, no modification or replacement to the Center shall (i) reduce the ratio of parking spaces (for standard size American cars) to gross leasable area of buildings in the Center below five (5) spaces per 1,000 square feet of leasable space, (ii) alter or make any changes, including any reduction or rearrangement of parking spaces, to that portion of the Center indicated on the Site Plan as the “Protected Area”, (iii) interfere with truck access to the loading doors of the Premises, (iv) materially adversely interfere with customer access to the Premises, (v) materially adversely interfere with the visibility of the Premises from the roads providing direct access to the Center, or (vi) result in the construction of any buildings in the area designated “No Build Area” on the Site Plan. In performing any construction work, repairs or maintenance in the Center permitted under this Lease after Tenant has taken physical possession of the Leased Premises, Landlord shall use good faith, commercially reasonable efforts to prevent any interference with parking for, access to or visibility or use of the Premises or the business of Tenant or any subtenant or licensee of Tenant. SECTION 2. LANDLORD’S AND TENANT’S WORK      (a) Prior to delivery of possession of the Premises to Tenant, Landlord shall construct, at its expense, the improvements to the Premises described on Exhibit “C” attached hereto and made a part hereof consistent with plans and specifications approved by Tenant as set   --------------------------------------------------------------------------------   forth in Section 2(e) below (the “Landlord’s Work”). Landlord agrees to deliver the Premises to Tenant with Landlord’s Work substantially completed (as defined in Section 2(c)) on or before June 1, 2007 (the “Delivery Date”). Landlord shall give Tenant notice (the “Estimated Delivery Notice”) no later than March 1, 2007 of the status of Landlord’s construction and the estimated date that Landlord shall deliver the Premises to Tenant with Landlord’s Work substantially completed (the “Estimated Delivery Date”). Landlord may revise the Estimated Delivery Date any time prior to April 1, 2006 (the “Final Delivery Notice Date”), by which time Landlord shall have given Tenant a final notice (the “Final Delivery Notice”) of a firm delivery date (the “Final Delivery Date”) upon which the Landlord’s Work shall be substantially completed and the Leased Premises delivered to Tenant. Upon the sending of the Final Delivery Notice, Landlord shall have no further right to modify the Final Delivery Date. Neither the Estimated Delivery Date nor the Final Delivery Date shall be (y) earlier than (i) thirty (30) days after the date Tenant receives the Estimated Delivery Notice or the Final Delivery Notice, as applicable. If Landlord does not provide a Final Delivery Notice on or before the earlier of the Final Delivery Notice Date and thirty (30) days prior to the Estimated Delivery Date or if the date provided for in such Final Delivery Notice does not comply with the requirements of this Section 2, the Estimated Delivery Date shall be deemed to be the Final Delivery Date, provided such date complies with the requirements of this Section 2. If Landlord does not provide an Estimated Delivery Date on or before the Final Delivery Notice Date or if such date does not comply with the requirements of this Section 2, then the Final Delivery Date shall be deemed to be the Delivery Date.      (b) In the event that the Premises and Landlord’s Work are not substantially completed and delivered to Tenant on or before the Final Delivery Date, the Base Rent due hereunder shall be adjusted so that, after the Rent Commencement Date, Tenant shall receive a credit against Base Rent thereafter due Landlord equal to one (1) day of Base Rent for each day after the Final Delivery Date until delivery of the Premises is made to Tenant consistent with the terms of this Lease, including substantial completion of the Landlord’s Work. Tenant shall not be obligated to accept possession of the Premises prior to the later of (a) substantial completion of Landlord’s Work and (b) the Final Delivery Date. Time is of the essence regarding all dates set forth in this Section 2.      (c) For purposes of this Lease, the Landlord’s Work shall be deemed “substantially completed” when (i) all of the Landlord’s Work has been completed except for “punch list items” that do not affect the Tenant’s use of or the appearance of the Premises or Tenant’s ability to perform Tenant’s Work (as defined in Section 2(f) below), (ii) Landlord has satisfied the requirements of Section 2(g), and (iii) Tenant has been furnished with a fully executed non-disturbance agreement from the holder(s) of any then existing Mortgages, which agreement is consistent with Section 11 of this Lease. Landlord shall complete the punch list items within thirty (30) days of the date Tenant notifies Landlord of same. Upon performance of such punch list, Tenant shall promptly acknowledge Landlord’s completion thereof. Punch list items shall not be deemed completed until an authorized representative of Tenant has provided Landlord written acknowledgment of same. Landlord agrees that any and all work performed by Landlord after delivery of the Leased Premises to Tenant shall not unreasonably interfere with Tenant’s performance of Tenant’s Work, and Landlord shall be responsible for any and all costs resulting from any such unreasonable interference.      (d) Actual possession of the Premises shall have been delivered to Tenant water-tight, free of Hazardous Substances, in a good, structurally sound condition, with all of Landlord’s Work substantially completed, which substantial completion shall be evidenced by Landlord’s architect to Tenant.      (e) The Landlord’s Work and Tenant’s Work shall be performed (i) in a good and workmanlike manner and in accordance with plans and specifications approved by the other party, which approval shall not be unreasonably withheld or delayed and (ii) in compliance with all applicable governmental codes, laws, ordinances and regulations.      (f) Landlord and Tenant agree that they shall conduct a joint walk through of the Premises approximately two (2) weeks prior to the Final Delivery Date to ascertain the status of Landlord’s construction. Tenant agrees to provide, at its expense, upon delivery of the Premises to Tenant, the improvements to the Premises described on Exhibit “D” attached hereto and made a part hereof (the “Tenant’s Work”). 4 --------------------------------------------------------------------------------        (g) Completion of Construction of Leased Premises. Prior to the Final Delivery Date, Landlord shall satisfy the following conditions: 1. Landlord shall furnish Tenant with a temporary certificate of occupancy and other necessary approvals which must be issued by the appropriate governmental authorities prior to the commencement of Tenant’s Work and the occupancy and use of the Premises as contemplated. Landlord agrees to provide a permanent certificate of occupancy prior to Tenant’s merchandising and, if required by the issuing authority, the setting of fixtures for the Premises, and otherwise as soon as available in the ordinary course of the issuing authority’s practice. 2. The architect engaged by Landlord shall execute a certificate of completion that the Premises has been constructed in a good and workmanlike manner in accordance with the plans and specifications approved by Tenant and the other requirements for Landlord’s Work hereunder. 3. Tenant shall have been furnished with a fully executed original of a commercially reasonable non-disturbance and attornment agreement pursuant to Section 11 hereof. 4. Tenant shall have been notified no later than one hundred twenty (120) days prior to the Final Delivery Date of all applicable local governmental authority code requirements, if any, for the installation of Tenant’s fixtures at the Premises and for low voltage electrical work in connection with the installation of Tenant’s music, telephone and security systems at the Premises. 5. Tenant shall have been furnished with a list of all subcontractors who performed work on the Premises, along with direct contact information for, the work discipline of, and the work performed by each. 6. Tenant shall have been furnished with two (2) copies of all contractors’, subcontractors’ and suppliers’ warranties relating to the Premises. 7. Tenant shall have been furnished with two (2) copies of all operations and maintenance manuals relating to materials and systems used or installed in the construction of the Premises. 8. Tenant shall have been furnished with two (2) copies of the record drawings for the construction of the Premises, marked to reflect actual locations of all components of the Premises.      (h) In addition to any guarantees provided to Tenant elsewhere in this Lease, Landlord hereby unconditionally guarantees all of Landlord’s Work against defective workmanship and materials for one (1) year from the Commencement Date (as defined in Section 3(a)).      (i) Landlord shall perform any additional work not required to be performed by Tenant under this Lease in order for Landlord to obtain a permanent certificate of occupancy for the Premises, whether such work relates to the Premises or other portions of the Center. SECTION 3. TERM      (a) The “Commencement Date” of this Lease shall be the later of (i) the date actual, physical possession of the Premises is delivered to Tenant with the Landlord’s Work substantially completed and (ii) the Final Delivery Date.      (b) The initial term (the “Initial Term”) of the Lease shall commence on the earlier of (i) the date on which the Tenant opens for business in the Premises, and (ii) ninety (90) days after the Commencement Date (the “Rent Commencement Date”) and end on the last day of the fifteenth (15th) full Lease Year. The term “Lease Year” shall mean a period of twelve (12) consecutive calendar months. The first Lease Year during the term hereof shall commence on the first day of the first February following the Rent Commencement Date. Each subsequent 5 --------------------------------------------------------------------------------   Lease Year shall begin on the anniversary of the first Lease Year. The period from the Rent Commencement Date to the first day of the first February following the Rent Commencement Date (the “Initial Period”) shall be a partial Lease Year.      (c) If for any reason, the Commencement Date has not occurred by September 1, 2007, Tenant shall have the right and option to either (i) terminate this Lease or (ii) elect that the Commencement Date not occur, and, thereby defer delivery of the Leased Premises, until January 2, 2008. The remedies set forth in this paragraph shall be in addition to any and all other rights and remedies provided for Tenant in the Lease or available to Tenant in law or at equity.      (d) Tenant shall have three (3) consecutive separate options to extend the term of this Lease for successive renewal terms of five (5) Lease Years each. Tenant may exercise each such renewal option by giving written notice to Landlord at least one-hundred eighty (180) days prior to the end of the then current term or renewal term.      (e) The Initial Term and any renewal terms are hereinafter collectively referred to as the “term”.      (f) Beginning on the date of this Lease and ending on the Commencement Date, Tenant, its employees and agents shall have the right to enter the Premises or any part thereof at reasonable times during regular business hours for the purpose of making such inspections as Tenant may deem reasonably necessary. In consideration of Tenant’s right to inspect the Premises, Tenant agrees to indemnify, defend and hold Landlord harmless from any and all loss, damage, claims, costs, demands or expenses (including reasonable attorney’s fees) resulting from such entry on the Premises by Tenant or its agents.      (g) From the date upon which the Premises are delivered to Tenant for its work until the Commencement Date of the lease term, Tenant shall observe and perform all of its obligations under this Lease (except Tenant’s obligation to operate and pay Base Rent, percentage rent and Tenant’s Proportionate Share (defined in Section 15(c) below) of “Maintenance Costs” (defined and provided for in Section 15(b) hereof Real Estate Taxes (defined and provided for in Section 27(b) hereof) and insurance (provided for in Section 28 hereof). In the event Tenant fails to open for business within one hundred twenty (120) days after the date possession of the Premises has been delivered to Tenant, Landlord, in addition to any and all other available remedies, may require Tenant to pay to Landlord, in addition to all other rent and charges herein, as liquidated damages and not as a penalty, an amount equal to one-three hundred sixty five thousandths (1/365) of the annual Base Rent for each day such failure to open continues. SECTION 4. MINIMUM RENT      From and after the Rent Commencement Date, Tenant covenants and agrees to pay on a monthly basis during the term “Base Rent” in the following amounts to Landlord at the address listed above or such other place as Landlord may by thirty (30) days’ prior written notice to Tenant direct:      (a) For the Initial Term of the Lease Tenant agrees to pay to Landlord, as Base Rent for the Premises, equal consecutive monthly installments of Twenty-five Thousand Dollars ($25,000.00) [which is calculated at Twenty Dollars ($20.00) per square foot using 15,000 square feet as the size of the Premises], commencing on the Rent Commencement Date, and continuing on the first day of each calendar month during the Initial Term of the Lease. Notwithstanding the foregoing, in the event Tenant’s annual gross sales from the Premises reach Four Million One-hundred Forty Thousand Dollars ($4,140,000.00) in any Lease Year during the Initial Term hereof (the “Gross Sales Threshold”), then Tenant agrees to pay to Landlord, as Base Rent for the Premises in each lease year thereafter, equal consecutive monthly installments of Thirty Thousand Dollars ($30,000,00) [which is calculated at Twenty Dollars ($20.00) per square foot using 18,000 square feet as the size of the Premises], commencing on the first month of the Lease Year following Tenant’s annual statement of gross sales evidencing the Gross Sales Threshold which statement shall provided to Landlord in accordance with Section 6 (e) below. Notwithstanding the foregoing, in the event Tenant’s annual gross sales from the Premises reach Four Million Seven Hundred Fifty-one Thousand Eight Hundred Dollars ($4,751,800.00) in any Lease Year during the Initial Term hereof (the “Second Gross Sales Threshold”) then Tenant 6 --------------------------------------------------------------------------------   agrees to pay to Landlord in each Lease Year thereafter, as Base Rent for the Premises, equal monthly installments of Thirty-four Thousand Four Hundred Thirty-three and 33/100 Dollars ($34,433.33) [which is calculated at Twenty Dollars ($20.00) per square foot using 20,660 square feet as the size of the Premises], commencing on the first month of the Lease Year following Tenant’s annual statement of gross sales evidencing the Second Gross Sales Threshold which statement shall be provided to Landlord in accordance with Section 6 (e) below. The square feet figures set forth above which are used to calculate Base Rent payments under this Section 4(a) shall be referred to as “Rentable Square Feet”. The monthly installments of Base Rent payable under this Section 4 shall be paid in advance on or before the first day of each calendar month from and after the Rent Commencement Date during the term hereof without notice or demand therefor and without any offsets or deductions whatsoever except as otherwise provided in this Lease. Base Rent for any partial month shall be prorated based upon a thirty (30) day month. Base Rent for any Initial Period shall be the same as the Base Rent for the first Lease Year. As used in this Lease, “Rent” shall mean Base Rent in addition to all other sums due and owing from Tenant to Landlord under this Lease.      (b) Provided Tenant has fully complied with all of the terms, provisions, and conditions on its part to be performed under this Lease and is not in default under this Lease, Tenant may, by giving written notice to the Landlord at least six (6) months on or before the expiration of the Initial Term of this Lease, extend such term for a period of five (5) years upon the same covenants and agreements as are herein set forth. The Base Rent during the first renewal term shall be the same as the Base Rent paid by Tenant in Lease Year fifteen (15) of the Initial Term hereof unless Tenant’s annual gross sales from the Premises reach Five Million Dollars ($5,000,000.00), whereupon Base Rent shall be increased by ten percent (10%) for the Lease Years remaining in such first renewal term.      (c) Provided Tenant has fully complied with all of the terms, provisions, and conditions on its part to be performed under this Lease and is not in default under this Lease, Tenant may, by giving written notice to the Landlord at least six (6) months on or before the expiration of the first renewal term of this Lease, extend such term for a period of five (5) years upon the same covenants and agreements as are herein set forth. The Base Rent during the second renewal term shall be the same as the Base Rent paid by Tenant in the last Lease Year of the first renewal term unless Tenant’s annual gross sales from the Premises reach Five Million Dollars ($5,000,000.00), whereupon Base Rent shall be increased by ten percent (10%) for the Lease Years remaining in such second renewal term.      (d) Provided Tenant has fully complied with all of the terms, provisions, and conditions on its part to be performed under this Lease and is not in default under this Lease, Tenant may, by giving written notice to the Landlord at least six (6) months on or before the expiration of the second renewal term of this Lease, extend such term for a period of five (5) years upon the same covenants and agreements as are herein set forth. The Base Rent during the third renewal term shall be the same as the Base Rent paid by Tenant in the last Lease Year of the second renewal term unless Tenant’s annual gross sales from the Premises reach Five Million Dollars ($5,000,000.00), whereupon Base Rent shall be increased by ten percent (10%) for the Lease Years remaining in such third renewal term. The initial term and any renewal term(s) are hereinafter collectively referred to as the “term”.      (e) In the event any sums required under this Lease to be paid are not received when due, then all such amounts shall bear interest from the due date thereof until the date paid at the rate of interest equal to two percent (2%) over the prime rate in effect from time to time as established by National City Bank, Columbus, Ohio (the “Interest Rate”), and shall be due and payable by Tenant without notice or demand, Tenant shall pay the foregoing interest thereon in addition to all default remedies of Landlord pursuant to Section 33 below.      (f) Notwithstanding anything herein contained to the contrary, Tenant shall initially pay to Landlord as additional Rent, simultaneously with the payment of Base Rent, payable in equal monthly installments, the estimated monthly amount of Tenant’s Proportionate Share of Maintenance Costs (provided for in Section 15 hereof), Real Estate Taxes (provided for in Section 27 hereof) and insurance (provided for in Section 28 hereof). 7 --------------------------------------------------------------------------------   SECTION 5. PERCENTAGE RENT      (a) Beginning with the first Lease Year, Tenant shall pay to Landlord, in addition to Base Rent, upon the conditions and at the times hereinafter set forth, percentage rent equal to two percent (2%) of Tenant’s gross sales (as hereinafter defined) in excess of the number obtained by dividing (a) Base Rent for the applicable lease year by (b) the number .02. The annual percentage rent shall be paid by Tenant to Landlord within ninety (90) days after the end of each Lease Year. Each such payment shall be accompanied by a statement signed by an authorized representative of Tenant setting forth Tenant’s gross sales for such Lease Year. For purposes of permitting verification by Landlord of the gross sales reported by Tenant, Landlord shall have the right, not more than one (1) time per Lease Year, upon not less than five (5) business days notice to Tenant, to audit during normal business hours in Tenant’s corporate office, Tenant’s books and records relating to Tenant’s gross sales for a period of two (2) years after the end of each Lease Year. Landlord agrees that no contingency fee auditor shall be employed by Landlord for the purpose of conducting any such audit. If such an audit reveals that Tenant has understated its gross sales by more than three percent (3%) for any Lease Year, Tenant, in addition to paying the additional percentage rent due, shall pay the reasonable cost of the audit within thirty (30) days of Tenant’s receipt of Landlord’s demand for the same and copies of all bills or invoices on which such cost is based.      (b) Each Lease Year shall constitute a separate accounting period, and the computation of percentage rental due for any one period shall be based on the gross sales for such Lease Year.      (c) The term “gross sales” as used in this Lease is hereby defined to mean the gross dollar aggregate of all sales or rental or manufacture or production of merchandise and all services, income and other receipts whatsoever of all business conducted in, at or from any part of the Premises, whether for cash, credit, check, charge account, gift or merchandise certificate purchased or for other disposition of value regardless of collection. Should any departments, divisions or parts of Lessee’s business be conducted by any subleases, concessionaires, licensees, assignees or others, then there shall be included in Lessee’s gross sales, all “gross sales” of such department, division or part, whether the receipts be obtained at the Premises or elsewhere in the same manner as if such business had been conducted by Lessee. Gross sales shall exclude the following: (i) all credit, refunds, and allowances granted to customers; (ii) all excise taxes, sales taxes, and other taxes levied or imposed by any governmental authority upon or in connection with such sales; (iii) bulk sales of goods in connection with the sale of Tenant’s business; (iv) sales of fixtures, furniture, equipment and other items not made in the ordinary course of business; (v) salvage sales of damaged merchandise; (vi) discount sales made to employees of the Tenant and Tenant’s subsidiaries and affiliated corporations, if any; (vii) exchanges of merchandise between Tenant’s warehouse or other stores and other similar movements of merchandise; (viii) returns to suppliers; (ix) the proceeds from vending machines and coin operated telephones and commissions on such proceeds to the extent such proceeds and commissions are less than five percent (5%) of Gross Sales exclusive of such proceeds and commissions; (x) uncollectible customer charges and bad checks; (xi) disallowed credit card amounts and credit card service charges or fees retained by the credit card company; (xii) delivery charges; and (xiii) customer credit insurance.      (d) The percentage rental, if any, shall be paid within ninety (90) days after the end of each lease year, accompanied by a statement in writing signed by Tenant setting forth its gross sales from the sale of all items for such lease year. Tenant shall keep at its principal executive offices, where now or hereafter located, true and accurate accounts of all receipts from the Premises. Landlord, its agents and accountants, shall have access to such records at any and all times during regular business hours for the purpose of examining or auditing the same. Tenant shall also furnish to Landlord any and all supporting data in its possession relating to gross sales and any deductions therefrom as Landlord may reasonably require. Landlord agrees to keep any information obtained therefrom confidential, except as may be required for Landlord’s tax returns, or in the event of litigation or arbitration where such matters are material.      (e) Tenant shall at all times maintain accurate records which shall be available for Landlord’s inspection at any reasonable time. 8 --------------------------------------------------------------------------------        (f) If Landlord, for any reason, questions or disputes any statement of percentage rental prepared by Tenant, then Landlord, at its own expense, may employ such non-contingency fee accountants as Landlord may select to audit and determine the amount of gross sales for the period or periods covered by such statements. If the report of the accountants employed by Landlord shall show any additional percentage rental payable by Tenant, then Tenant shall pay to Landlord such additional percentage rental plus interest at one (1) point over the prime rate, commencing on the date such percentage rentals should have been paid, within thirty (30) days after such report has been forwarded to Tenant, unless Tenant shall, within said thirty (30) day period, notify Landlord that Tenant questions or disputes the correctness of such report. In the event that Tenant questions or disputes the correctness of such report, the accountants employed by Tenant and the accountants employed by Landlord shall endeavor to reconcile the question(s) or dispute(s) within thirty (30) days after the notice from Tenant questioning or disputing the report of Landlord’s accountants. In the event that it is finally determined by the parties that Tenant has understated percentage rent for any Lease year by three percent (3%) or more, Tenant shall pay the cost of the audit. Furthermore, if Tenant’s gross sales cannot be verified due to the insufficiency or inadequacy of Tenant’s records, then Tenant shall pay the cost of the audit. The cost of any audit resulting from failure to report percentage rent after written notification of default shall be at the sole cost of Tenant. SECTION 6. TITLE ENCUMBRANCES; LANDLORD REPRESENATATIONS, WARRANTIES AND COVENANTS      (a) Tenant’s rights under this Lease are subject and subordinate to those title matters set forth in Landlord’s owner’s title policy issued by First American Title Insurance Company, being Policy No. 104036716 VMDO, dated April 19, 2006, a copy of which has been provided to Tenant, specifically including but not limited to the terms and conditions of a certain Total Site Agreement by and between Lynnhaven Mall Company, a Virginia limited partnership and the Estate of Jack Stein, Arthur H. Stein, Edward S. Stein, Robert M. Stein and Barbara S. Feldman, First & Merchants National Bank as Trustee under Trust Agreement dated December 8, 1978 and known as Trust No. 1, Carrie M. Stein, Joanne F. Stein and Jane P. Stein, recorded December 21, 1978, in Book 1856, Page 335, Circuit Court of Virginia Beach, Virginia as amended by that certain Declaration by and between Arthur H. Stein, Edward S. Stein, Robert M. Stein and Barbara F. Fischer, Carrie M. Stein, Joanne P. Stein and Jane P. Stein, recorded February 15, 1985 in Book 2392, Page 171, Circuit Court of Virginia Beach, Virginia along with that certain Declaration of Protective Covenants and Restrictions by and between the City of Virginia Beach Development Authority and Robert M. Stein, Barbara S. Feldman, Arthur H. Stein, Carrie M. Stein, Robert M. Stein, Joanne F. Stein, Edward S. Stein, Jane P. Stein, Annette K Stein and Robert M. Stein recorded on December 21, 1978, in Book 1856, Page 186, Circuit Court of Virginia Beach, Virginia (collectively the “REA”) Tenant agrees that it shall abide by the terms and conditions of the REA.      (b) Landlord covenants, represents and warrants to Tenant that: (i) the REA has not been modified, amended or terminated except as set forth above; (ii) the REA is currently in full force and effect; (iii) to its actual knowledge as of the date hereof, no default under the REA exists thereunder beyond any applicable notice and cure period; and (iv) the REA is, and shall remain, superior in lien to all mortgages and related liens affecting the Center and all other land which is encumbered by the REA. Tenant shall comply with the terms and conditions of the REA to the extent same affects the Premises (it being agreed that Tenant shall not be obligated to expend any sums in connection with such compliance).      (c) Landlord shall, during the term: (i) perform and observe all of the terms, covenants, provisions and conditions of the REA on Landlord’s part to be performed and observed; (ii) defend, indemnify and hold harmless Tenant from and against and all claims, demands, causes of action, suits, damages, liabilities and expenses of any nature arising out of or in connection with the enforcement of, or a claimed breach by, Landlord of any covenant, term, condition or provision of the REA; and (iii) diligently enforce, at its sole expense, the covenants, agreements and obligations of the REA.      (d) Whenever, pursuant to the REA, the consent or approval of Landlord shall be required by or requested, and such consent or approval could diminish the rights or increase the obligations of Tenant thereunder or under this Lease, or could adversely affect Tenant’s use or occupancy of the Premises, or the conduct of Tenant’s business therein, such consent or approval 9 --------------------------------------------------------------------------------   shall not be granted without the prior written consent of Tenant, which consent may be withheld in its sole and absolute discretion.      (e) Landlord shall not amend, or modify the REA if such amendment or modification could diminish the rights or increase the obligations of Tenant thereunder of under this Lease, or could adversely affect Tenant’s use or occupancy of the Premises or the conduct of Tenant’s business therein, nor shall Landlord terminate the REA.      (f) Landlord further represents, warrants and/or covenants: 1. That it has the right to enter into this Lease and that the person(s) signing this Lease on its behalf has authority to enter into this Lease and to bind Landlord to the terms, covenants and conditions contained herein. 2. That it has good and marketable fee simple title to the Premises and the Center is free and clear of all easements, restrictions, liens and encumbrances except as described in Section 6(a) above. 3. That the Premises, including without limitation, the roof and HVAC system, are or as of the Commencement Date shall be, in good condition and repair. 4. That the Premises is, or as of the Commencement Date shall be, properly zoned for use by the Tenant as a retail footwear location and there are no restrictive covenants or other title encumbrances which restrict in any way the use of the Premises as a retail footwear location. 5. That Landlord has, or as of the Commencement Date shall have, obtained all necessary approvals and permits from appropriate governmental authorities for the development of the Center in accordance with the Site Plan and for the construction and occupancy of the Premises by Tenant as a retail footwear location. 6. That Landlord has not entered into, and shall not hereafter prior to the expiration or termination of this Lease enter into, any leases, agreements or restrictive covenants that would prohibit or interfere with the use of the Premises by the Tenant as a retail footwear location. 7. In the event the legal description of the Center described on Exhibit “B” hereto indicates that the Center is composed of more than one (1) parcel or lot, there exists no strips or gores between such parcels or lots which are not owned by Landlord. 8. No third-party consents or approvals are required in order for Landlord to enter into this Lease, or for the performance of Landlord’s Work. 9. The Center now has, and on the Commencement Date shall have, access to and from Lynnhaven Parkway and North Mall Drive, as shown on the Site Plan, for the passage of vehicular traffic. 10. As of the date of this Lease, there are no sign ordinances, restrictive covenants, uniform sign plans or other signage restrictions which would prevent the Premises from having the signage (including, without limitation, the square foot area and size of letters) as depicted on Exhibit “F” hereof. SECTION 7. RIGHT TO REMODEL      (a) Tenant may, at Tenant’s expense, make repairs and alterations to the interior non-structural portions of the Premises and remodel the interior of the Premises, excepting structural and exterior changes, in such manner and to such extent as may from time to time be deemed necessary by Tenant for adapting to the Premises to the requirements and uses of Tenant and for the installation of its fixtures, appliances and equipment. Any structural or exterior alteration may only be made by Tenant with the prior written approval of Landlord, which approval may be granted or withheld in Landlord’s sole discretion. All plans for any structural alterations shall 10 --------------------------------------------------------------------------------   be submitted to Landlord for endorsement of its approval prior to commencement of work. Upon Landlord’s request, Tenant shall be obligated, if it remodels and/or alters the Premises, to restore the Premises upon vacating the same. Tenant will indemnify and save harmless the Landlord from and against all mechanics liens or claims by reason of repairs, alterations or improvements which may be made by Tenant to the Premises. Inasmuch as any such alterations, additions or other work in or to the Premises may constitute or create a hazard, inconvenience or annoyance to the public and other tenants in the Center, Tenant shall, if so directed in writing by Landlord, erect barricades, temporarily close the Premises, or affected portion thereof, to the public or take whatever measures are necessary to protect the building containing the Premises, the public and the other tenants of the Center for the duration of such alterations, additions or other work. If Landlord determines, in its sole judgment, that Tenant has failed to take any of such necessary protective measures, and Tenant fails to cure same within ten (10) days after notice thereof, Landlord may do so and Tenant shall reimburse Landlord for the cost thereof within ten (10) days after Landlord bills Tenant therefor.      (b) All such work, including Tenant’s Work pursuant to Exhibit “D” shall be performed lien free by Tenant. In the event a mechanic’s lien is filed against the premises or the Center, Tenant shall discharge or bond off same within ten (10) days from the filing thereof. If Tenant fails to discharge said lien, Landlord may bond off or pay same without inquiring into the validity or merits of such lien, and all sums so advanced shall be paid on demand by Tenant as additional rent. SECTION 8. UTILITIES      (a) Prior to the Commencement Date, Landlord shall provide, at Landlord’s expense, by separate meter, electric, water, sewer, and other utilities to the Premises sufficient to meet Tenant’s requirements. Landlord shall further provide, or cause to be provided, all such utility services to the Premises during the term of this Lease. Tenant agrees to be responsible and pay for all public utility services rendered or furnished to the Premises during the term hereof, including, but not limited to, heat, water, gas, electric, steam, telephone service and sewer services, together with all taxes, levies or other charges on such utility services when the same become due and payable. Tenant shall be responsible for all utility services and costs inside the premises. Landlord shall not be liable for the quality or quantity of or interference involving such utilities unless due directly to Landlord’s negligence.      (b) During the term hereof, whether the Premises are occupied or unoccupied, Tenant agrees to maintain heat sufficient to heat the Premises so as to avert any damage to the Premises on account of cold weather.      (c) Tenant agrees to be responsible for its rubbish removal from the Premises. Tenant shall be permitted to maintain and operate, at no extra charge: (i) a trash compactor in the portion of the Common Areas designated on Site Plan as “Trash Compactor Pad”; and (ii) a trash container(s) in the portion(s) of the Common Areas designated on Site Plan as “Trash Container Pad”. Tenant, at its sole cost and expense, shall keep the trash compactor and containers neat and clean and repair any damage caused by use and storage of such compactor and containers. SECTION 9. GLASS      The Tenant shall maintain the glass part of the Premises, promptly replacing any breakage and fully saving the Landlord harmless from any loss, cost or damage resulting from such breakage or the replacement thereof. SECTION 10. PERSONAL PROPERTY      The Tenant further agrees that all personal property of every kind or description that may at any time be in or on the Premises shall be at the Tenant’s sole risk, or at the risk of those claiming under the Tenant, and that the Landlord shall not be liable for any damage to said property or loss suffered by the business or occupation of the Tenant caused in any manner whatsoever. 11 --------------------------------------------------------------------------------   SECTION 11. RIGHT TO MORTGAGE      (a) Landlord reserves the right to subject and subordinate this Lease at all times to the lien of any deed of trust, mortgage or mortgages now or hereafter placed upon Landlord’s interest in the Premises; provided, however, that no default by Landlord, under any deed of trust, mortgage or mortgages, shall affect Tenant’s rights under this Lease, so long as Tenant performs the obligations imposed upon it hereunder and is not in default hereunder, and Tenant attorns to the holder of such deed of trust or mortgage, its assignee or the purchaser at any foreclosure sale. Any such subordination shall be contingent upon Tenant receiving a commercially reasonable subordination, non-disturbance and attornment agreement (“SNDA”). It is a condition, however, to the subordination and lien provisions herein provided, that Landlord shall procure from any such mortgagee an agreement in writing, which shall be delivered to Tenant or contained in an SNDA, providing in substance that so long as Tenant shall faithfully discharge the obligations on its part to be kept and performed under the terms of this Lease and is not in default under the terms hereof, its tenancy will not be disturbed nor this Lease affected by any default under such mortgage. The parties acknowledge that the SNDA attached hereto as Exhibit “I” is commercially reasonable. Landlord represents and warrants that, as of the date of this Lease and the Commencement Date, there are no mortgages, ground leases or other encumbrances that could dispossess Tenant’s leasehold interest hereunder (collectively, “Mortgages”) on Landlord’s fee title to the Center other than that certain Deed of Trust, Assignment of Rents and Security Agreement granted by Landlord in favor of Key Bank National Association and recorded on September 6, 2006 in the City of Virginia Beach Recorder’s Office as Document Number 20060906001348180 (the “Mortgage”). Landlord agrees that Tenant’s obligations under this Lease shall be contingent upon Tenant entering into an SNDA with the holder of such Mortgage on or before the Commencement Date.      (b) Wherever notice is required to be given to Landlord pursuant to the terms of this Lease, Tenant will likewise give such notice to any mortgagee of Landlord’s interest in the Premises upon notice of such mortgagee’s name and address from Landlord. Furthermore, such mortgagee shall have the same rights to cure any default on the part of Landlord that Landlord would have had. SECTION 12. SUBLEASE OR ASSIGNMENT      (a) Tenant may assign Tenant’s interest in this Lease or sublet all or any portion of the Premises to a nationally or regionally recognized retailer without Landlord’s consent. Any other assignment or subletting not specifically provided for in this Section 12 shall be subject to Landlord’s prior written consent, which consent shall not be unreasonably withheld. Landlord’s review of the proposed assignee or subtenant shall be limited to business reputation, business experience, a retail use compatible with then existing tenant mix of the Center, and financial ability to perform its obligations under this Lease or the proposed sublease, as the case may be. In any such event, Tenant shall remain fully and primarily liable hereunder. Tenant’s right to assign or sublet shall be subject to any then existing exclusives or primary use exclusives for tenants leasing more than 15,000 square feet of space in the Center.      Tenant may, without the consent of Landlord, (i) grant licenses and/or concessions within the Premises or (ii) assign or sublet all or any portion of the Premises to (a) any parent, affiliate or subsidiary corporation of Tenant; (b) a transferee or successor by merger, consolidation or acquisition of Tenant or its parent or subsidiary; or (c) a transferee with a good business reputation who is acquiring all or substantially all of the stores of Tenant in the State of Virginia or the assets of Tenant, its parent or subsidiary. Any such assignee or sublessee shall be bound by the terms of this Lease. Tenant shall deliver to Landlord in the ordinary course of its business an instrument whereby the assignee or entity succeeding to Tenant’s interest hereunder agrees to be bound by the terms of this Lease.      (b) Landlord may assign Landlord’s interest in this Lease without the consent of Tenant (a) to any entity to which Landlord transfers its fee interest in the Premises provided such entity (i) agrees in writing to be bound by all the terms of this Lease and (ii) such assignment is pursuant to a bona fide arm’s length transaction not designed to reduce Landlord’s liability or to otherwise exempt Landlord from any provision of this Lease or (b) subject to Section 12, as security for any indebtedness undertaken by Landlord. 12 --------------------------------------------------------------------------------   SECTION 13. COMMON AREAS      Landlord grants to Tenant and its customers, agents, employees, licensees, invitees and subtenants, a non-exclusive easement in common with the other tenants of the Center for the use of all Common Areas. Landlord hereby covenants and agrees that Landlord shall not grant any party other than tenants of the Center and their customers, agents, employees, licensees, invitees and subtenants a right to utilize the parking areas in the Center, and Landlord shall use commercially reasonable efforts to restrict the use of the parking areas to such parties. “Common Areas” means all areas and facilities in the Center provided and so designated by Landlord and made available by Landlord in the exercise of good business judgment for the common use and benefit of tenants of the Center and their customers, employees and invitees. Common Areas shall include (to the extent the same are constructed), but not be limited to, the parking areas, sidewalks, landscaped areas, corridors, stairways, boundary walls and fences, incinerators, truckways, service roads, and service areas not reserved for the exclusive use of Tenant or other tenants. SECTION 14. OPERATION OF COMMON AREAS      (a) From and after the Commencement Date, Landlord, at its cost and expense, shall operate the Center and maintain the Common Areas and the Center in a clean and safe condition and repair so that Tenant and its customers, guests, invitees, licensees, officers and employees can use and enjoy the same. The obligations of Landlord pursuant hereto shall include, without limitation, the maintenance of the Center and any pylon structure(s) (excluding therefrom Tenant’s advertising panels), regular cleaning of the Common Areas, removal of trash and debris from the Common Areas, repairing the asphalt and concrete portions of the Common Areas (including potholes, curbs and sidewalks), repairing common utility lines and facilities, repairing storm drains, repairing parking lot lights, maintaining the landscaped portion of the Common Areas (including regular grass cutting), maintaining floodlights and other necessary means of illumination sufficient to illuminate the Common Areas during twilight and evening hours that Tenant’s store is open for business and in operation, prompt removal of snow and ice on every occasion where safety of the Common Areas or access to the Premises is impeded, and periodic restriping of the parking area. Landlord covenants that such maintenance and repair shall be planned and preventative maintenance undertaken in order to maintain the Common Areas in a good and usable condition and so as to avoid any breakdown of maintenance and avoidable costly repairs. Landlord shall at all times have exclusive control of the Common Areas and may at any time and from time to time: (i) promulgate, modify and amend reasonable rules and regulations for the use of the Common Areas, which rules and regulations shall be binding upon Tenant upon delivery of a copy thereof to Tenant; (ii) temporarily close any part of the Common Areas, including but not limited to closing the streets, sidewalks, road or other facilities to the extent necessary to prevent a dedication thereof or the accrual of rights of any person or of the public therein; (iii) exclude and restrain anyone from the use or occupancy of the Common Areas or any part thereof except bona fide customers and suppliers of the tenants of the Center who use said areas in accordance with the rules and regulations established by Landlord; and (iv) engage others to operate and maintain all or any part of the Common Areas, on such terms and conditions as Landlord shall, in its sole judgment, deem reasonable and proper; and (v) make such changes in the Common Areas as in its opinion are in the best interest of the Center, including but not limited to changing the location of walkways, service areas, driveways, entrances, existing automobile parking spaces and other facilities, changing the direction and flow of traffic and establishing prohibited areas; provided, however, that any such change shall be subject to the terms and conditions of Section 1(c) of this Lease.      (b) Tenant shall keep all Common Areas free of obstructions created or permitted by Tenant. Tenant shall permit the use of the Common Areas only for normal parking and ingress and egress by its customers and suppliers to and from the Premises. If in Landlord’s opinion unauthorized persons are using any of the Common Areas by reason of Tenant’s occupancy of the Premises, Landlord shall have the right at any time to remove any such unauthorized persons from said areas or to restrain unauthorized persons from said areas. Landlord, Tenant, and others constructing improvements or making repairs or alterations in the Center shall have the right to make reasonable use of portions of the Common Areas.      (c) Throughout the term, Landlord shall keep the Common Areas fully lighted and open to the customers of the Center seven (7) days a week from dusk until 11:00 p.m. Monday 13 --------------------------------------------------------------------------------   through Saturday and until 7:00 p.m. on Sunday (“Normal Hours”). Upon request of Tenant, Landlord shall keep the Common Areas lighted for as long as after Normal Hours as Tenant shall request, provided Tenant shall pay for a share of the reasonable cost of said requested lighting, which share shall be equal to the product of (i) such costs, and (ii) a fraction, the numerator of which shall be the number of square feet of leasable space within the Premises and the denominator of which shall be the aggregate number of square feet of leasable space of all premises within the Center (including the Premises) open later than Normal Hours (excluding, however, those tenants and occupants who separately control and pay for their own Common Area lighting). In addition to the foregoing, Landlord shall provide for low level security lighting from one (1) hour after the close of business in the Premises until dawn. SECTION 15. COMMON AREA MAINTENANCE, TENANT’S SHARE      (a) Tenant shall initially pay to Landlord as additional rental, simultaneously with the payment of Base Rent called for under Section 4(a), the estimated monthly amount of Tenant’s Proportionate Share of the “Maintenance Costs” (as defined in Section 15(b) below) for the operation and maintenance of the Common Areas as set forth in Section 4(c), One and 75/100 Dollars ($1.75) per square foot based on the Rentable Square Feet then in effect under Section 5(a) above.      (b) The Maintenance Costs for the common areas shall be computed on an accrual basis, under generally accepted accounting principles, and shall include all costs of operating, maintaining, repairing and replacing the common areas, including by way of example but not limitation: (i) cost of labor (including worker’s compensation insurance, employee benefits and payroll taxes); (ii) materials, and supplies used or consumed in the maintenance or operation of the common area; (iii) the cost of operating and repairing of the lighting; (iv) cleaning, painting, removing of rubbish or debris, snow and ice, private security services, and inspecting the common areas; (v) the cost of repairing and/or replacing paving, curbs, walkways, markings, directional or other signs; landscaping, and drainage and lighting facilities; (vi) rental paid for maintenance of machinery and equipment; and (vii) a reasonable allowance to Landlord for Landlord’s supervision, which allowance shall not in an accounting year exceed five percent (5%) of the total of all Maintenance Costs (excluding insurance costs) for such accounting year (all of the foregoing are collectively referred to herein as “Maintenance Costs”). Notwithstanding the foregoing, the following shall be excluded, deducted or credited from Maintenance Costs when computing Tenant’s Proportionate Share of same: (a) Net recoveries received by Landlord from tenants as a result of any act, omission, default or negligence or as the result of breaches by tenants of the provisions of their leases and/or other amounts received by Landlord from third parties, which recoveries and/or amounts reimburse Landlord for or reduce Maintenance Costs; (b) Gross revenues from charges, if any, made for the use of the parking facilities and other Common Areas or facilities of the Center (including, without limitation, the sale or rental of advertising space); (c) The cost of the land underlying and the construction of the Center, whether initially or in connection with any replacement or expansion thereof and whether mandated by law or otherwise, including, without limitation, costs of correcting (I) defective conditions in the Center resulting from defects in or inadequacy of the initial design or construction of the same, or (II) code violations, including the payment of fines or citations in connection therewith; (d) The depreciation or amortization of the Center or any part thereof or any equipment or other property used in connection therewith; (e) the initial cost of the installation of the parking areas or facilities or the amortization or depreciation of such initial cost; (f) The cost of providing or performing improvements, work or repairs to or within (I) any portion of the premises of any other tenants or occupants in the Center, (II) any other building which is not part of the Common Areas or (III) any portion of the Center the use of which is not available to Tenant; (g) Any reserves for future expenditures or liabilities which would be incurred subsequent to the then current accounting year; (h) Any bad debt loss, rent loss or reserves for bad debt or rent loss; (i) Legal fees, audit fees, leasing commissions, advertising expenses and other costs incurred in connection with (I) the original development or original leasing of the Center, (II) the future re-leasing of the Center, (III) any advertising or promotion of the Center or any part thereof, and (IV) disputes with other tenants or third parties; (j) Costs of repairing or restoring any portion of the Center damaged or destroyed by any casualty or peril whether insured, uninsured or uninsurable; (k) Costs in connection with the cleanup or removal of hazardous materials; (l) The cost of compliance with the Americans with Disabilities Act of 1990, as amended, and all regulations promulgated pursuant thereto; (m) Net 14 --------------------------------------------------------------------------------   recoveries from insurance policies taken out by Landlord to the extent that the proceeds reimburse Landlord for expenses which have previously been included or which would otherwise be included in Maintenance Costs; (n) Contributions to Maintenance Costs by tenants or occupants whose space is permitted by provisions in the Lease to be excluded from the denominator of the Tenant’s Proportionate Share; (o) Costs associated with repairs or improvements the need for which arose prior to the date of this Lease; (p) Any otherwise permissible fees or costs to the extent in excess of prevailing and competitive rates; (q) Costs of a capital nature, including all capital improvements, alterations, repairs and/or replacements (for purposes of this Lease, “costs of a capital nature” shall mean the cost of any item or service the useful life of which exceeds 36 months); (r) Costs relating to the negligence of Landlord or its contractors, agents or employees or the payment of any claims or damages relating to the same; (s) Any insurance costs.      (c) Landlord shall maintain accurate and detailed records of all Maintenance Costs for the common areas in accordance with generally accepted accounting principles. For purposes of this Lease, “Tenant’s Proportionate Share” shall be the product of the applicable cost or expense multiplied by a fraction, the numerator of which shall be the gross leasable area (expressed in square feet) of the Premises and the denominator of which shall be the gross leasable area (expressed in square feet) of all leasable space in the Center. Tenant’s Proportionate Share of that portion of the Center owned by Landlord is estimated to be fifteen percent (15%), during the first Lease Year.      (d) The actual amount of Tenant’s Proportionate Share of all Maintenance Costs shall be computed by Landlord within one hundred eighty (180) days after the end of each accounting year (which Landlord may change from time to time). At this time Landlord shall furnish to Tenant a statement showing in reasonable detail the actual Maintenance Costs incurred during such accounting year and Tenant’s Proportionate Share thereof (prorated for any partial Lease year, with appropriate adjustments to reflect any change in the floor area of the premises or the gross leasable area of a building occurring during such accounting year). Any excess payments from Tenant shall be applied to the next installments of the Maintenance Costs hereunder, or refunded by Landlord. Any underpayments by Tenant shall be paid to Landlord within thirty (30) days after receipt of such reconciliation statement. Tenant’s estimated monthly Maintenance Cost hereunder may be adjusted by written notice from Landlord. Notwithstanding anything contained in this Section 15 to the contrary, Landlord and Tenant agree that the actual amount of Tenant’s Proportionate Share of Maintenance Costs, excluding costs for snow and ice removal, shall not increase by more than five percent (5%) in any lease year over the previous Lease Year, and that Tenant’s Proportionate Share of Maintenance Costs for the first lease year, excluding costs for snow and ice removal, shall not exceed One and 75/100 Dollars ($1.75) per square foot.      (e) If Tenant, for any reason in the exercise of good business judgment, questions or disputes any statement of Maintenance Costs prepared by Landlord, then Tenant, at its own expense, may employ such accountants as Tenant may select to review Landlord’s books and records solely with respect to Maintenance Costs during the prior two Lease years and to determine the amount of Maintenance Costs for the period or periods covered by such statements. If the report of the accountants employed by Tenant shall show any overcharge paid by Tenant, then Tenant shall receive a credit from Landlord for such difference. Any underpayment shall be paid by Tenant. Tenant agrees that no contingency fee auditors shall be employed by Tenant for the purpose of conducting any such audit. In the event that Landlord questions or disputes the correctness of such report, the accountants employed by Tenant and the accountants employed by Landlord shall endeavor to reconcile the question(s) or dispute(s) within thirty (30) days after the notice from Tenant questioning or disputing the report of Landlord’s accountants. In the event that it is finally determined by the parties that Landlord has overstated Maintenance Costs for any Lease year by three percent (3%) or more, Landlord shall pay the reasonable cost of the audit. Furthermore, if Landlord’s Maintenance Costs cannot be verified due to the insufficiency or inadequacy of Landlord’s records, then Landlord shall pay the cost of the audit. SECTION 16. EMINENT DOMAIN      (a) In the event the entire premises or any part thereof shall be taken or condemned either permanently or temporarily for any public or quasi-public use or purpose by any 15 --------------------------------------------------------------------------------   competent authority in appropriation proceedings or by any right of eminent domain, the entire compensation or award therefore, including leasehold, reversion and fee, shall belong to the Landlord and Tenant hereby assigns to Landlord all of Tenant’s right, title and interest in and to such award.      (b) In the event that only a portion of the Premises, not exceeding twenty percent (20%) of same, shall be so taken or condemned, and the portion of the Premises not taken can be repaired within ninety (90) days from the date of which possession is taken for the public use so as to be commercially fit for the operation of Tenant’s business, the Landlord at its own expense shall so repair the portion of the Premises not taken and there shall be an equitable abatement of rent for the remainder of the term and/or extended terms. The entire award paid on account thereof shall be paid to the Landlord. If the portion of the Premises not taken cannot be repaired within ninety (90) days from the date of which possession is taken so as to be commercially fit for the operation of Tenant’s business, then this Lease shall terminate and become null and void from the time possession of the portion taken is required for public use, and from that date on the parties hereto shall be released from all further obligations hereunder except as herein stated and Tenant shall have no claim for any compensation on account of its leasehold interest. No other taking, appropriation or condemnation shall cause this Lease to be terminated. Any such appropriation or condemnation proceedings shall not operate as or be deemed an eviction of Tenant or a breach of Landlord’s covenant of quiet enjoyment and Tenant shall have no claim for any compensation on account of its leasehold interest.      (c) In the event that more than twenty percent (20%) of the Premises shall at any time be taken by public or quasi-public use or condemned under eminent domain, then at the option of the Landlord or Tenant upon the giving of thirty (30) days written notice (after such taking or condemnation), this Lease shall terminate and expire as of the date of such taking and any prepaid rental shall be prorated as of the effective date of such termination. SECTION 17. TENANT’S TAXES      Tenant further covenants and agrees to pay promptly when due all taxes assessed against Tenant’s fixtures, furnishings, equipment and stock-in trade placed in or on the Premises during the term of this Lease. SECTION 18. RISK OF GOODS      All personal property, goods, machinery, and merchandise in said Premises shall be at Tenant’s risk if damaged by water, fire, explosion, wind or accident of any kind, and Landlord shall have no responsibility therefore or liability for any of the foregoing and Tenant hereby releases Landlord from such liability. SECTION 19. USE AND OCCUPANCY      (a) Tenant agrees to initially open and operate a DSW for the retail sales of shoes and other footwear in the Premises, fully staffed and stocked and equivalent to other DSW stores operated by Tenant in the State of Virginia. The Premises during the term of this Lease shall be occupied for the operating and conducting therein of a retail shoe store or any other lawful retail purpose. Any use other than a retail shoe store shall be consistent with the then existing character of the Center, and shall not violate those exclusives and prohibited uses set forth on Exhibit “E” attached hereto and made a part hereof, which are the exclusives and prohibited uses in effect for the Center as of the date hereof, for so long as and to the extent said exclusives and prohibited uses are still in full force and effect, as well as exclusives and prohibited uses hereafter granted for tenants leasing more than 15,000 square feet of space elsewhere within the Center, for so long as and to the extent said exclusives are still in full force and effect.      (b) For so long as Tenant is continuously and regularly operating its business in the Premises, Landlord will not hereafter lease any space within the Center or permit any space within the Center to be used by any person, persons, partnership or entity who devotes ten percent (10%) or more of its selling area to the sale of footwear (the “Exclusive Use”). The foregoing limitation shall not apply to typical shoe departments found in department stores, junior department stores, general merchandise and discount stores, and clothing retailers, such as Filene’s Basement, Marshalls, TJ Maxx and similar type stores so long as such tenants are 16 --------------------------------------------------------------------------------   operating their prototypical shoe department. Any portion of the Center which is sold by Landlord during the term shall contain a deed restriction incorporating the foregoing Exclusive Use.      In the event an owner of an existing leasehold interest at the Center who has the right as of the date hereof to engage in the Exclusive Use (an “Excluded Leasehold”), and such owner desires to assign or sublet its leasehold interest in the Center, or any part thereof, and in connection therewith Landlord’s consent is required or requested, whether with respect to such assignment or subletting or any modification of such Excluded Leasehold in connection therewith, then Landlord agrees that it shall condition its consent thereto to such owner of the Excluded Leasehold agreeing to thereafter being subject to the Exclusive Use. In the event any such third party contests Landlord’s right to condition its consent to such Excluded Leasehold thereafter being subject to the Exclusive Use, Landlord agrees to use commercially reasonable efforts to satisfy the provisions of this paragraph. In the event Landlord fails to exercise commercially reasonable efforts to cause such Excluded Leasehold to be subject to the Exclusive Use, Tenant shall be entitled to a reduction in minimum rent in accordance with the provisions of the immediately following paragraph.      Landlord acknowledges that in the event of a breach or an attempted or prospective breach of this Section 19(b), Tenant’s remedies at law would be inadequate. Therefore, in any such event, if such breach is not cured within thirty (30) days after written notice from Tenant to Landlord, Tenant shall be entitled, at its option and without limitation of any other remedy permitted by law or equity or by this Lease, (i) to elect to pay in lieu of Base Rent and percentage rent due under this Lease two percent (2%) of Tenant’s gross sales calculated according to Tenant’s standard procedures in accordance with generally accepted accounting principles, (ii) to cancel this Lease on thirty (30) days written notice to Landlord, and/or (iii) to full and adequate relief by temporary or permanent injunction. Notwithstanding the foregoing, the remedy of lease cancellation shall not be applicable if the violation of this Section 19(b) is due to the breach of another tenant’s lease and Landlord is, in Tenant’s good faith judgment, diligently pursuing appropriate legal proceedings to halt the violation and such violation is so halted within sixty (60) days of Landlord’s receipt of Tenant’s notice.      (c) Tenant shall at all times conduct its operations on the Premises in a lawful manner and shall, at Tenant’s expense, comply with all laws, rules, orders, ordinances, directions, regulations, and requirements of all governmental authorities, now in force or which may hereafter be in force, which shall impose any duty upon Landlord or Tenant with respect to the business of Tenant and the use, occupancy or alteration of the Premises. Tenant shall comply with all requirements of the Americans with Disabilities Act, and shall be solely responsible for all alterations within the Premises in connection therewith. Tenant covenants and agrees that the Premises shall not be abandoned or left vacant and that only minor portions of the Premises shall be used for office or storage space in connection with Tenant’s business conducted in the Premises.      Without being in default of this Lease, Tenant shall have the right to cease operating (go dark) at any time and for whatever reason after the first (1st) lease year. Notwithstanding the foregoing, Tenant’s right to vacate (go dark), shall not release or excuse the Tenant from any obligations or liabilities, including the payment of minimum rent and additional rent and other charges, under this Lease without the express written consent of Landlord. In the event Tenant fails to (i) open and operate within ninety (90) days after delivery of the Premises or (ii) operate for one hundred twenty (120) or more consecutive days, Landlord shall have the right, effective upon thirty (30) days prior written notice to Tenant, to terminate the Lease as Landlord’s sole remedy, provided that if Tenant recommences operating fully stocked in substantially all of the premises within such thirty (30) days, Landlord’s termination shall be null and void. In the event Tenant fails to open and operate as provided above or shall cease operating as provided above, Landlord’s sole remedy on account thereof shall be limited to the right to elect to recapture the premises and terminate the Lease, whereupon there shall be no further liability of the parties hereunder. Such termination shall be effective upon written notice to Tenant any time prior to Tenant reopening for business in the Premises. Provided, however, in the event Landlord has not so elected to recapture, Tenant shall have right to notify Landlord of Tenant’s intention to reopen for business in the Premises within sixty (60) days, followed by Tenant’s actually reopening for business fully stocked in substantially all of the Premises within such sixty (60) day period, which notice and actual reopening shall toll Landlord’s right to recapture. 17 --------------------------------------------------------------------------------        (d) Landlord and Tenant agree that no space in the Center, including the Premises, shall be used as a bowling alley, deep discount retailer, theater showing either film, television or the like or live entertainment, health club, bar, games/amusement room, indoor playground, adult bookstore, flea market, bingo parlor, bar, tavern, restaurant, cocktail lounge, adult book or adult video store (defined for the purposes hereof as a store devoting ten percent (10%) or more of its floor space to offering books and/or video materials for sale or for rent which are directed to or restricted to adult customers due to sexually explicit subject matter or for any other reason making it inappropriate for general use), adult theater or “strip-tease” establishment, automotive maintenance or automotive repair facility, warehouse, car wash, pawn shop, check cashing service, establishment selling second hand goods, flea market, entertainment or recreational facility (as defined below), training or educational facility (as defined below); the renting, leasing, selling or displaying of any boat, motor vehicle or trailer; industrial or manufacturing purposes; a carnival, circus or amusement park; a gas station, facility for the sale of paraphernalia for use with illicit drugs, funeral home, blood bank or mortuary, gambling establishment, banquet hall, auditorium or other place of public assembly, second-hand or surplus store, gun range; the sale of fireworks; a veterinary hospital or animal raising facility; the storage of goods not intended to be sold from the Center; a video rental store, karate center, central laundry or dry cleaning plant, supermarket or any facility which is illegal or dangerous, constitutes a nuisance, emits offensive odors, fumes, dust or vapors or loud noise or sounds or is inconsistent with community oriented shopping centers. For the purposes of this Section 19(d), the phrase “entertainment or recreational facility” shall include, without limitation, a movie or live theater or cinema, bowling alley, skating rink, gym, health spa or studio, dance hall or night club, billiard or pool hall, massage parlor, health club, game parlor or video arcade (which shall be defined as any store containing more than five (5) electronic games) or any other facility operated solely for entertainment purposes (such as a “laser tag” or “virtual reality” theme operation). For the purposes of this Section 19(d), the phrase “training or educational facility” shall include, without limitation, a beauty school, nail salon, barber college, reading room, place of instruction or any other operation catering primarily to students or trainees as opposed to customers. Notwithstanding the foregoing, Landlord may lease any premises in the Center for use as a restaurant or supermarket provided that no part of the Center within two hundred feet (200’) of the Premises shall be used for such uses. The total floor area of all restaurants and medical, dental, professional and business offices located within the Center shall not exceed ten percent (10%) of the gross leasable area of the Center. Any portion of the Center which is sold by Landlord during the term shall contain a deed restriction incorporating the foregoing restrictions.      Landlord acknowledges that in the event of a breach or an attempted or prospective breach of this Section 19(d), Tenant’s remedies at law would be inadequate. Therefore, in any such event, if such breach is not cured within sixty (60) days after written notice from Tenant to Landlord, Tenant shall be entitled, at its option and without limitation of any other remedy permitted by law or equity or by this Lease, (i) to elect to pay in lieu of Base Rent and percentage rent due under this Lease two percent (2%) of Tenant’s gross sales calculated according to Tenant’s standard procedures in accordance with generally accepted accounting principles, and/or (ii) to full and adequate relief by temporary or permanent injunction. Notwithstanding the foregoing, the remedy of lease cancellation shall not be applicable if the violation of this Section 19(d) is due to the breach of another tenant’s lease and Landlord is, in Tenant’s good faith judgment, diligently pursuing appropriate legal proceedings to halt the violation and such violation is so halted within one hundred twenty (120) days of Landlord’s receipt of Tenant’s notice.      (e) Landlord and Tenant agree that (a) no auction, fire or going-out-of-business sales shall be conducted in the Center except a going-out-of-business sale conducted during the last thirty (30) days of an existing retail operation, (b) no exterior identification signs attached to any building in the Center shall be (i) flashing, moving or audible signs or (ii) signs employing exposed neon tubes, exposed ballast boxes or exposed transformers, and (c) no sidewalk sales shall be allowed in the Center. SECTION 20. NUISANCES      Tenant shall not perform any acts or carry on any practice which may injure the Premises or be a nuisance or menace to other tenants in the Center. 18 --------------------------------------------------------------------------------   SECTION 21. WASTE AND REFUSE REMOVAL      Tenant covenants that it will use, maintain and occupy said Premises in a careful, safe, lawful and proper manner and will not commit waste therein. Landlord or its agent shall have access at all reasonable times to the Premises for purposes of inspecting and examining the condition and maintenance of the Premises. Tenant agrees to remove all refuse from the Premises in a timely, clean and sanitary manner. Tenant shall provide a refuse collection container at the rear of the Premises to accommodate Tenant’s refuse and Tenant shall routinely clean up around trash containers. Tenant shall contract with a licensed and insured refuse collection contractor to timely remove refuse therefrom and the location of the container shall be approved by Landlord. SECTION 22. DAMAGE AND DESTRUCTION OF PREMISES      (a) Landlord shall at all times during the term of this Lease carry property insurance on the building containing the Premises, including the “Structural Portions” (defined in Section 24(a) below) and common utility lines up to the point they serve individual tenant’s premises. Landlord shall be under no obligation to maintain insurance on any improvements installed by or for the benefit of Tenant’s use of the premises or otherwise owned by Tenant. Landlord may elect to self-insure its obligations hereunder and/or use whatever deductibles as Landlord deems appropriate, in its sole discretion.      (b) If the Premises shall be damaged, destroyed, or rendered untenantable, in whole or in part, by or as the result or consequence of fire or other casualty during the term hereof, Landlord shall repair and restore the same to a good tenantable condition with reasonable dispatch. During such period of repair, the rent herein provided for in this Lease shall abate (i) entirely in case all of the Premises are untenantable; and (ii) proportionately if only a portion of the Premises is untenantable and Tenant is able to economically conduct its business from the undamaged portion of the Premises. The abatement shall be based upon a fraction, the numerator of which shall be the square footage of the damaged and unusable area of the Premises and the denominator shall be the total square footage of the Premises. Said abatement shall cease at such time as the Premises shall be restored to a tenantable condition.      (c) In the event the Premises, because of such damage or destruction, are not repaired and restored to a tenantable condition with reasonable dispatch within one hundred fifty (150) days from the date of receipt of insurance proceeds for such damage or destruction, Tenant or Landlord may, at their option, terminate this Lease within sixty (60) days following such one hundred fifty (150) day period but prior to the repair and restoration of same by giving prior written notice to the other party and thereupon Landlord and Tenant shall be released from all future liability and obligations under this Lease.      (d) If one-third (1/3) or more of the ground floor area of the Premises are damaged or destroyed during the last two (2) years of the original or any extended term of this Lease, Landlord shall have the right to terminate this Lease by written notice to Tenant within sixty (60) days following such damage or destruction, unless Tenant shall, within thirty (30) days following receipt of such notice, offer to extend the term of this Lease for an additional period of five (5) years from the date such damage or destruction is repaired and restored. If Tenant makes said offer to extend, Landlord and Tenant shall determine the terms and conditions of said extension within thirty (30) days thereafter or Tenant’s offer shall not be deemed to prevent Landlord from canceling this Lease. If such terms and conditions have been mutually agreed to by the parties, then Landlord shall accept Tenant’s offer and shall repair and restore the Premises with reasonable dispatch thereafter.      (e) If Landlord is required or elects to repair and restore the Premises as herein provided, Tenant shall repair or replace its stock in trade, trade fixtures, furniture, furnishings and equipment and other improvements including floor coverings, and if Tenant has closed, Tenant shall promptly reopen for business. Anything contained in this Section 22 to the contrary notwithstanding, Landlord’s restoration and repair obligations under Section 22 shall in no event include restoration or repair of Tenant’s Work or improvements. 19 --------------------------------------------------------------------------------   SECTION 23. LANDLORD REPAIRS      (a) Landlord shall keep in good order, condition, and repair, maintain and replace, as necessary, the following: (i) structural portions of the Premises; (ii) downspouts; (iii) gutters; (iv) the roof of the Building of which the Premises forms a part; and (v) any utility and other systems or lines serving the Premises but located outside of the Premises, except (as to all items) for damage caused by any negligent act or omission of Tenant or its customers, employees, agents, invitees, licensees or contractors, which shall be repaired or replaced as necessary, at the sole cost and expense of Tenant. “Structural Portions” shall mean only the following: (vi) foundations; (vii) exterior walls except for interior faces); (viii) concrete slabs; (ix) the beams and columns bearing the main load of the roof; and (x) the floors (but not floor coverings).      (b) Notwithstanding the provisions of Section 23(a) above, Landlord shall not be obligated to repair the following: (i) the exterior or interior of any doors, windows, plate glass, or showcases surrounding the Premises or the store front or (ii) damage to Tenant’s improvements or personal property caused by any casualty, burglary, break-in, vandalism, acts of terrorism, war or act of G-d. Landlord shall, in any event, have ten (10) days after notice from Tenant stating the need for repairs to complete same, or commence and proceed with due diligence to complete same. Landlord shall be obligated to replace all HVAC components as and when necessary so long as Tenant has fulfilled its obligations under Section 24(a)(ii) below. Except as specifically set forth herein, Tenant expressly hereby waives the provisions of any law permitting repairs by a tenant at Landlord’s expense.      (c) The provisions of this Section 23 shall not apply in the case of damage or destruction by fire or other casualty or a taking under the power of eminent domain in which events the obligations of Landlord shall be controlled by Section 22 and Section 16 respectively.      (d) Landlord shall assign to Tenant all warranties covering all matters required by the terms hereof to be repaired and maintained by Landlord.      (e) If Landlord fails to make any of the repairs required to be made under this Lease within thirty (30) days after written notice from Tenant, Tenant, in addition to any other rights it may have hereunder or at law or in equity, shall have the right to make said repairs on behalf of Landlord and to bill Landlord for the reasonable cost thereof. Landlord shall have thirty (30) days to reimburse Tenant. In the event of an emergency or if any such repairs are immediately necessary for the proper use and enjoyment of the Premises, no prior thirty (30) days notice shall be required, Tenant, after diligent effort to first notify Landlord, forthwith make said repairs on behalf of Landlord and bill Landlord for the reasonable cost thereof. Tenant has not received reimbursement for any repairs permitted to be made under this Section 23(e) within such thirty (30) day period, Tenant shall have the right to deduct the cost of repairs from Rent otherwise due Landlord. SECTION 24. TENANT’S REPAIRS      (a) Tenant shall keep and maintain, at Tenant’s expense, all and every other part of the Premises in good order, condition and repair, including, by way of example but not limitation: (i) all leasehold improvements; (ii) all HVAC unit(s), equipment and systems (including all components thereof) serving the Premises; (iii) interior plumbing and sewage facilities; (iv) all interior lighting; (v) electric signs; (vi) all interior walls; (vii) floor coverings; (viii) ceilings; (ix) appliances and equipment; (x) all doors, exterior entrances, windows and window moldings; (xi) plate glass; (xii) signs and showcases surrounding and within the Premises; (xiii) the store front; (xiv) sprinkler systems including supervisory alarm service in accordance with National Fire Protection Association standards and current local and state fire protection standards to ensure property operation.      (b) Sprinkler systems, if any, located in Tenant’s area shall be maintained in accordance with National Fire Protection Association standards to ensure proper operation. Sprinkler control valves (interior and exterior) located in Tenant’s area shall be monitored by supervisory alarm service. In the event local or state codes do not require alarm systems, Tenant shall provide alarm service on all sprinkler systems to detect water flow and tampering with exterior and interior main control valves of the sprinkler system servicing Tenant’s premises. 20 --------------------------------------------------------------------------------   Moreover, it shall be Tenant’s responsibility to contact Chuck Seall, VP Property Management at 614-449-6890, in the event the sprinkler system in the Premises is ever shut off for any reason, and advise same of any damage occasioned or caused by the actions of Tenant, its agents, invitees, or employees, and/or as a result of Tenant’s repair obligations hereunder. In the event fifty percent (50%) or more of the total number of sprinkler heads require replacement at any one time as part of ordinary maintenance, but excluding repairs or replacements that arise from (x) repairs, installations alterations, or improvements made by or for Tenant or anyone claiming under Tenant, or (y) the fault or misuse of Tenant or anyone claiming under Tenant, such cost shall be fifty percent (50%) borne by Landlord and fifty percent (50%) borne by Tenant. Tenant, at Tenant’s sole cost and expense, shall replace all sprinkler heads due to repairs, installations, alterations, or improvements made by or for Tenant or anyone claiming under Tenant, the fault or misuse of Tenant or anyone claiming under Tenant, painting or environmental exposure from Tenant’s operations. All other costs of maintaining the sprinkler system in the Premises shall be paid by Tenant.      (c) If Landlord deems any repair which Tenant is required to make hereunder to be necessary, Landlord may demand that Tenant make such repair immediately. If Tenant refuses or neglects to make such repair and to complete the same with reasonable dispatch, Landlord may make such repair and Tenant shall, on demand, immediately pay to Landlord the cost of said repair, together with annual interest at the Interest Rate. Landlord shall not be liable to Tenant for any loss or damage that may accrue to Tenant’s stock or business by reason of such work or its results.      (d) Neither Tenant nor any of its contractors are permitted access to or permitted to perform alterations of any kind to the roof of the Premises.      (e) Tenant shall pay promptly when due the entire cost of work in the Premises undertaken by Tenant under this Lease (including, but not limited to, Tenant’s Work and/or alterations permitted under Section 7 of this Lease) so that the Premises and the Center shall at all times be free of liens for labor and materials arising from such work; to procure all necessary permits before undertaking any such work; to do all of such work in a good and workmanlike manner, employing materials of good quality; to perform such work only with contractors previously reasonably approved of in writing by Landlord; to comply with all governmental requirements; and save Landlord and its agents, officers, employees, contractors and invitees harmless and indemnified from all liability, injury, loss, cost, damage and/or expense (including reasonable attorneys’ fees and expenses) in respect of any injury to, or death of, any person, and/or damage to, or loss or destruction of, any property occasioned by or growing out of any such work. SECTION 25. COVENANT OF TITLE AND PEACEFUL POSSESSION      Subject to the provisions of Section 11 hereof, Landlord shall, on or before the date on which Tenant is permitted to install its merchandise and fixtures in the Premises, have good and marketable title to the Premises in fee simple and the right to make this Lease for the term aforesaid. At such time, Landlord shall put Tenant into complete and exclusive possession of the Premises, and if Tenant shall pay the rental and perform all the covenants and provisions of this Lease to be performed by the Tenant, Tenant shall, during the term hereby demised, freely, peaceably, and quietly enjoy and occupy the full possession of the Premises and the common facilities of the Center, subject, however, to the terms and conditions of this Lease. SECTION 26. TENANT’S AND LANDLORD’S INSURANCE; INDEMNITY      (a) Tenant’s Commercial General Liability Insurance. Commencing as of the Commencement Date, and thereafter throughout the term of this Lease, Tenant shall, at Tenant’s sole cost and expense, provide and maintain or cause to be provided and maintained a commercial general liability policy (including coverage for product and contractual liability), naming Tenant as an insured (and naming Landlord as an additional insured, said additional insured’s coverage under Tenant’s commercial general liability policy to be primary), protecting Tenant, the business operated by Tenant, and any additional insureds (including Landlord) against claims for bodily injury (including death) and property damage occurring within the Premises. Such insurance shall afford protection to the limits of not less than One Million Dollars ($1,000,000.00) per occurrence and Five Hundred Thousand Dollars ($500,000.00) with 21 --------------------------------------------------------------------------------   respect to property damage for fire legal liability. Tenant may use commercially reasonable deductibles Tenant customarily carries in the conduct of its business; however, Tenant shall be responsible for all such deductibles or self-insured retention level. All liability policies shall be written on an occurrence form.      (b) Worker’s Compensation. Commencing as of the Commencement Date, and thereafter throughout the term of this Lease, Tenant shall, at Tenant’s sole cost and expense, provide and maintain or cause to be provided and maintained workers’ compensation insurance (meeting the requirements of the state workers’ compensation laws) and employer liability insurance covering all of Tenant’s employees at the Premises. Tenant shall also use good faith efforts to ensure all contractors, sub-contractors, vendors, leased employees, and temporary employees are properly insured for workers’ compensation.      (c) Tenant’s Umbrella. Commencing as of the Commencement Date, and thereafter throughout the term of this Lease, Tenant shall, at Tenant’s sole cost and expense, provide and maintain or cause to be provided and maintained an umbrella liability insurance policy with a Ten Million Dollar ($10,000,000.00) policy limits, which umbrella policy (or policies) shall list the commercial general liability, product liability, contractual liability and employer liability policies required hereunder, and any other liability policy or policies carried by, or for the benefit of, Tenant as underlying policies. Said umbrella liability insurance policy shall also name Landlord as an additional insured (said additional insured’s coverage under Tenant’s umbrella liability policy to be primary). All liability policies shall be written on an occurrence form.      (d) Tenant’s Property Insurance. Commencing as of the Commencement Date, and thereafter throughout the term of this Lease, Tenant shall, at Tenant’s sole cost and expense, provide and maintain or cause to be provided and maintained a property insurance policy insuring Tenant’s contents, fixtures, equipment and personal property located within the Premises and/or owned by Tenant for all the hazards and perils normally covered by the Causes of Loss-Special Form. Said property insurance policy shall include endorsements for coverage against: (i) earthquake and flood (including, but not limited to, mud slide, flood hazard or fault area(s), as designated on any map prepared or issued for such purpose by any governmental authority); and (ii) increased costs of construction and demolition due to law and ordinance. The foregoing property coverage shall be provided in amounts sufficient to provide one hundred percent (100%) of the full replacement cost of Tenant’s contents, fixtures, equipment and personal property located within the Premises and/or owned by Tenant. If for any reason the Causes of Loss-Special Form is not customarily used in the insurance industry, then the property insurance policy then in effect shall at least provide coverage for the following perils: fire, lightning, windstorm and hail, explosion, smoke, aircraft and vehicles, riot and civil commotion, vandalism and malicious mischief, sprinkler leakage, sinkhole and collapse, volcanic action, earthquake or earth movement, and flood, and increased costs of construction and demolition due to law, ordinance and inflation. The property insurance policy required to be maintained by Tenant under this Section 26(d) shall: (y) not provide coverage for Tenant’s Improvements (defined in Section 49 below), which Tenant’s Improvements shall be insured by Landlord as required under Section 26(a);      (e) Landlord’s Property Insurance. Commencing as of the Commencement Date, and thereafter throughout the term of this Lease, Landlord shall, at Landlord’s sole cost and expense, provide and maintain or cause to be provided and maintained a property insurance policy insuring all buildings (and building additions) and other improvements in the Center, Tenant’s store building, and Tenant Improvements (but excluding those items insured by Tenant as required under Section 26(d)) for all the hazards and perils normally covered by the Causes of Loss-Special Form. Said property insurance policy shall include endorsements for coverage against: (i) earthquake and flood (including, but not limited to, mud slide, flood hazard or fault area(s), as designated on any map prepared or issued for such purpose by any governmental authority); and (ii) increased costs of construction and demolition due to law and ordinance. The foregoing property coverage shall be provided in amounts sufficient to provide one hundred percent (100%) of the full replacement cost of all buildings (and building additions) and other improvements in the Center, Tenant’s store building, and Tenant Improvements (but excluding those items insured by Tenant as required under Section 26(d)). If for any reason the Causes of Loss-Special Form is not customarily used in the insurance industry, then the property insurance policy then in effect shall at least provide coverage for the following perils: fire, lightning, windstorm and hail, explosion, smoke, aircraft and vehicles, riot and civil commotion, vandalism 22 --------------------------------------------------------------------------------   and malicious mischief, sprinkler leakage, sinkhole and collapse, volcanic action, earthquake or earth movement, and flood, and increased costs of construction and demolition due to law, ordinance and inflation. Neither Tenant nor any of its affiliates or subtenants shall be liable to Landlord for any loss or damage (including loss of income), regardless of cause, resulting from fire, flood, act of G-d or other casualty.      (f) Landlord’s Commercial General Liability Insurance. Commencing as of the Commencement Date, and thereafter throughout the term of this Lease, Landlord shall, at Landlord’s sole cost and expense, provide and maintain or cause to be provided and maintained a commercial general liability policy (including coverage for contractual liability), naming Landlord as an insured (and naming Tenant as an additional insured, said additional insured’s coverage under Landlord’s commercial general liability policy to be primary), protecting Landlord, the business operated by Landlord, and any additional insureds (including Tenant) against claims for bodily injury (including death) and property damage occurring upon, in or about the Center (other than the Premises and those areas insured by other tenants at the Center), including Common Areas. Such insurance shall afford protection to the limits of not less than One Million Dollars ($1,000,000.00) per occurrence and Five Hundred Thousand Dollars ($500,000.00) with respect to property damage for fire legal liability. All liability policies shall be written on an occurrence form. Landlord may use commercially reasonable deductibles Landlord customarily carries in the conduct of its business; however, Landlord shall be responsible for all such deductibles or self-insured retention levels.      (g) Landlord’s Umbrella. Commencing as of the Commencement Date, and thereafter throughout the term of this Lease, Landlord shall, at Landlord’s sole cost and expense, provide and maintain or cause to be provided and maintained an umbrella liability insurance policy with a Ten Million Dollar ($10,000,000.00) minimum annual aggregate, which umbrella policy (or policies) shall list Landlord’s commercial general liability and contractual liability policies required hereunder, and any other liability policy or policies carried by, or for the benefit of, Landlord as underlying policies. Said umbrella liability policy shall also name Tenant as an additional insured (said additional insured’s coverage under Landlord’s umbrella liability policy to be primary). All liability policies shall be written on an occurrence form.      (h) All insurance provided for in this Section 26 shall be effected under standard form policies issued by insurers of recognized responsibility authorized to do business in the state in which the Premises are located; provided, however, that Landlord or Tenant may self-insure any of the amounts herein stated pursuant to a bona fide self-insurance retention program so long as the amounts so self-insured by such party do not exceed ten percent (10%) of such party’s net worth as computed in accordance with generally accepted accounting principles consistently applied by such party.      (i) Prior to the Commencement Date, and thereafter during the term hereof within fifteen (15) days after request therefor by either party, and within fifteen (15) days after each policy renewal date, Tenant and Landlord shall furnish the other party with certificates of insurance evidencing all insurance coverage required herein. All such certificates shall: (i) evidence the continuous existence during the term hereof of the insurance required hereunder; (ii) include attachment of an additional insured endorsement; (iii) name any and all non-standard exclusions or limitations; and (iv) contain a provision that the insurance carrier shall not cancel or modify the insurance coverage without giving at least ten (10) days prior written notice thereof to both Landlord and Tenant at their last known address as provided for herein. Current certificates of insurance shall be delivered to both Landlord and Tenant in time sufficient to assure that both Landlord and Tenant shall always possess certificates of insurance evidencing current insurance coverage. All insurance carriers shall be licensed to do business in the state in which the Premises is located and shall have a Best’s Key Rating Guide rating of A- VIII.      (j) Landlord and Tenant shall neither do nor suffer anything to be done whereby any of the insurance required by the provisions of this Section 26 shall or may be invalidated in whole or in part. Landlord shall not permit or suffer to be done in any part of the Center any activities which shall increase the rate of any insurance to be maintained by Tenant over that rate normal and customary for Tenant’s type of business or which shall increase the rate on any insurance maintained by Landlord for which Tenant is required to reimburse Landlord pursuant to Section 28 hereof. Should such occur, Landlord shall pay, without reimbursement from Tenant, all costs and expenses of such insurance over the base rate. Tenant shall not permit or 23 --------------------------------------------------------------------------------   suffer to be done in any part of the Premises any activities which shall increase the rate of any insurance to be maintained by Landlord over the base rate. Should such occur, Tenant shall pay all costs and expenses of such insurance over the base rate.      (k) Notwithstanding anything to the contrary hereinabove contained, Tenant or Landlord, may, at its option, include any of the insurance coverage hereinabove set forth in general or blanket policies of insurance. All insurance required hereunder shall be consistent with sound insurance practices.      (l) Tenant and Landlord shall cooperate with each other in connection with the collection of any insurance monies that may be due in the event of loss and Landlord shall execute and deliver to Tenant such proofs of loss and other instruments which may be required for the purpose of obtaining the recovery of any such insurance monies.      (m) Tenant Indemnity. Subject to Section 34 of this Lease, Tenant shall indemnify Landlord, Landlord’s agents, employees, officers or directors, against all damages, claims and liabilities arising from any alleged products liability or from any accident or injury whatsoever caused to any person, firm or corporation during the demised term in the Premises, unless such claim arises from a breach or default in the performance by Landlord of any covenant or agreement on its part to be performed under this Lease or, to the extent not required to be insured hereunder, the negligence of Landlord. The indemnification herein provided shall include all reasonable costs, counsel fees, expenses and liabilities incurred in connection with any such claim or any action or proceeding brought thereon.      (n) Landlord Indemnity. Subject to Section 34 of this Lease, Landlord shall indemnify Tenant, Tenant’s officers, directors, employees and agents against all damages, claims and liabilities arising from any accident or injury whatsoever caused to any person, firm or corporation during the demised term in the Center (excluding therefrom the Premises), unless such claim arises from a breach or default in the performance by Tenant of any covenant or agreement on Tenant’s part to perform under this Lease or, to the extent not required to be insured hereunder, the negligence of Tenant. The indemnification herein provided shall include all reasonable costs, counsel fees, expenses and liabilities incurred in connection with any such claim or any action or proceeding brought thereon. SECTION 27. REAL ESTATE TAXES      (a) Tenant shall pay Tenant’s Proportionate Share (as defined in Section 15(c) above) of any “Real Estate Taxes” (defined in Section 27(b) below) imposed upon the Center that become due and payable during each lease year included within the period commencing with the Commencement Date and ending with the expiration of the term of this Lease. Tenant shall initially pay to landlord as additional rental, simultaneously with the payment of Base Rent called for under Section 4(a), the estimated monthly amount of Tenant’s Proportionate Share of Real Estate Taxes as set forth in Section 4(c) of One Dollar ($1.00) per square foot based on the Rentable Square Feet in effect under Section 5(a) above. Within one hundred twenty (120) days after the end of each accounting year (which Landlord may change from time to time), Landlord shall provide Tenant with an annual reconciliation of Real Estate Taxes and a statement of the actual amount of Tenant’s Proportionate Share thereof. Any excess payments from Tenant shall be applied to the next installments of Real Estate Taxes hereunder, or refunded by Landlord. Any underpayments by Tenant shall be paid to Landlord within thirty (30) days after receipt of such reconciliation statement. Tenant’s estimated monthly installment of Real Estate Taxes payable hereunder may be adjusted by written notice from Landlord.      (b) For the purpose of this Lease, the term “Real Estate Taxes” shall include any special and general assessments, water and sewer rents and other governmental impositions imposed upon or against the Center of every kind and nature whatsoever, extraordinary as well as ordinary, foreseen and unforeseen and each and every installment thereof, which shall or may during the lease term be levied, assessed or imposed upon or against such Center and of all expenses, including reasonable attorneys’ fees, administrative hearing and court costs incurred in contesting or negotiating the amount, assessment or rate of any such real estate taxes, minus any refund received by Landlord. 24 --------------------------------------------------------------------------------        (c) Notwithstanding any provision of this Lease to the contrary, Tenant shall not be obligated to pay for any assessment for special improvements heretofore installed or in the process of installation in connection with the initial development of the Center, and Landlord hereby agrees to pay for the same.      (d) The real estate taxes for any lease year shall be the real estate taxes that become due and payable during such lease year. If any lease year shall be greater than or less than twelve (12) months, or if the real estate tax year shall be changed, an appropriate adjustment shall be made. If there shall be more than one taxing authority, the real estate taxes for any period shall be the sum of the real estate taxes for said period attributable to each taxing authority. If, upon the assessment day for real estate taxes for any tax year fully or partly included within the term of this Lease, a portion of such assessment shall be attributable to buildings in the process of construction, a fair and reasonable adjustment shall be made to carry out the intent of this Section 27.      (e) Upon request, Landlord shall submit to Tenant true copies of the real estate tax bill for each tax year or portion of a tax year included within the term of this Lease and shall bill Tenant for the amount to be paid by Tenant hereunder. Said bill shall be accompanied by a computation of the amount payable by Tenant and such amount shall be paid by Tenant within thirty (30) days after receipt of said bill.      (f) Should the State of Virginia or any political subdivision thereof or any governmental authority having jurisdiction thereof, impose a tax and/or assessment (other than an income or franchise tax) upon or against the rentals payable hereunder, in lieu of or in addition to assessments levied or assessed against the Premises, or Center, then such tax and/or assessment shall be deemed to constitute a tax on real estate for the purpose of this Section 27. SECTION 28. TENANT’S INSURANCE CONTRIBUTION      Tenant shall pay as additional rent, Tenant’s Proportionate Share (as defined in Section 15(c) above) of the premiums for the insurance maintained by Landlord on all buildings and improvements, as well as liability insurance, for the Center, including the Common Areas, as set forth above in Section 28, for each Lease Year during the term of this Lease. The premiums for the first and last Lease Years shall be prorated. Tenant shall pay Tenant’s Proportionate Share of such premiums annually upon demand for such payment by Landlord. Tenant’s Proportionate Share thereof shall be paid by Tenant within thirty (30) days after Landlord’s demand therefore. Tenant shall initially pay to Landlord as additional rental, simultaneously with the payment of Base Rent called for under Section 4(a), the estimated monthly amount of Tenant’s Proportionate Share of such insurance premiums as set forth in Section 4(c), of Twenty-Five Cents ($0.25) per square foot based on the Rentable Square Feet in effect under Section 5(a) above. Within one hundred twenty (120) days after the end of each accounting year (which Landlord may change from time to time), Landlord shall provide Tenant with a reconciliation of the premiums for the insurance maintained by Landlord hereunder and a statement of the actual amount of Tenant’s Proportionate Share thereof. Any excess payments from Tenant shall be applied to the next installments of insurance premiums payable by Tenant hereunder, or refunded by Landlord. Any underpayments by Tenant shall be paid to Landlord within thirty (30) days after receipt of such reconciliation statement. Tenant’s monthly installment of insurance premiums payable hereunder may be adjusted by written notice from Landlord. SECTION 29. FIXTURES      Provided that Tenant shall repair any damage caused by removal of its property and provided that the Tenant is not in default under this Lease, Tenant shall have the right to remove from the Premises all of its signs, shelving, electrical, and other fixtures and equipment, window reflectors and backgrounds and any and all other trade fixtures which it has installed in and upon the Premises. SECTION 30. SURRENDER      The Tenant covenants and agrees to deliver up and surrender to the Landlord the physical possession of the Premises upon the expiration of this Lease or its termination as herein provided in as good condition and repair as the same shall be at the commencement of the initial term, loss 25 --------------------------------------------------------------------------------   by fire and/or ordinary wear and tear excepted, and to deliver all of the keys to Landlord or Landlord’s agents. SECTION 31. HOLDING OVER      There shall be no privilege of renewal hereunder (except as specifically set forth in this Lease) and any holding over after the expiration by the Tenant shall be from day to day on the same terms and conditions (with the exception of rental which shall be prorated on a daily basis at one hundred twenty-five percent (125%) the daily rental rate of the most recent expired term) at Landlord’s option; and no acceptance of rent by or act or statement whatsoever on the part of the Landlord or his duly authorized agent in the absence of a written contract signed by Landlord shall be construed as an extension of the term or as a consent for any further occupancy. SECTION 32. NOTICE      Any consent, waiver, notice, demand, request or response thereto or other instrument required or permitted to be given under this Lease shall be given by overnight courier or by certified United States mail, return receipt requested, postage prepaid: (a) if to Landlord, at the address set forth in Section 1; and (b) if to Tenant, at the address set forth in Section 1 with duplicate copies to (i) Sr. Vice President — Real Estate, 4150 East Fifth Avenue, Columbus, Ohio 43219 and (ii) General Counsel, 4150 East Fifth Avenue, Columbus, Ohio 43219. Either party may change its address for notices by notice in the manner set forth above, given at least thirty (30) days in advance. All such consents, waivers, notices, demands, requests or other instruments shall be deemed given upon receipt thereof or upon the refusal of the addressee to receive the same. SECTION 33. DEFAULT      (a) Elements of Default: The occurrence of any one or more of the following events shall constitute a default of this Lease by Tenant: 1. Tenant fails to pay any monthly installment of rent within ten (10) days after the same shall be due and payable, except for the first two (2) times in any consecutive twelve (12) month period, in which event Tenant shall have five (5) days after receipt of written notice of such failure to pay before such failure shall constitute a default; 2. Tenant fails to perform or observe any term, condition, covenant or obligation required to be performed or observed by it under this Lease for a period of twenty (20) days after notice thereof from Landlord; provided, however, that if the term, condition, covenant or obligation to be performed by Tenant is of such nature that the same cannot reasonably be cured within twenty (20) days and if Tenant commences such performance or cure within said twenty (20) day period and thereafter diligently undertakes to complete the same, then such failure shall not be a default hereunder if it is cured within a reasonable time following Landlord’s notice, but in no event later than forty-five (45) days after Landlord’s notice. 3. A trustee or receiver is appointed to take possession of substantially all of Tenant’s assets in, on or about the Premises or of Tenant’s interest in this Lease (and Tenant or any guarantor of Tenant’s obligations under this Lease does not regain possession within sixty (60) days after such appointment); Tenant makes an assignment for the benefit of creditors; or substantially all of Tenant’s assets in, on or about the Premises or Tenant’s interest in this Lease are attached or levied upon under execution (and Tenant does not discharge the same within sixty (60) days thereafter). 4. A petition in bankruptcy, insolvency, or for reorganization or arrangement is filed by or against Tenant or any guarantor of Tenant’s obligations under this Lease pursuant to any Federal or state statute, and, with respect to any such petition filed against it, Tenant or such guarantor fails to secure a stay or discharge thereof within sixty (60) days after the filing of the same. 26 --------------------------------------------------------------------------------        (b) Landlord’s Remedies: Upon the occurrence of any event of default, Landlord shall have the following rights and remedies, any one or more of which may be exercised without further notice to or demand upon Tenant: 1. Landlord may re-enter the Premises and cure any default of Tenant, in which event Tenant shall reimburse Landlord for any reasonable out-of-pocket cost and expenses which Landlord may incur to cure such default; and Landlord shall not be liable to Tenant for any loss or damage which Tenant may sustain by reason of Landlord’s action. 2. Landlord may terminate this Lease or Tenant’s right to possession under this Lease as of the date of such default, without terminating Tenant’s obligation to pay rent due hereunder, in which event (A): neither Tenant nor any person claiming under or through Tenant shall thereafter be entitled to possession of the Premises, and Tenant shall immediately thereafter surrender the Premises to Landlord; (B) Landlord may re-enter the Premises and dispose Tenant or any other occupants of the Premises by force, summary proceedings, ejectment or otherwise, and may remove their effects, without prejudice to any other remedy which Landlord may have for possession or arrearages in rent; and (C) notwithstanding a termination of this Lease, Landlord shall use good faith efforts to re-let all or any part of the Premises for at least the balance of the term of this Lease for commercially reasonable rent, whereupon Tenant shall be obligated to pay to Landlord as liquidated damages the difference between the rent provided for herein and that provided for in any lease covering a subsequent re-letting of the Premises, such deficiency to be computed and paid monthly at the times that Rent is payable hereunder, together with all of Landlord’s reasonable costs and expenses for preparing the Premises for re-letting, including all repairs which are Tenant’s obligations hereunder, reasonable broker’s and attorney’s fees, and all loss or damage which Landlord may sustain by reason of such termination, re-entry and re-letting, it being expressly understood and agreed that the liabilities and remedies specified herein shall survive the termination of this Lease. Notwithstanding a termination of this Lease by Landlord, Tenant shall remain liable for payment of all rentals and other charges and costs imposed on Tenant herein, in the amounts, at the times and upon the conditions as herein provided. Landlord shall credit against such liability of the Tenant all amounts received by Landlord from such re-letting after first reimbursing itself for all reasonable costs incurred in curing Tenant’s defaults and re-entering, preparing and refinishing the Premises for re-letting, and re-letting the Premises. 3. Upon termination of this Lease pursuant to Section 33(b)2, Landlord may recover possession of the Premises under and by virtue of the provisions of the laws of the State of Virginia, or by such other proceedings, including reentry and possession, as may be applicable. 4. If the Tenant shall not remove all of Tenant’s property from said Premises as provided in this Lease, Landlord, at its option, may remove any or all of said property in any manner that Landlord shall choose and store same without liability for loss thereof, and Tenant will pay the Landlord, on demand, any and all reasonable expenses incurred in such removal and storage of said property for any length of time during which the same shall be in possession of Landlord or in storage, or Landlord may, upon thirty (30) days prior notice to Tenant, sell any or all of said property in such manner and for such price as the Landlord may reasonably deem best and apply the proceeds of such sale upon any amounts due under this Lease from the Tenant to the Landlord, including the reasonable expenses of removal and sale. 5. Any damage or loss of rent sustained by Landlord may be recovered by Landlord, at Landlord’s option, at the time of the reletting, or in separate actions, from time to time, as said damage shall have been made more easily ascertainable by successive relettings, or at Landlord’s option in a single proceeding deferred until the expiration of the term of this Lease (in which event Tenant hereby agrees that the cause of action shall not be deemed to have accrued until the date of 27 --------------------------------------------------------------------------------   expiration of said term) or in a single proceeding prior to either the time of reletting or the expiration of the term of this Lease. 6. In the event of a breach by Tenant of any of the covenants or provisions hereof, Landlord shall have the right of injunction and the right to invoke any remedy allowed at law or in equity as if reentry, summary proceedings, and other remedies were not provided for herein. Mention in this Lease of any particular remedy shall not preclude Landlord from any other remedy, in law or in equity. Tenant hereby expressly waives any and all rights of redemption granted by or under any present or future laws in the event of Tenant being evicted or dispossessed for any cause, or in the event of Landlord obtaining possession of the Premises by reason of the violation by Tenant of any of the covenants and conditions of this Lease or other use. 7. Tenant hereby expressly waives any and all rights of redemption granted by or under any present or future laws, in the event of eviction or dispossession of Tenant by Landlord under any provision of this Lease. No receipt of monies by Landlord from or for the account of Tenant or from anyone in possession or occupancy of the Premises after the termination of this Lease or after the giving of any notice shall reinstate, continue or extend the term of this Lease or affect any notice given to the Tenant prior to the receipt of such money, it being agreed that after the service of notice or the commencement of a suit, or after final judgment for possession of said Premises, the Landlord may receive and collect any rent or other amounts due Landlord and such payment shall not waive or affect said notice, said suit or said judgment.      (c) Additional Remedies and Waivers: The rights and remedies of Landlord set forth herein shall be in addition to any other right and remedy now or hereinafter provided by law and/or equity and all such rights and remedies shall be cumulative and shall not be deemed inconsistent with each other, and any two or more or all of said rights and remedies may be exercised at the same time or at different times and from time to time without waiver thereof of any right or remedy provided or reserved to Landlord. No action or inaction by Landlord shall constitute a waiver of a default and no waiver of default shall be effective unless it is in writing, signed by the Landlord.      (d) Default by Landlord. Any failure by Landlord to observe or perform any provision, covenant or condition of this Lease to be observed or performed by Landlord, if such failure continues for thirty (30) days after written notice thereof from Tenant to Landlord, shall constitute a default by Landlord under this Lease, provided, however, that if the nature of such default is such that the same cannot reasonably be cured within a thirty (30) day period, Landlord shall not be deemed to be in default if it shall commence such cure within such thirty (30) day period and thereafter rectify and cure such default with due diligence.      (e) Interest on Past Due Obligations: All monetary amounts required to be paid by Tenant or Landlord hereunder which are not paid on or before the due date thereof shall, from and after such due date, bear interest at the Interest Rate, and shall be due and payable by such party without notice or demand.      (f) Tenant’s Remedies. In the event of default by the Landlord with respect to the Premises, Tenant shall have the option to cure said default. Landlord shall reimburse Tenant for the reasonable costs incurred by Tenant in curing such default within thirty (30) days after invoice thereof by Tenant, together with reasonable evidence supporting such invoiced amount. Tenant shall also have any and all rights available under the laws of the state in which the Premises are situated; provided, however, that any right of offset available to Tenant shall be subject to the provisions of Section 35 below. SECTION 34. WAIVER OF SUBROGATION      Landlord and Tenant, and all parties claiming under each of them, mutually release and discharge each other from all claims and liabilities arising from or caused by any casualty or hazard covered or required hereunder to be covered in whole or in part by insurance coverage required to be maintained by the terms of this Lease on the Premises or in connection with the 28 --------------------------------------------------------------------------------   Center or activities conducted with the Premises, and waive any right of subrogation which might otherwise exist in or accrue to any person on account thereof. All policies of insurance required to be maintained by the parties hereunder shall contain waiver of subrogation provisions so long as the same are available. SECTION 35. LIABILITY OF LANDLORD; EXCULPATION      (a) Except with respect to any damages resulting from the gross negligence of Landlord, its agents, or employees, Landlord shall not be liable to Tenant, its agents, employees, or customers for any damages, losses, compensation, accidents, or claims whatsoever. The foregoing notwithstanding, it is expressly understood and agreed that nothing in this Lease contained shall be construed as creating any liability whatsoever against Landlord personally, and in particular without limiting the generality of the foregoing, there shall be no personal liability to pay any indebtedness accruing hereunder or to perform any covenant, either express or implied, herein contained, or to keep, preserve or sequester any property of Landlord and that all personal liability of Landlord to the extent permitted by law, of every sort, if any, is hereby expressly waived by Tenant, and by every person now or hereafter claiming any right or security hereunder; and that so far as the parties hereto are concerned, the owner of any indebtedness or liability accruing hereunder shall look solely to the Premises and the Center for the payment thereof.      (b) If the Tenant obtains a money judgment against Landlord, any of its officers, directors, shareholders, partners, members or their successors or assigns under any provisions of or with respect to this Lease or on account of any matter, condition or circumstance arising out of the relationship of the parties under this Lease, Tenant’s occupancy of the building or Landlord’s ownership of the Center, Tenant shall be entitled to have execution upon any such final, unappealable judgment only upon Landlord’s fee simple or leasehold estate in the Center (whichever is applicable) and not out of any other assets of Landlord, or any of its officers, directors, shareholders, members or partners, or their successor or assigns; and Landlord shall be entitled to have any such judgment so qualified as to constitute a lien only on said fee simple or leasehold estate.      Notwithstanding the above, Tenant shall have the right to offset any final, unappealable judgment against twenty five percent (25%) of all minimum rent and all percentage rental (but no other additional rent components) if not paid to Tenant by Landlord within thirty (30) days thereafter.      (c) It is expressly agreed that nothing in this Lease shall be construed as creating any personal liability of any kind against the assets of any of the officers, directors, members, partners or shareholders of Tenant, or their successors and assigns. SECTION 36. RIGHTS CUMULATIVE      Unless expressly provided to the contrary in this Lease, each and every one of the rights, remedies and benefits provided by this Lease shall be cumulative and shall not be exclusive of any other of such rights, remedies and benefits or of any other rights, remedies and benefits allowed by law. SECTION 37. MITIGATION OF DAMAGES      Notwithstanding any of the terms and provisions herein contained to the contrary, Landlord and Tenant shall each have the duty and obligation to mitigate, in every reasonable manner, any and all damages that may or shall be caused or suffered by virtue of defaults under or violation of any of the terms and provisions of this Lease agreement committed by the other. SECTION 38. SIGNS      (a) Landlord shall, at its sole cost and expense, construct, erect and maintain at the location shown on the Site Plan a pylon sign upon which Tenant’s advertising panel shall be installed. Tenant’s prototypical advertising panel for such pylon sign, which is hereby approved by Landlord, is as shown on Exhibit “F” attached hereto and made a part hereof. Thereafter, throughout the term of this Lease, Tenant shall have continuous representation on (a) such pylon 29 --------------------------------------------------------------------------------   sign and any replacement pylon sign consistent with Exhibit “F” and (b) any new pylon signs erected at the Center, and Tenant shall have no worse representation on any such new pylon sign(s) than any other tenant of the Center leasing the same or less square feet of leasable space as Tenant.      (b) Tenant shall have the right to install its standard signs and awnings on the exterior of the Leased Premises provided that the same are in compliance with local code. Landlord agrees to provide an adequate building facia for Tenant’s signs. Tenant shall also have the right to place signs or banners in the windows of the Premises provided the same have been professionally prepared.      (c) Tenant shall have the right to alter its exterior and pylon signs with Landlord’s consent, which consent shall not be unreasonably withheld; provided, however, Tenant shall have no obligation to obtain Landlord’s consent to any change in Tenant’s signage if such signage is consistent with Tenant’s then prototypical signage. SECTION 39. ENTIRE AGREEMENT      This Lease shall constitute the entire agreement of the parties hereto; all prior agreements between the parties, whether written or oral, are merged herein and shall be of no force and effect. This Lease cannot be changed, modified, or discharged orally but only by an agreement in writing signed by the party against whom enforcement of the change, modification or discharge is sought. SECTION 40. TENANT’S PROPERTY      All equipment, inventory, trade fixtures and other property owned by the Tenant and located in the Premises shall remain the personal property of the Tenant and shall be exempt from the claims of the Landlord or any mortgagee or lienholder of the Landlord without regard to the means by which they are installed or attached specifically not including, however, the Tenant Improvements (defined in Section 49(a) below) which throughout the term and upon the expiration of this Lease shall be and remain the property of Landlord. The Landlord expressly waives any statutory or common law landlord’s lien and any and all rights granted under any present or future laws to levy or distrain for rent (whether in arrears or in advance) against the aforesaid property of the Tenant on the Premises and further agrees to execute any reasonable instruments evidencing such waiver, at any time or times hereafter upon the Tenant’s request including the “Landlord’s Waiver” described in Section 56(c) hereof. The Tenant shall have the right, at any time or from time to time, to remove such trade fixtures or equipment. If such removal damages any part of the Premises, the Tenant shall repair such damages. Tenant is expressly authorized to finance, pledge, and encumber its own trade fixtures, equipment, and inventory for purposes of financing such trade fixtures, equipment and inventory. SECTION 41. BINDING UPON SUCCESSORS      The covenants, conditions, and agreements made and entered into by the parties hereto shall be binding upon and inure to the benefit of their respective heirs, representatives, successor and assigns. SECTION 42. HAZARDOUS SUBSTANCES      (a) During the term of this Lease, Tenant shall not suffer, allow, permit or cause the generation, accumulation, storage, possession, release or threat of release of any hazardous substance or toxic material, as those terms are used in the Comprehensive Environmental Response Compensation and Liability Act of 1980, as amended, and any regulations promulgated thereunder, or any other present or future federal, state or local laws, ordinances, rules, and regulations. Tenant shall indemnify and hold Landlord harmless from any and all liabilities, penalties, demands, actions, costs and expenses (including without limitation reasonable attorney fees), remediation and response costs incurred or suffered by Landlord directly or indirectly arising due to the breach of Tenant’s obligations set forth in this Section. Such indemnification shall survive expiration or earlier termination of this Lease. At the expiration or sooner termination hereof, Tenant shall return the Premises to Landlord in 30 --------------------------------------------------------------------------------   substantially the same condition as existed on the date of commencement hereof free of any hazardous substances in, on or from the Premises.      (b) Landlord hereby represents and warrants that, except as set forth in that certain Phase I Environmental Site Assessment dated February 2006, prepared by Craig A. Edgerley of Mostardi Platt Environmental: (i) it has not used, generated, discharged, released or stored any hazardous substances on, in or under the Center and has received no notice and has no knowledge of the presence in, on or under the Center of any such hazardous substances; (ii) to Landlord’s knowledge there have never been any underground storage tanks at the Center, whether owned by the Landlord or its predecessors in interest; (iii) to Landlord’s knowledge there have never been accumulated tires, spent batteries, mining spoil, debris or other solid waste (except for rubbish and containers for normal scheduled disposal in compliance with all applicable laws) in, on or under the Center; (iv) to Landlord’s knowledge it has not spilled, discharged or leaked petroleum products other than de minimis quantities in connection with the operation of motor vehicles on the Center; (v) to Landlord’s knowledge there has been no graining, filling or modification of wetlands (as defined by federal, state or local law, regulation or ordinance) at the Center; and (vi) to Landlord’s knowledge there is no asbestos or asbestos-containing material in the Premises. The representations and warranties set forth in this subparagraph shall apply to any contiguous or adjacent property owed by the Landlord. Landlord hereby indemnifies Tenant for any and all loss, cost, damage or expense to Tenant resulting from any misrepresentation or breach of the foregoing representations and warranties.      (c) If any such hazardous substances are discovered at the Center (unless introduced by the Tenant, its agents or employees) or if any asbestos or asbestos containing material is discovered in the Premises (unless introduced by the Tenant, its agents or employees), and removal, encapsulation or other remediation is required by applicable laws, the Landlord immediately and with all due diligence and at no expense to the Tenant shall take all measures necessary to comply with all applicable laws and to remove such hazardous substances or asbestos from the Center and/or encapsulate or remediate such hazardous substances or asbestos, which removal and/or encapsulation or remediation shall be in compliance with all environmental laws and regulations, and the Landlord shall repair and restore the Center at its expense. From the date such encapsulation, remediation and restoration is complete, the rent due hereunder shall be reduced by the same percentage as the percentage of the Premises which, in the Tenant’s reasonable judgment, cannot be safely, economically or practically used for the operation of the Tenant’s business. Anything herein to the contrary notwithstanding, if in the Tenant’s reasonable judgment, such removal, encapsulation, remediation and restoration cannot be completed within one hundred eighty (180) days or the same is not actually completed by Landlord within such one hundred eighty (180) day period following the date such hazardous substances or asbestos are discovered and such condition materially adversely affects Tenant’s ability to conduct normal business operations in the premises, then the Tenant may terminate this Lease by written notice to the Landlord within thirty (30) days after such 180 day period, which notice shall be effective on Landlord’s receipt thereof. Landlord shall comply with OSHA 29 CFR 1910.1001 (j) to notify tenants, including Tenant, of asbestos related activities in the Premises and the Center including, but not limited to, selection of the certified/licensed asbestos abatement contractor, scope of the abatement work, and final clearance testing procedures and results. SECTION 43. TRANSFER OF INTEREST      If Landlord should sell or otherwise transfer its interest in the Premises, upon an undertaking by the purchaser or transferee to be responsible for all the covenants and undertakings of Landlord accruing subsequent to the date of such sale or transfer, Tenant agrees that Landlord shall thereafter have no liability to Tenant under this Lease or any modifications or amendments thereof, or extensions thereof, except for such liabilities which might have accrued prior to the date of such sale or transfer of its interest by Landlord. SECTION 44. ACCESS TO PREMISES      Landlord and its representatives shall have free access to the Premises at all reasonable times for the purpose of: (a) examining the same or to make any alterations or repairs to the Premises that Landlord may deem necessary for its safety or preservation; (b) exhibiting the Premises for sale or mortgage financing; (c) during the last three (3) months of the term of this 31 --------------------------------------------------------------------------------   Lease, for the purpose of exhibiting the Premises and putting up the usual notice “for rent” which notice shall not be removed, obliterated or hidden by Tenant, provided, however, that any such action by Landlord shall cause as little inconvenience as reasonably practicable and such action shall not be deemed an eviction or disturbance of Tenant nor shall Tenant be allowed any abatement of rent, or damages for an injury or inconvenience occasioned thereby. SECTION 45. HEADINGS      The headings are inserted only as a matter of convenience and for reference and in no way define, limit or describe the scope or intent of this Lease. SECTION 46. NON-WAIVER      No payment by Tenant or receipt by Landlord or its agents of a lesser amount than the rent in this Lease stipulated shall be deemed to be other than on account of the stipulated rent nor shall an endorsement or statement on any check or any letter accompanying any check or payment of rent be deemed an accord and satisfaction and Landlord or its agents may accept such check or payment without prejudice to Landlord’s right to recover the balance of such rent or pursue any other remedy in this Lease provided. SECTION 47. SHORT FORM LEASE      This Lease shall not be recorded, but a short form lease, which describes the property herein demised, gives the term of this Lease and refers to this Lease, shall be executed by the parties hereto, upon demand of either party and such short form lease may be recorded by Landlord or Tenant at any time either deems it appropriate to do so. The cost and recording of such short form lease shall belong to the requesting party. SECTION 48. ESTOPPEL CERTIFICATE      Each party agrees that at any time and from time to time on ten (10) days prior written request by the other, it will execute, acknowledge and deliver to the requesting party a statement in writing stating that this Lease is unmodified and in full force and effect (or, if there have been modifications, stating the modifications, and that the Lease as so modified is in full force and effect, and the dates to which the rent and other charges hereunder have been paid, and such other information as may reasonably re requested, it being intended that any such statements delivered pursuant to this Section may be relied upon by any current or prospective purchaser of or any prospective holder of a mortgage or a deed of trust upon or any interest in the fee or any leasehold or by the mortgagee, beneficiary or grantee of any security or interest, or any assignee of any thereof or under any mortgage, deed of trust or conveyance for security purposes now or hereafter done or made with respect to the fee of or any leasehold interest in the Premises SECTION 49. TENANT’S REIMBURSEMENT      (a) Landlord shall pay Tenant One Hundred Eighty Thousand Dollars ($180,000.00) (the “Tenant Reimbursement”), as payment for all costs incurred on behalf of Tenant for the purchase, erection, and installation of Tenant Improvements on or within the Premises. “Tenant Improvements” shall consist of the work described in the attached Exhibit “G”. The Tenant Reimbursement shall be paid by Landlord to Tenant within ten (10) days of the later of (i) Tenant opening for business in the Premises and (ii) Tenant providing to Landlord a lien waiver from Tenant’s general contractor. In the event Landlord does not timely pay the Tenant Reimbursement to Tenant, (a) Landlord shall pay to Tenant interest on such unpaid amounts the Interest Rate and (b) Tenant shall have the right to deduct any and all such amounts owed Tenant against payments of Rent thereafter due Landlord until such time as Tenant has been credited the full amount of the Tenant Reimbursement plus applicable interest.      (b) Notwithstanding anything to the contrary contained in this Lease, the Tenant Improvements shall, at all times during the term of this Lease and upon the expiration or earlier termination of this Lease, be the property of Landlord. Tenant shall not acquire any interest, equitable or otherwise, in any Tenant Improvement. 32 --------------------------------------------------------------------------------   SECTION 50. TENANT’S TERMINATION RIGHT      In the event (i) that Tenant’s gross sales (as defined in Section 5 of this Lease) shall be less than Four Million Seven Hundred Fifty-one Thousand Eight Hundred Dollars ($4,751,800.00) in either of the eighth or ninth Lease Years of the initial term hereof, and (ii) Tenant was open and operating for business for the Permitted Use during the Center’s standard business days and hours during the eighth and ninth Lease Years (unless Tenant was not open and operating on account of casualty or condemnation), Tenant shall have the right, at Tenant’s sole election, provided that Tenant is not then in default of the terms of this Lease beyond any applicable notice and cure periods, on or before the date (the “Last Termination Notice Date”) which is thirty (30) days after the end of the ninth Lease Year, to send to Landlord a notice terminating this Lease (“Termination Notice”) as of the last day of the tenth Lease Year (the “Tenant’s Termination Date”). In the event that Tenant shall so terminate this Lease in accordance with the provisions of this Section 50, then the term of this Lease shall terminate and expire on Tenant’s Termination Date with the same force and effect as though said date was the scheduled expiration date of the term under this Lease. Notwithstanding the giving of such Termination Notice and Tenant’s exercise of its termination right under this Section 50, Tenant shall perform and observe all of Tenant’s obligations under this Lease through and including the Tenant’s Termination Date and Tenant shall pay to Landlord, simultaneous with the delivery of the Termination Notice, the sum of One Hundred Thousand Dollars ($100,000.00). In the event Tenant exercises the termination right provided for in this Section 50, Landlord shall have the right, upon ten (10) days prior written notice, at Tenant’s corporate headquarters, to examine Tenant’s books and records relating to gross receipts at the Premises, provided such right shall expire sixty (60) days after Tenant notifies Landlord of Tenant’s exercise of Tenant’s election to terminate the Lease pursuant to the provisions of this Section 50. SECTION 51. NO BROKER      Landlord and Tenant each represent to the other that they have not entered into any agreement or incurred any obligation in connection with this transaction which might result in the obligation to pay a brokerage commission to any broker. Each party shall indemnify and hold the other party harmless from and against any claim or demand by any broker or other person for bringing about this Lease who claims to have dealt with such indemnifying party, including all expenses incurred in defending any such claim or demand (including reasonable attorney’s fees). SECTION 52. UNAVOIDABLE DELAYS      In the event either party hereto (the “Delayed Party”) shall be delayed or hindered in or prevented from the performance of any act required under this Lease by reason of strikes, lockouts, labor troubles, inability to procure materials, failure of power, the unforeseen application of restrictive governmental laws or regulations, riots, insurrection, war, acts of terrorism or other reason of a like nature not the fault of the Delayed Party in performing work or doing acts required under the terms of this Lease, then performance of such act shall be excused for the period of the delay, and the period for the performance of any such act shall be extended for a period equivalent to the period of such delay, provided that the Delayed Party notified the other party within fifteen (15) days of the Delayed Party being informed of the occurrence of the event causing such delay. The provisions of this Section 52 shall not operate to excuse either party from the payment of any rental or other monetary sums due under the terms of this Lease. SECTION 53. TIMELY EXECUTION OF LEASE      Landlord and Tenant agree that this Lease, and the parties’ obligations hereunder, shall automatically be null and void and this Lease shall terminate automatically without further action of the parties if both parties do not execute this Lease and both parties have not received an original thereof within sixty (60) days after the date of execution hereof by the first party to execute this Lease. SECTION 54. ACCORD AND SATISFACTION      No payment by Tenant or receipt by Landlord of a lesser amount than the entire rent and all other additional rents and charges hereunder shall be deemed to be other than payment on 33 --------------------------------------------------------------------------------   account of the earliest stipulated rent and other additional rents and charges hereunder, nor shall any endorsement or statement on any check or any letter accompanying any check or payment for rent or other additional rent and charges be deemed an accord and satisfaction, and Landlord may accept such check or payment without prejudice to Landlord’s right to recover the balance of such rent and other additional rents and charges or pursue any other right or remedy available to the Landlord. SECTION 55. WAIVER OF JURY TRIAL      Landlord and Tenant do hereby knowingly, voluntarily and intentionally waive the right to a trial by jury of any and all issues either now or hereinafter provided by law in any action or proceeding between the parties hereto, or their successors, arising directly or indirectly out of or in any way connected with this Lease or any of its provisions, Tenant’s use or occupancy of said premises and/or any claim for personal injury or property damage including, without limitation, any action to rescind or cancel this Lease, and any claim or defense asserting that this Lease was fraudulently induced or is otherwise void or voidable. It is intended that said waiver shall apply to any and all defenses, rights and/or counterclaims in any action or proceeding at law or in equity. This waiver is a material inducement for Landlord and Tenant to enter into this Lease. SECTION 56. LEASEHOLD FINANCING      (a) Landlord acknowledges and agrees that Tenant may from time to time during the term, without the consent of Landlord, mortgage or otherwise finance and encumber, whether by leasehold deed of trust or mortgage, collateral assignment of this Lease, lease/sublease-back, and/or assignment/leaseback, any and/or all of its leasehold estate hereunder, and property and rights in and to the Leased Premises granted to it under this Lease, as security for the payment of an indebtedness (any and all of which are herein referred to as a “Leasehold Mortgage” and the holder thereof is herein referred to as “Leasehold Mortgagee”). Any such Leasehold Mortgage shall be a lien only upon Tenant’s leasehold estate hereunder and Tenant’s interests in this Lease and shall not encumber Landlord’s fee simple title to the Center or the Leased Premises. Pursuant to any such Leasehold Mortgage, the Leasehold Mortgagee or another person or entity (a “Successor-Tenant”) may acquire title to Tenant’s interest in the leasehold estate in the Leased Premises in any lawful way, including but not limited to, through foreclosure, assignment in lieu of foreclosure, or otherwise. In such event, the Successor-Tenant shall succeed to the rights of Tenant under this Lease, including the right to possession of the Leased Premises, in which event Landlord shall recognize the Successor-Tenant as the tenant under this Lease, the same as if such Successor-Tenant were the original tenant hereunder.      (b) Tenant shall notify Landlord (and any Fee Mortgagee, as hereinafter defined in Section 56(d) below), in the manner hereinafter provided for the giving of notice, of the execution of such Leasehold Mortgage and the name and place for service of notice upon Leasehold Mortgagee. Upon such notification of Landlord that Tenant has entered into a Leasehold Mortgage, Landlord hereby agrees for the benefit of such Leasehold Mortgagee, and upon written request by Tenant, to execute and deliver to Tenant and Leasehold Mortgagee a “Landlord’s Agreement” whereby Landlord agrees to recognize the interest of Leasehold Mortgagee and any Successor-Tenant hereunder, on commercially reasonable terms and conditions acceptable to Leasehold Mortgagee.      (c) Landlord does hereby waive any statutory or other lien of the Landlord in Tenant’s present and after-acquired assets, including among other things, Tenant’s inventory and equipment. To evidence such waiver for the benefit of a lender of Tenant, Landlord agrees execute and deliver to Tenant and any such lender a commercially reasonable “Landlord’s Waiver” whereby Landlord agrees to waive any lien on Tenant’s assets including its inventory and equipment.      (d) In the event that, at any time prior to the execution of this Lease and the recordation of a memorandum of lease in accordance with Section 47 hereof, Landlord has mortgaged or otherwise encumbered the fee simple title to the Premises, Landlord shall deliver to Tenant a commercially reasonable SNDA (as defined in Section 11) containing terms substantially similar to the terms of the document so entitled attached hereto and made a part hereof as Exhibit “I”, duly executed by the holder of any such mortgage or encumbrance (the “Fee Mortgagee”). Landlord agrees that Tenant’s obligations hereunder shall be contingent upon 34 --------------------------------------------------------------------------------   delivery by Landlord to Tenant of an SNDA executed by the Fee Mortgagee on or before the Commencement Date, as more fully set forth in Section 11. (SIGNATURES ON FOLLOWING PAGE) 35

Exhibit 10.11   BEVERLY NATIONAL CORPORATION 240 Cabot Street Beverly, MA 01915   July 9, 2002   Mr. Donat Fournier 17 Homestead Road West Simsbury, CT 06092-2227   Dear Mr. Fournier:   Beverly National Corporation, a Massachusetts corporation (“Corporation”), expects that during your tenure as an officer of the Corporation and of Beverly National Bank, a wholly-owned subsidiary of the Corporation (the “Bank”), you will contribute to the growth and success of the Bank in significant ways, and that you will develop an intimate knowledge of the business and affairs of the Bank and of its policies, methods, personnel and problems. The Corporation also recognizes that such contributions and knowledge are expected to be of significant benefit to the future growth and success of the Bank and the Corporation.   The Board of Directors of the Corporation (the “Board”) recognizes that a change in control of the Corporation may occur and that the threat of such a change in control may result in the departure of management personnel to the detriment of the Corporation and its stockholders. The Board has determined that appropriate steps should be taken to reinforce and encourage the continued dedication of members of the Bank’s and the Corporation’s management, including yourself, to their assigned duties in the face of the potentially disturbing circumstances arising from the possibility of such a change in control. The continued performance of your duties as an officer of the Bank and the Corporation may require your strenuous opposition to such a threatened change in control which, in the judgment of the Board, may not be in the best interests -------------------------------------------------------------------------------- of the Corporation and its stockholders, and your opposition to such a threatened change in control of the Corporation could prevent or inhibit you from effectively continuing your duties as an officer of the Bank and the Corporation should such a change in control occur.   In order to induce you to remain in the employ of the Bank and the Corporation under such circumstances and then to continue to perform your duties as an officer of the Bank and the Corporation in a manner which is, in your judgment, in the best interests of the Bank and the Corporation, the Corporation hereby agrees to provide you with certain severance benefits in the event your employment with the Bank or the Corporation is terminated subsequent to a change in control (as defined in Section 1 hereof) under the circumstances described below.   1. Change in Control. No benefits shall be payable hereunder unless there shall have been a change in control as set forth below, and your employment by the Bank or the Corporation shall thereafter have been terminated in accordance with Section 2 below. For purposes of this Agreement, a “Change in Control” of the Corporation shall mean any of the following:   (a) The acquisition of “control” (within the meaning of Section 2(a)(2) of the Bank Holding Company Act of 1956, as amended, or Section 602 of the Change in Bank Control Act of 1978) of the Corporation by any person, company or other entity;   (b) Any “person” (as such term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934) is or becomes the “beneficial owner” (as defined in Rule 13d-3 thereunder), directly or indirectly, of securities of the Corporation representing 20% or more of the combined voting power of the Corporation’s then-outstanding securities.   (c) Any such person becomes the beneficial owner, directly or indirectly, of securities of the Corporation representing less than 20% of the Corporation’s then-outstanding securities, but -------------------------------------------------------------------------------- is determined by a court or regulatory agency with jurisdiction over the matter to possess or to have exercised control over the Corporation; or   (d) During any period of two consecutive years, individuals who at the beginning of such period constitute the Board cease for any reason to constitute at least a majority thereof unless the election or the nomination for election by the Corporation’s stockholders of each new director was approved by a vote of at least three-fourths of the directors of the Corporation then still in office who were directors at the beginning of the period; or   (e) The Corporation sells a majority of its assets, or enters into any transaction in which another entity (other than an insurer of the deposit liabilities of a subsidiary of the Corporation) assumes a majority of the deposit liabilities of any subsidiary of the Corporation.   2. Termination Following Change in Control. You shall be entitled to the benefits provided for in Section 3(c) hereof upon the termination of your employment as an officer of the Bank or the Corporation (i) by reason of your resignation, as defined in Section 2(b) hereof, from employment with the Corporation or the Bank for any reason as set forth in a letter from you delivered to the Board or to the Board of Directors of the Bank, within twenty-four (24) months after a Change in Control, or (ii) for any other reason, voluntary or involuntary, within twenty-four (24) months after a Change in Control, unless your employment is terminated by the Bank or the Corporation for Cause (as hereinafter defined). In the event your employment with the Bank or the Corporation, but not both, shall be terminated and you shall be entitled to the benefits provided in Section 3 hereof, you may thereafter terminate your employment with the Corporation or the Bank, respectively, and continue to be entitled to the benefits provided in Section 3 hereof.   (a) Cause. Termination by the Bank or the Corporation of your employment for “Cause” shall mean termination upon a conviction for criminal misconduct by you which is materially injurious to the Bank or the Corporation monetarily or otherwise. -------------------------------------------------------------------------------- Notwithstanding the foregoing, you shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to you a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board of Directors of the Bank or the Board at a meeting of such board called and held for the purpose (after reasonable notice to you and an opportunity for you, together with your counsel, to be heard before such board), finding that in the good faith opinion of such board you were guilty of conduct set forth above in the first sentence of this paragraph and specifying the particulars thereof in detail.   (b) Resignation. Your voluntary resignation from employment with the Corporation or the Bank for any reason as set forth in a letter from you delivered to the Board or to the Board of Directors of the Bank.   (c) Notice of Termination. The Corporation agrees that it will, and will cause the Bank to, promptly furnish you with a written Notice of Termination. Any purported termination by you shall be communicated by written Notice of Termination to the Bank, with a copy to the Corporation. For purposes of this Agreement, a “Notice of Termination” shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of your employment under the provision so indicated.   (d) Date of Termination. “Date of Termination” shall mean:   (i) if your employment is terminated by the Bank or the Corporation for Cause, the date specified in the Notice of Termination, and -------------------------------------------------------------------------------- (ii) if your employment is terminated for any other reason, the date on which a Notice of Termination is given; provided that if within five (5) days after any Notice of Termination is given the party receiving such Notice of Termination notifies the other party that a dispute exists concerning the termination, the Date of Termination shall be the date on which the dispute is finally determined, either by mutual written agreement of the parties, by a binding and final arbitration award or by a final judgment, order or decree of court of competent jurisdiction (the time for appeal therefrom having expired and no appeal having been perfected).   3. Compensation During Disability or Upon Termination.   (a) During any period that you fail to perform your duties as a result of incapacity due to physical or mental illness, the Corporation shall pay you, to the extent it is not paid by Bank, an amount equal to your full base salary at the rate then in effect until the Date of Termination. Thereafter, your benefits shall be determined in accordance with the Bank’s long-term disability plan then in effect.   (b) If your employment shall be terminated for Cause, the Corporation shall pay you, to the extent it is not paid by Bank, an amount equal to your full base salary through the Date of Termination at the rate in effect at the time Notice of Termination was given and the Corporation shall have no further obligations to you under this Agreement.   (c) If, within twenty-four (24) months after a Change in Control shall have occurred, your employment by the Bank or the Corporation shall be terminated other than for Cause, then the Corporation shall pay you within five days after the Date of Termination an amount equal to the sum of:   (i) An amount equal to your full base salary through the Date of Termination at the rate in effect at the time Notice of Termination was given, to the extent Bank does not promptly pay such amount; plus -------------------------------------------------------------------------------- (ii) A lump sum amount equal to the product of (A) the average sum of your annual base compensation (salary plus bonus) paid to you by the Bank or the Corporation and includible in your taxable income for the five years (or the term of your employment, if less) preceding a Change in Control multiplied by (B) the number three (3), less one hundred ($100) dollars; plus   (iii) All legal fees and expenses incurred by you as a result of such termination (including all such fees and expenses, if any, incurred in contesting or disputing any such termination or in seeking to obtain or enforce any right or benefit provided for by this Agreement).   (d) You shall not be required to mitigate the amount of any payment provided for in this Section 3 by seeking other employment or otherwise, nor shall the amount of any payment provided for in this Section 3 be reduced by any compensation earned by you as the result of employment by another employer after the Date of Termination, or otherwise.   (e) Notwithstanding any provision hereof to the contrary, no payment hereunder shall be made if it would violate any applicable law, rule or regulation, including without limitation, 12 C.F.R. Part 359, as promulgated by the Federal Deposit Insurance Corporation.   (f) It is the intention of the parties to this Agreement that no payments by the Corporation to you or for your benefit under this Agreement shall be non-deductible to the Corporation by reason of the operation of Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”). Accordingly, notwithstanding any other provision hereof, if by reason of the operation -------------------------------------------------------------------------------- of said Section 280G, any such payments exceed the amount which can be deducted by the Corporation, the amount of such payments shall be reduced to the maximum which can be deducted by the Corporation. To the extent that payments in excess of the amount which can be deducted by the Corporation have been made to you or for your benefit, they shall be refunded with interest at the applicable rate provided under Section 1274(d) of the Code, or at such other rate as may be required in order that no such payment to you or for your benefit shall be nondeductible pursuant to Section 280G of the Code. Any payments made hereunder which are not deductible by the Corporation as a result of losses which have been carried forward by the Corporation for Federal tax purposes shall not be deemed a non-deductible amount for purposes of this Section 3(f).   4. Successors; Binding Agreement.   (a) The Corporation will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Corporation, by agreement in form and substance satisfactory to you, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Corporation would be required to perform it if no such succession had taken place. Failure of the Corporation to obtain such agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle you to compensation from the Corporation in the same amount and on the same terms as you would be entitled to hereunder if you resigned (as defined in Section 2(b) hereof) within twenty-four (24) months after a Change in Control, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination. As used in this Agreement, “Corporation” shall mean the Corporation as hereinbefore defined and any successor to its business and/or -------------------------------------------------------------------------------- assets as aforesaid which executes and delivers the agreement provided for in this Section 4 or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law.   (b) This Agreement shall inure to the benefit of and be enforceable by your personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees, and legatees. If you should die while any amount would still be payable to you hereunder if you had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to your devisee, legatee or other designee or, if there be no such designee, to your estate.   5. Notices. All notices and other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth on the first page of this Agreement, provided that all notices to the Corporation shall be directed to the attention of the Board with a copy to the Chairman of the Board, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt.   6. Miscellaneous. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by you and such officer as may be specifically designated by the Board. No waiver by either party hereto at any time of any breach by the other or failure to comply with any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof -------------------------------------------------------------------------------- have been made by either party which are not expressly set forth in this Agreement. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the Commonwealth of Massachusetts. This Agreement is made under seal.   7. Validity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.   8. Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument.   9. Arbitration. Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration in Boston, Massachusetts, in accordance with the rules of the American Arbitration Association then in effect. Notwithstanding the pendency of any such dispute or controversy, the Corporation will pay you promptly an amount equal to your full compensation in effect when the notice giving rise to the dispute was given (including, but not limited to, base salary) and provide you with all compensation, benefits and insurance plans in which you were participating when the notice giving rise to the dispute was given, until the dispute is finally resolved in accordance with this Section, to the extent Bank does not make such payments or continue such benefits. Amounts paid under this Section 9 are in addition to all other amounts due under this Agreement and shall not be offset against or reduce any other amounts due under this Agreement. Judgment may be entered on the arbitrator’s award in any court having jurisdiction; provided, however, that you shall be entitled to seek specific performance of your right to be paid until the Date of Termination during the pendency of any dispute or controversy arising under or in connection with this Agreement. -------------------------------------------------------------------------------- 10. Election of Benefits. An election by you to resign after a Change in Control under the provisions of this Agreement will not constitute a breach by you of the Employment Agreement dated the date hereof (or any other employment agreement) between the Corporation (or any subsidiary thereof) and you and will not be deemed a voluntary termination of employment by you for the purpose of interpreting the provisions of any benefit plans, programs or policies. Nothing in this Agreement will be construed to limit your rights under any employment agreement you may then have with the Corporation, provided, however, that if you become entitled to compensation under Section 3 hereof following a Change in Control, you may elect either to receive the severance payment provided in Section 3 or such termination benefits as you may have under any such employment agreement, but may not elect to receive both.   If this letter correctly sets forth our agreement on the subject matter hereof, kindly sign and return to the Corporation the enclosed copy of this letter which will then constitute our agreement on this subject.   ATTEST:       BEVERLY NATIONAL CORPORATION /s/ Paul Germano       By:   /s/ Alice B. Griffin             Alice B. Griffin Agreed to this 9th day of July, 2002         /s/ Donat Fournier             Donat Fournier            

Exhibit 10.3 TRANSITION SERVICES AGREEMENT This Transition Services Agreement (“Agreement”) is made this 10th day of April 2006 (“Effective Date”), between Prosoft Learning Corporation, a Nevada corporation (the “Company”), and Benjamin M. Fink (the “Employee”). WHEREAS: A. The Company and Employee entered into an employment agreement dated the 27th of October 2005 (the “Prior Agreement”). B. This Agreement amends and restates the Prior Agreement, which as of the Effective Date and subject to Section 12 of this Agreement, shall be null and void and of no effect. C. The Company has entered into an Acquisition and Reorganization Agreement dated the 11th day of April 2006 (“Acquisition Agreement”), by and between the Company, ComputerPREP, Inc. and VCampus Corporation (“VCampus”), whereby VCampus would acquire, by itself or through one of its affiliates, all of the newly issued and outstanding capital stock of the Company on or after the Closing Date, as defined in the Acquisition Agreement (“Reorganized Prosoft”). Terms not otherwise defined herein shall be as defined in the Acquisition Agreement. D. NOW, THEREFORE, in consideration of the promises and mutual covenants herein set forth, the parties do hereby agree and promise as follows: 1. Services and Compensation. 1.1 Prior to the Closing Date, Employee shall remain employed by the Company and entitled to continue to receive whatever base salary he was receiving from the Company immediately prior to the date hereof. He shall continue to provide substantially the same services to the Company as under the Prior Agreement, as well as to assist with the completion of the transactions contemplated by the Acquisition Agreement. 1.2 Promptly following the Closing of the transactions contemplated by the Acquisition Agreement [and receipt by Reorganized Prosoft or VCampus of $209,080 [note: includes gross up for employer portion of social security tax] from the Secured Noteholders pursuant to the side letter agreement between such parties dated as of the Closing Date], the Company shall immediately make a payment to Employee of $200,000. Neither the Company nor Reorganized Prosoft or VCampus shall thereafter have any further obligations under this Agreement. Employee’s employment by the Company shall terminate effective immediately upon the Closing Date. 1.3 To the extent required by law, the Company shall withhold from any payments due Employee under this Agreement any applicable Federal, state or local taxes and such other deductions as are prescribed by law or Company policy.   1 -------------------------------------------------------------------------------- 2. Proprietary Information. 2.1 Employee understands that the Company possesses and will continue to possess information that has been created, discovered, developed or otherwise become known to the Company (including, without limitation, information created, discovered, developed or made known by Employee during the period of or arising out of his employment by the Company, whether prior to or after the date hereof, including under the Prior Agreement) or in which property rights have been assigned or otherwise conveyed to the Company, which information has commercial value in the business in which the Company is engaged. All such information is hereinafter called “Proprietary Information.” By way of illustration, but not limitation, Proprietary Information includes processes, formulas, codes, data, programs, know-how, improvements, discoveries, developments, designs, inventions, techniques, marketing plans, strategies, forecasts, new products, unpublished financial statements, budgets, projections, licenses, prices, costs, contracts and customer and supplier lists. 2.2 In consideration of the compensation received by the Employee from the Company and the covenants contained in this Agreement, Employee agrees as follows: 2.2.1 All Proprietary Information shall be the sole property of the Company and its assigns, and the Company and its assigns shall be the sole owner of all patents, copyrights, and other rights in connection therewith. Employee hereby assigns to the Company rights he may have or acquire in such Proprietary Information. At all times, both during his employment by the Company and after his termination, Employee will keep in strictest confidence and trust all Proprietary Information and will not use or disclose any Proprietary Information without the written consent of the Company, except as may be necessary in the ordinary course of performing his duties under this Agreement. 2.2.2 All documents, records, equipment and other physical property, whether or not pertaining to Proprietary Information, furnished to Employee by the Company or produced by Employee or others in connection with Employee’s employment with the Company shall be and remain the sole property of the Company. In the event of the termination of his employment by him or the Company for any reason, Employee will deliver to the Company all documents, notes, drawings, specifications, programs, data, customer lists and other materials of any nature pertaining to his work with the Company and Employee will not take with him or use any of the foregoing, any reproduction of any of the foregoing, or any Proprietary Information that is embodied in a tangible medium of expression. 2.2.3 Employee recognizes that the Company is engaged in a continuous program of development and marketing respecting its present and future business. Employee understands that as part of his employment by the Company he has been expected to make new contributions of value to the Company and that his employment has created a relationship of confidence and trust between him and the Company with respect to certain information applicable to the business of the Company   2 -------------------------------------------------------------------------------- or applicable to the business of any customer of the Company, which has been or may be made known to Employee by the Company or by any customer of the Company or which may have been or may be learned by Employee during the period of his employment by the Company. 3. Covenant Not to Compete. 3.1 In consideration for the payments to be made under this Agreement, Employee shall, for a period of one year from the Closing Date, refrain from, either alone or in conjunction with any other person, or directly or indirectly through its present or future affiliates: (i) employing, engaging or seeking to employ or engage any person who within the prior twenty-four (24) months had been an officer or employee of the Company, unless in a venture not in direct competition with the Company; (ii) causing or attempting to cause (A) any client, customer or supplier of the Company to terminate or materially reduce its business with the Company, or (B) any officer, employee or consultant of the Company to resign or sever a relationship with the Company; (iii) disclosing (unless compelled by judicial or administrative process) or using any confidential or secret information relating to the Company or any of their respective clients, customers or suppliers; or (iv) participating or engaging in (other than through the ownership of five percent (5%) or less of any class of securities registered under the Securities Exchange Act of 1934, as amended), or otherwise lending assistance (financial or otherwise) to any person participating or engaged in, any of the lines of business in which the Company is participating or engaged on the date of termination in any jurisdiction in which the Company participates or engages in such line of business on the date of termination. 3.2 The parties hereto recognize that the laws and public policies of the various states of the United States may differ as to the validity and enforceability of covenants similar to those set forth in this Section. It is the intention of the parties that the provisions of this Section be enforced to the fullest extent permissible under the laws and policies of each jurisdiction in which enforcement may be sought, and that the unenforceability (or the modification to conform to such laws or policies) of any provisions of this Section shall not render unenforceable, or impair, the remainder of the provisions of this Section. Accordingly, if any provision of this Section shall be determined to be invalid or unenforceable, such invalidity or unenforceability shall be deemed to apply only with respect to the operation of such provision in the particular jurisdiction in which such determination is made and not with respect to any other provision or jurisdiction. 3.3 The parties hereto acknowledge and agree that any remedy at law for any breach of the provisions of this Section would be inadequate, and   3 -------------------------------------------------------------------------------- Employee hereby consents to the granting by any court of an injunction or other equitable relief, without the necessity of actual monetary loss being proved, in order that the breach or threatened breach of such provisions may be effectively restrained. 3.4 The Company and the Employee acknowledge that the foregoing restrictive covenants in this Section 3 are essential elements of this Agreement and that, but for the agreement of the Employee to comply with those covenants, the Company would not have agreed to enter into this Agreement. The covenants by the Employee shall be construed as agreements independent of any other provision in this Agreement. 3.5 The Company and the Employee intend that the covenants contained in this Section 3 shall be construed as a series of separate covenants, one for each county of the State of Arizona and one for each State of the United States other than Arizona. 3.6 The Company and the Employee understand and agree that, if any portion of the restrictive covenants set forth in this Section 3 is held to be unreasonable, arbitrary, or against public policy, then that portion of those covenants shall be considered divisible as to time and geographical area. The Company and the Employee agree that, if any court of competent jurisdiction determines that the specified time period or the specified geographical area of application in any covenant is unreasonable, arbitrary, or against public policy, then a lesser time period, geographical area, or both, that is determined to be reasonable, nonarbitrary, and not against public policy may be enforced against Employee. The Company and the Employee agree and acknowledge that they are familiar with the present and proposed operations of the Company and believe that the restrictive covenants set forth in this Section 3 are reasonable with respect to their subject matter, duration, and geographical application. 3.7 The parties acknowledge that the status of the Employee in this business and industry is unique and the success of the Company in said business, and in the sale of the business as contemplated by the Acquisition Agreement, is materially and substantially dependent upon the continued employment of the Employee, and in the event the employment of the Employee is terminated for any reason, such business of the Company will be substantially and irrevocably damaged. In view thereof, the parties acknowledge that monetary damages alone will not fully compensate the Company in the event the Employee fails or refuses to comply with the terms of this Section 3 above when applicable, and agree that the Company, in addition to all other remedies provided in law and in equity, shall have the remedy of injunctive relief and specific performance to enforce the terms of said Section. 4. Arbitration. Except as otherwise provide herein, any controversies or claims arising out of, or relating to this Agreement or the breach thereof, shall be settled by arbitration in Phoenix, Arizona in accordance with the rules of, but not subject to the jurisdiction of, the American Arbitration Association, which decision shall be final and binding on the parties, and judgment upon the award rendered may be entered in any court having jurisdiction thereof. For these purposes the arbitrator shall be an individual   4 -------------------------------------------------------------------------------- who has demonstrated that such individual is familiar with and has experience in the legal issues involving employer-employee relationships and has had no prior prejudicial contacts with either party. In addition to all other remedies provided in law or in equity, the arbitrator is hereby authorized to assess costs and attorneys’ fees against either party if the arbitrator finds, based on all the facts and circumstances, that the conduct of or the claims made by such party were unreasonable or substantially without merit. 5. Notice. All notices, requests and other communications hereunder must be in writing and will be deemed to have been duly given only if delivered personally or by facsimile transmission or mailed (first class postage prepaid) to the parties at the following addresses or facsimile numbers:   If to Employee:   Benjamin M. Fink   410 North 44th Street   Phoenix, Arizona 85008   Telephone: (602) 794-4199 If to the Company:   Prosoft Learning Corporation   410 North 44th Street   Phoenix, AZ 85008   Facsimile No: (602) 794-4198   Attn: Board of Directors All such notices, requests and other communications will (i) if delivered personally to the address as provided in this Section, be deemed given upon delivery, (ii) if delivered by facsimile transmission to the facsimile number as provided in this Section, be deemed given upon receipt, and (iii) if delivered by mail in the manner described above to the address as provided in this Section, be deemed given upon receipt (in each case regardless of whether such notice, request or other communication is received by any other person to whom a copy of such notice, request or other communication is to be delivered pursuant to this Section). Any party from time to time may change its address, facsimile number or other information for the purpose of notices to that party by giving notice specifying such change to the other party hereto. 6. Invalid Provision. The invalidity or unenforceability of any particular provision of this Agreement in any jurisdiction shall not affect the other provisions hereof or the validity of that particular provision in any other jurisdiction, and the Agreement shall be construed in all respects as though such invalid or unenforceable provisions were omitted only in the jurisdiction in which the case is held to be invalid or unenforceable. 7. Interpretation. This Agreement shall be interpreted in accordance with the laws of the State of Arizona. 8. Successors. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors, assigns, heirs, and legal representatives, including but not limited to any person, firm, corporation or other business entity which at any time, by merger, purchase or otherwise, acquires all or   5 -------------------------------------------------------------------------------- substantially all of the assets, equity or business of the Company. The duties and covenants of Employee under this Agreement, being personal, may not be delegated. 9. Entire Agreement; Modification. This Agreement constitutes the entire agreement between the parties, and may be changed only by an agreement in writing signed by the parties. 10. Headings. Sections and other headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. 11. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. Signatures may be exchanged by telecopy, with original signatures to follow. Each of the parties hereto agrees that it will be bound by its own telecopied signature and that it accepts the telecopied signatures of the other parties to this Agreement. The original signature pages shall be forwarded to the Company or its counsel and the Company or its counsel will provide all of the parties hereto with a copy of the entire Agreement. 12. Reinstatement of the Prior Agreement. In the event the Acquisition Agreement is terminated without a closing of the transactions contemplated thereunder, this Agreement shall immediately terminate and the parties shall thereafter be subject to the terms of the Prior Agreement. IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the duly authorized officer of each party hereto as of the date first above written.   “COMPANY” Prosoft Learning Corporation, a Nevada corporation By:       Name:       Title:     “EMPLOYEE”   Benjamin M. Fink   6

  EXHIBIT 10.2 American Medical Systems Holdings, Inc. Non-employee Director Compensation Summary In July 2006, the Board of Directors of American Medical Systems Holdings, Inc. approved the following revised compensation schedule for independent directors: Annual Retainer We pay our independent directors an annual retainer for serving on the Board and Committees as follows:           Board member   $ 40,000   Audit Committee chair   $ 20,000   Audit Committee member   $ 10,000   Compensation Committee chair   $ 10,000   Compensation Committee member   $ 5,000   Nominating/Corporate Governance Committee chair   $ 7,500   Nominating/Corporate Governance Committee member   $ 2,500   Stock Options Our current compensation program also provides for the grant of stock options to our independent directors. On each of May 4, 2006 and July 26, 2006, we granted each of our then-current, independent directors an option to purchase 10,000 shares of our common stock. Subsequently on August 4, 2006, we appointed two new independent directors, Robert McLellan, M.D. and D. Verne Sharma, and granted each of Dr. McLellan and Mr. Sharma an option to purchase 40,000 shares of our common stock. For future fiscal years, each independent director who is reelected as a director at the annual meeting of stockholders or continues to serve as a director after such meeting will be granted an option to purchase a number of shares of our common stock, as determined by the Board each year prior to the annual meeting for such year. The Board anticipates that value (based on customary valuation methods) of future option grants will be approximately equal to the value of the options to purchase a total of 20,000 shares granted to independent directors in 2006. The options have an exercise price equal to the fair market value of the shares on the date of grant. The options vest over a three-year period from the date of grant, as long as the non-employee director continues to serve on the board, and become immediately exercisable in full upon a change in control. The options expire seven years from the date of grant. Expenses In addition, we reimburse our non-employee directors for reasonable travel, food, lodging and other incidental expenses incurred in connection with attending meetings of the Board or Committees.  

Exhibit 10.24   AMERICAN STANDARD COMPANIES INC. SUPPLEMENTAL SAVINGS PLAN (Restated to include all amendments through December 8, 2005)   Section 1. Purpose The purpose of the Plan is to provide those participants in the American Standard Companies Inc. Employee Stock Ownership Plan (the “ESOP”), the Savings Plan of American Standard Inc. and Participating Subsidiary Companies (the “Savings Plan”) and the American Standard Pension Plan (the “Pension Plan”), who are not Corporate Officers participating in the Company’s SERP, and whose employer contributions under the ESOP, the Savings Plan and the Pension Plan have been cut back by the statutory reduction to the amount of annual compensation recognizable for qualified plan benefit accruals under Section 401(a)(17) of the Code, with an annual benefit, subject to certain limitations, to roughly reflect the equivalent value of lost ESOP, Savings Plan and Pension Plan contributions.   Section 2. Definitions Whenever used herein, the following terms shall have the meanings set forth below. Words in the masculine gender shall also include the feminine gender.   2.1 Affected Earnings means that portion, if any, of a Participant’s Eligible Compensation for a calendar year in excess of the Statutory Limitation, provided that, if more than one Valuation Date occurs in a calendar year, the Plan Administrator shall allocate Affected Earnings in such manner as the Plan Administrator shall specify from time to time.   2.2 Applicable Interest Rate means for any calendar year, the interest rate used to credit interest to Participants’ accounts under the Pension Plan.   2.3 ASI means American Standard Inc., a Delaware corporation.   1 -------------------------------------------------------------------------------- 2.4 Board means the Board of Directors of the Company.   2.5 Cash Account means a separate memorandum account established in respect of a Participant which shall be credited with awards under the Plan intended to compensate such Participant for employer contributions under the Pension Plan which have been cut back due to the Statutory Limitation.   2.6 Code means the Internal Revenue Code of 1986, as amended, or any subsequent income tax law of the United States. References to Code shall be deemed to include all subsequent amendments of those sections or the corresponding provisions of any subsequent income tax law.   2.7 Common Stock means the common stock, par value $0.01 per share, of the Company.   2.8 Company means American Standard Companies Inc., a Delaware corporation.   2.9 Disability means, effective January 1, 2005, the Participant (i) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months or (ii) is by reason of medically determinable physical or mental impairment, which can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement benefits for a period of not less than three (3) months under an accident and health plan covering employees of the Participant’s employer.   2.10 Eligible Compensation means, for any calendar year beginning on or after January 1, 2006, the Participant’s total remuneration, up to a maximum of $250,000 ($235,000 for calendar years prior to January 1, 2006), that would have been included in the definition of   2 -------------------------------------------------------------------------------- compensation under the ESOP, the Savings Plan and the Pension Plan but for the Statutory Limitation.   2.11 Employer Contribution Percentage means for each Participant the sum of (a) 3% plus (b) the percentage of such Participant’s compensation for which the Company actually provided a matching contribution under the Savings Plan during the year, determined by taking into account (i) such Participant’s level of contributions throughout the year and (ii) whether or not such Participant also participated in the Pension Plan.   2.12 Fair Market Value on any date means the closing price of a Share on such date as reported on the New York Stock Exchange consolidated reporting system, provided that, in the event that there are no Common Stock transactions reported on such date, Fair Market Value shall mean the closing price of a Share on the immediately preceding date on which Common Stock transactions were so reported.   2.13 Participant means with respect to each calendar year any participant in the ESOP, the Savings Plan or the Pension Plan, who is not a corporate officer of the Company who also actively participates in the Company’s Executive Supplemental Retirement Benefit Program (the “SERP”), and whose allowable employer contributions under the ESOP, the Savings Plan or the Pension Plan have been determined by the Plan Administrator to have been cut back by the Statutory Limitation.   2.14 Plan means this American Standard Companies Inc. Supplemental Savings Plan.   2.15 Plan Unit means a Participant’s right to receive pursuant to the Plan one Share upon such Participant’s Termination of Employment, which right is subject to forfeiture in accordance with Section 14 (a) of the Plan.   3 -------------------------------------------------------------------------------- 2.16 Share means a share of Common Stock.   2.17 Statutory Limitation means for any calendar year the maximum dollar amount of compensation that may be taken into account under the ESOP, the Savings Plan and the Pension Plan pursuant to section 401(a) (17) of the Code.   2.18 Stock Account means a separate memorandum account established in respect of a Participant which shall be credited with Plan Units intended to compensate such Participant for employer contributions under the ESOP and Savings Plan which have been cut back due to the Statutory Limitation.   2.19 Termination of Employment means a Participant’s termination of service as such is defined for purposes of the ESOP, the Savings Plan and the Pension Plan.   2.20 Valuation Date means the last day of any calendar year (or such other date or dates as the Plan Administrator may specify from time to time).   Section 3. Form of Benefits. Benefits awarded under this Plan shall be in the form of either (a) Plan Units and fractions thereof, with each Plan Unit to be equivalent to one Share or (b) cash equivalent credits to the Cash Account.   Section 4. Stock Account. The Company shall maintain a Stock Account for each Participant. For each award of Plan Units, the Stock Account shall note the number of Plan Units and fractions thereof awarded, the date of the award, as well as the Fair Market Value that was used to determine the award of Plan Units and fractions thereof.   4 -------------------------------------------------------------------------------- Section 5. Cash Account. The Company shall maintain a Cash Account for each Participant who receives an award under the Plan due to such individual’s participation in the Pension Plan. For each award to the Cash Account, the account shall note the amount credited, the date of the award and interest accrued according to this Section 5. Any amounts credited to the Cash Account shall earn interest at the Applicable Interest Rate in effect for each calendar year, which interest shall be credited in the same manner as credited to Participants’ accounts under the Pension Plan.   Section 6. Awarding of Plan Units. As of the Valuation Date, the Company will add to each Participant’s Stock Account that number of Plan Units and/or fractions thereof equal to the quotient of:   (a) the Employer Contribution Percentage of the Participant’s Affected Earnings divided by   (b) the Fair Market Value as of the Valuation Date.   Notwithstanding anything to the contrary herein, a Participant whose employer contributions to the ESOP or Savings Plan have been limited by provisions of the Code applicable to contributions to qualified retirement plans other than the provisions of Section 401(a)(17) of the Code before such Participant would have otherwise been limited under Section 401(a)(17) of the Code shall be eligible for an award of Plan Units to the same extent as if such Participant had not first been limited by such other provisions. Notwithstanding the foregoing, for so long as the Valuation Date occurs less frequently than by each payroll period, no Participant shall be   5 -------------------------------------------------------------------------------- entitled to the foregoing award of Plan Units if such Participant has experienced a Termination of Employment before the applicable Valuation Date.   Whenever a dividend other than a dividend payable in the form of Shares is declared with respect to the Company’s Common Stock, the number of Plan Units in the Participant’s Stock Account shall be increased by a number of Plan Units determined by dividing (i) the product of (A) the number of Plan Units in the Participant’s Stock Account on the related dividend record date and (B) the amount of any cash dividend declared by the Company on a Share (or, in the case of any dividend distributable in property other than Common Stock, the per share value of such dividend, as determined by the Company for purposes of income tax reporting) by (ii) the Fair Market Value Per Share on the related dividend payment date.   Section 7 Awards to the Cash Account. As of each Valuation Date, the Company will add to the Cash Account of any Participant who suffered a reduction in employer credits to the Pension Plan as a result of the Statutory Reduction an amount equal to 3% of such Participant’s Affected Earnings. Notwithstanding anything to the contrary herein, a Participant whose employer contributions to the Pension Plan have been limited by provisions of the Code applicable to contributions to qualified retirement plans other than the provisions of Section 401(a)(17) of the Code before such Participant would have otherwise been limited under Section 401(a)(17) of the Code shall be eligible for an award under this Section 7 to the same extent as if such Participant had not first been limited by such other provisions.   Notwithstanding the foregoing, for so long as the Valuation Date occurs less frequently than by   6 -------------------------------------------------------------------------------- each payroll period, no Participant shall be entitled to an award if such Participant has experienced a Termination of Employment before the applicable Valuation Date.   Section 8 Vesting and Forfeitures. Any Participant who is employed by the Company or an Affiliate as of January 1, 2004 shall, subject to the last sentences of Sections 6 and 7, be 100% vested in their Cash and Stock Accounts at all times. Cash Account balances of those Participants who are first employed by the Company or an Affiliate (as such term is defined in the Pension Plan) after January 1, 2004 shall vest in accordance with the vesting rules in effect for the Pension Plan. Stock Account balances of those Participants who are first employed by the Company or an Affiliate (as such term is defined in the Savings Plan) after January 1, 2004 shall vest in accordance with the vesting rules in effect for the Savings Plan. Upon Termination of Employment of a Participant who is not vested in his or her Cash Account or Stock Account, such unvested accounts shall be forfeited as of the date of Termination of Employment. Notwithstanding the foregoing, forfeited balances in the Cash Account and Stock Account shall be subject to restoration in accordance with the rules regarding restoration of forfeited account balances in the Pension Plan and Savings Plan, respectively, including with respect to the Cash Account, restoration of interest credits that would have been earned during the period of forfeiture.   Section 9 Changes in Capital Structure. In the event of the payment of any dividend payable in, or the making of any distribution of, Shares to holders of record of Shares during the period any Plan Units awarded under the Plan are credited to a Participant’s Stock Account; or in   7 -------------------------------------------------------------------------------- the event of any stock split, combination of Shares, recapitalization or other similar change in the authorized capital stock of the Company during such period; or in the event of the merger or consolidation of the Company into or with any other corporation or the reorganization, dissolution or liquidation of the Company during such period; there shall be credited to such Participant’s Stock Account either (1) Plan Units corresponding to such new, additional or other shares of capital stock of any class or (2) other property (including cash), as such Participant would be entitled to receive as a matter of law if the number of Plan Units credited to the Participant’s Stock Account at the time of such event were actually Shares owned by such Participant.   Section 10. Distribution of a Participant’s Stock Account.   Effective January 1, 2005, upon a Participant’s Termination of Employment, such Participant shall be entitled to a distribution of his Stock Account thirty (30) days thereafter , provided that, if the Participant is a “key employee” under Section 416(i) of the Code for the relevant measuring period under Section 409A of the Code, any distribution in connection with the Participant’s Termination of Employment for any reason other than death or Disability will be made six months after Termination of Employment. The distribution shall be in Shares, with one Share distributed for each unit in the Stock Account, and fractional units converted to cash based on the Fair Market Value as of the last business day of the month preceding the date of distribution. Notwithstanding the foregoing, so long as it will not cause the Company or ASI to breach any covenant or otherwise incur a default under any credit or other financing agreement to which it is a party, the Company may elect to pay the Participant the cash value of his Shares   8 -------------------------------------------------------------------------------- based on the Fair Market Value as of the last business day of the month preceding the date of distribution. Distributions shall be subject to all required tax withholdings, and for purposes of Stock Account distributions, the Stock Account shall be valued as of the last business day of the month preceding the date of distribution. In the event of distribution of a Participant’s Stock Account due to such Participant’s death, distribution under this Section 10 shall be made to the same person or persons to whom such Participant’s interest in the Savings Plan becomes payable as a result of such Participant’s death.   Section 11. Distribution of a Participant’s Cash Account.   Effective January 1, 2005, upon a Participant’s Termination of Employment, such Participant shall be entitled to a distribution of the Actuarial Equivalent value of his Cash Account balance, if any, thirty (30) days thereafter, provided that, if the Participant is a “key employee” under Section 416(i) of the Code for the relevant measuring period under Section 409A of the Code, any distribution in connection with the Participant’s Termination of Employment for any reason other than death or Disability will be made six months after Termination of Employment. “Actuarial Equivalent” shall have the same meaning as ascribed to such term in the Pension Plan and Actuarial Equivalent value shall be calculated in the same manner as for lump sum distributions from the Pension Plan. The distribution shall be in cash, subject to all required tax withholdings, and for purposes of Cash Account distributions, the Cash Account shall be valued as of the last business day of the month preceding the date of distribution. In the event of a distribution of a Participant’s Cash Account due to such Participant’s death, distribution under this Section 11 shall be made to the same person or   9 -------------------------------------------------------------------------------- persons to whom such Participant’s interest in the Pension Plan becomes payable as a result of such Participant’s death.   Section 12. Effective Date, Amendment and Termination. The Plan was first effective as of January 1, 1994. Except as otherwise specified, the Plan, as amended and restated herein, shall be effective as of December 8, 2005. The Board may amend or terminate the Plan at any time; provided that, no such amendment or termination shall impair the rights of a Participant with respect to amounts then credited to his Account under the Plan.   Section 13. Administration. The Plan shall be administered by the Senior Vice President, Human Resources (the “Plan Administrator”) or his delegate(s). In addition to such functions and responsibilities specifically reserved to the Plan Administrator under the Plan, the Plan Administrator shall have full power and authority, subject to the provisions of the Plan, to determine any and all questions as to eligibility to participate in the Plan, the amounts to be credited to a Participant’s Account(s), a Participant’s right to receive a distribution from the Plan, to interpret and carry out the terms of the Plan, and to exercise discretion where necessary or appropriate in the interpretation of the Plan. All decisions by the Plan Administrator shall be final and binding on all affected parties. Claims made for benefits under the Plan shall be subject to the same claims and appeals procedures as the qualified plans.   Section 14. Miscellaneous.   a. Unfunded Plan. The Company shall not be obligated to fund its liabilities   10 -------------------------------------------------------------------------------- under the Plan, the Account(s) established for each Participant shall not constitute a trust, and a Participant shall have no claim against the Company or ASI or their assets other than as an unsecured general creditor. Without limiting the generality of the foregoing, the Participant’s claim at any time shall be for the amount credited to such Participant’s Stock Account and Cash Account at such time. Notwithstanding the foregoing, the Company may establish a grantor’s trust to assist it in meeting its obligations hereunder; provided, however, that in no event shall any Participant have any interest in such trust or property other than as an unsecured general creditor.   b. Non-Alienation. The right of a Participant to receive a distribution of the value of such Participant’s Account payable pursuant to the Plan shall not be subject to assignment or alienation.   c. No Right to Continued Employment. Nothing in this Plan shall be construed to give any Participant the right to continued employment by the Company or any of its affiliates.   d. Governing Law. This Plan and all rights and obligations hereunder shall be construed in accordance with and governed by the laws of the State of Delaware, to the extent such laws are not superseded by ERISA or other federal law. The Plan is intended to be a nonqualified deferred compensation plan maintained for a select group of management or highly compensated individuals.   e. Withholding. The Company shall provide for the withholding of any taxes required to be withheld by federal, state or local law in respect of any contribution, payment or   11 -------------------------------------------------------------------------------- distribution made pursuant to the Plan.   f. Compliance. The Plan Administrator shall impose such restrictions, limitations, rules and regulations as it may deem advisable in order to comply with the applicable federal securities laws, the requirements of the New York Stock Exchange or any other applicable stock exchange or automated quotation system, any applicable state securities laws, any provision of the Company Certificate of Incorporation of Bylaws, or any other law, regulation, rule, or binding contract to which the Company is subject. The Plan is intended to (i) be an excess parallel plan within the meaning of the New York Stock Exchange rules relating to shareholder approval of equity compensation plans and (ii) comply with the applicable requirements of Section 409A of the Code. Notwithstanding anything else contained herein to the contrary, the Company shall not be in breach of its obligations hereunder, nor liable for any interest or other payments, if it fails to make any payments hereunder on the stated date on which such payment is due, so long as such payment is made not later than the last day of the calendar year in which it is otherwise due hereunder.   12

Exhibit 10.1 September 8, 2006 Mr. William Hayes 155 Honeysuckle Road Lake Forest, IL  60045 Dear Bill: This letter agreement (“Letter Agreement”) will confirm and formalize our agreement with respect to your employment for the position of President of the General Safety and Preparedness segment of Norcross Safety Products L.L.C. (the “Company”).  In this position you will have full General Management responsibility for the General Safety and Preparedness segment and will report directly to me. This Letter Agreement is among you, the Company and Safety Products Holdings, Inc., a Delaware corporation (“Safety Products”), and I represent to you that I have the authority to enter into this Letter Agreement with you on behalf of both the Company and Safety Products. Starting Date:  The starting date of your employment shall be between October 2, 2006 and October 16, 2006, to be mutually agreed upon (the “Hire Date”). Base Salary:  Beginning on your Hire Date, you will receive a base salary of $375,000 per year (“Base Salary”), to be paid in bi-weekly installments of $14,423.08 in accordance with the Company’s payroll cycle.  Beginning on January 1, 2007, and each year thereafter, the Base Salary will be reviewed and will be subject to increase, but not decrease from time to time.  Upon any increase in Base Salary, Base Salary as so increased shall be considered the new Base Salary for all purposes of this Letter Agreement, and shall not thereafter be reduced. Annual Bonus:  You shall be eligible for an annual incentive bonus (“Annual Bonus”) at the end of each fiscal year that provides for a target Annual Bonus of 85% of your Base Salary (i.e. Annual Bonus of $318,750 based on current Base Salary).  The Annual Bonus will be based upon the financial performance of our General Safety and Preparedness segment (80%) and personal objectives together with the EBITDA performance of the Company (20%).  In addition, if we exceed our budgeted targets, the Annual Bonus could be as much as 125% of your targeted 85% (or $398,438 based on current Base Salary).  The Annual Bonus shall be paid no later than two and a half (2-1/2) months after the end of the fiscal year in which it is earned (i.e. currently because the fiscal year is the calendar year, the Annual Bonus for a particular year shall be paid no later than March 15 of the immediately following year).  The target (85%) and maximum (125% of 85%) percentages for the Annual Bonus shall not be reduced, unless such reduction is applicable to all similarly situated senior executives of the Company, and in such an event, the reduction factors applicable to you shall not be worse than the reduction factors applicable to similarly situated senior executives of the Company. 1 -------------------------------------------------------------------------------- Guaranteed Bonus:  No later than fifteen business days after your Hire Date, you will be paid $88,000, net of legally required tax and other withholdings, in a single lump sum to replace the estimated bonus you have earned to date in 2006 at your current employer.  Additionally, your Annual Bonus for 2006 shall be prorated based on the Hire Date, it shall be guaranteed at the minimum 85% target level, and it shall be paid to you no later than March 15, 2007. Stock Options:  On, or as soon after your Hire Date as Safety Product’s Board of Directors and Shareholders have approved a sufficient increase in the number of shares available for grant under the 2005 Option Plan of Safety Products Holdings, Inc., which approval will be sought beginning promptly after you sign this Agreement, (the “Grant Date”), you shall be granted an option (the “Option”) to purchase an amount of common stock of Safety Products at fair market value on the Grant Date equal to one percent (1.0%) of the outstanding common stock of Safety Products on a fully diluted basis (which currently equates to approximately 120,000 shares).  The Option shall vest and become exercisable as to one-third (1/3) (approximately 40,000 shares) of the shares underlying the Option ratably on December 31, 2007, December 31, 2008, and December 31, 2009, as set forth in the Non-Qualified Option Agreement of Safety Products Holdings, Inc. to be executed by you and Safety Products on the Grant Date (the “Option Agreement”), in a form as nearly identical as possible as that attached hereto as Exhibit A.  The Option shall vest and become exercisable as to the remaining two-thirds (2/3) of the shares underlying the Option as provided in Section 3.1(b) and (c) of Exhibit A.  For the avoidance of doubt, the EBITDA targets set out in Exhibit A are subject to adjustment as provided in Section 4.6 thereof. Purchased Shares:  You agree that you will invest, within 15 business days of your Hire Date, between $100,000 and $150,000 in Safety Products.  This equates to between 5,000 and 7,500 shares.  The Company and Safety Products have, in good faith and using their best judgment under the circumstances, determined that the current fair market value of a share of common stock of Safety Products, based on the reasonable application of a reasonable valuation method, within the meaning of Proposed Regulation 1.409A-1(b)(5)(iv)(B), is nineteen dollars and sixty-seven cents ($19.67). Severance:  If your employment is terminated by the Company or Safety Products without “Cause” (as defined in Section 1.1 of the Option Agreement attached hereto as Exhibit A), or if you terminate your employment because your Base Salary has been reduced or the Option is not granted to you within forty-five (45) calender days of your hire date, you shall be paid:  (A) two (2) years of your Base Salary payable in equal monthly installments in accordance with the Company’s normal payroll practices, over the 24 months immediately following the date of your termination of employment (the “Termination Date”); (B) any accrued Annual Bonus earned but not yet paid, for the fiscal year prior to the year which includes the Termination Date, payable within the period otherwise applicable to the payment of your Annual Bonus; (C) no later than two and a half (2-1/2) months after the end of the fiscal year which includes the Termination Date, you shall be paid a prorated Annual Bonus for the fiscal year which includes the Termination Date, based on the portion of the Base Salary paid to you in such year if financial targets are met for the year in which the Termination Date occurs; and (D) from your Termination Date through the second anniversary of your Termination Date, 2 -------------------------------------------------------------------------------- your medical insurance coverage shall continue on the same basis and at the same cost to you as if you were an active full-time employee of the Company. Vacation:  You will be entitled to four (4) weeks paid vacation each year.  Vacation not taken during the calendar year may not be carried forward to any subsequent year without the approval of the President/CEO of the Company. Health Insurance:  On your Hire Date, you would be eligible to participate immediately in the Company’s group health insurance plan.  The group health insurance plan offers medical, dental, vision, life, accidental death and dismemberment, long-term disability and optional life and accidental death coverages.  The details of the group insurance benefits will be provided to you under separate cover. Retirement Savings Plan:  The Company provides a 401(k) plan (“401(k) Plan”) in which you may elect to participate after completing three consecutive months of employment.  The 401(k) Plan provides for a Company matching contribution. Automobile:  You will receive a $700.00 per month vehicle allowance. Tax Withholding.  All payments to be made to you under this Agreement or your Option Agreement will be paid net of all legally required tax and other withholdings. Indemnification:  The Company and Safety Products agree to indemnify you for any work related liability to the fullest extent permitted under their by-laws, applicable law, applicable indemnification agreements, and other governing documents.  While you are employed by the Company and for so long thereafter as the Company provides such indemnification to other similarly situated former employees, the Company shall maintain liability insurance coverage for you at a level equal to the most favorable and protective coverage provided for any active officer or director of the Company. Internal Revenue Code Section 409A Compliance.  If payment of any amount or other benefit that is “deferred compensation” subject to Section 409A of the Internal Revenue Code at the time otherwise specified in this Letter Agreement would subject such compensation to additional tax pursuant to Internal Revenue Code Section 409A(a)(1), the payment thereof shall be postponed to the earliest commencement date on which such amounts could be paid without incurring such additional tax.  If any benefits permitted or required under this Letter Agreement are otherwise reasonably determined by the Company or you to be subject for any reason to a material risk of additional tax pursuant to Internal Revenue Code Section 409A(a)(1), you and the Company agree to negotiate in good faith appropriate provisions to avoid such risk without materially changing the economic value of this Letter Agreement to you or the economic value or financial effect of this Letter Agreement on the Company. This Letter Agreement contains the entire understanding of the parties with respect to your employment by the Company, and may not be modified or amended except by written instrument signed by the parties hereto. 3 -------------------------------------------------------------------------------- Bill, we are excited at the prospect of you joining the Company and believe this will be a challenging and exciting opportunity providing you with both professional and personal growth.  We recognize that you retain the option, as does the Company, of ending your employment with the Company at any time, with or without notice and with or without Cause.  As such, your employment with the Company is at-will and neither this Letter Agreement nor any other oral or written representations may be considered as providing for continuation of your employment with the Company for a specific period of time. Kindly indicate your acceptance of this offer by signing below and return it to me by fax 630-572-8518.  If you have any questions regarding this offer, please contact me at 630-572-8231. Sincerely yours, /s/ Robert A. Peterson Robert Peterson  /s/ William Hayes   September 8, 2006   William Hayes   Date   4 --------------------------------------------------------------------------------

Exhibit 10.8   March 8, 2006   Good Harbor Partners Acquisition Corp. 4100 North Fairfax Drive Arlington, VA 22203   HCFP/Brenner Securities LLC 888 Seventh Avenue, 17th Floor New York, New York 10106   Re: Initial Public Offering   Ladies and Gentlemen:   The undersigned officer, director and security holder of Good Harbor Partners Acquisition Corp. (the “Company”), in consideration of HCFP/Brenner Securities LLC’s (“Brenner”) willingness to underwrite an initial public offering of the securities of the Company (the “IPO”) and embarking on the IPO process, hereby agrees as follows (certain capitalized terms used herein are defined in paragraph 11 hereof):   1. In the event that the Company fails to consummate a Business Combination within 18 months from the effective date (“Effective Date”) of the registration statement relating to the IPO (or 24 months under the circumstances described in the prospectus relating to the IPO), the undersigned will take all reasonable actions within his power to (i) cause the Trust Fund to be liquidated and distributed to the holders of the shares of Class B common stock sold in the Company’s IPO and (ii) liquidate as soon as reasonably practicable. The undersigned waives any and all right, title, interest or claim of any kind in or to any distribution of the Trust Fund as a result of such liquidation with respect to his Insider Securities (each a “Claim”) and hereby waives any Claim he may have in the future as a result of, or arising out of, any contracts or agreements with the Company and will not seek recourse against the Trust Fund for any reason whatsoever. The undersigned agrees to indemnify and hold harmless the Company, severally, pro rata with Richard Clarke, John Tritak, Ralph Sheridan, Jack Mallon, Roger Cressey and Brian Stafford (together with the undersigned the “Indemnifiers”), based on the percentage of Insider Securities directly or indirectly beneficially owned by the Indemnifiers prior to the IPO, against any and all loss, liability, claims, damage and expense whatsoever (including, but not limited to, any and all legal or other expenses reasonably incurred in investigating, preparing or defending against any litigation, whether pending or threatened, or any claim whatsoever) which the Company may become subject as a result of any claim by any vendor or other person who is owed money by the Company for services rendered or products sold, or by any target business, only in the event that such vendor, other person or target business did not execute an agreement waiving any right, title, interest or claim of any kind in or to any amounts held in the Trust Fund, and only to the extent necessary to ensure that such loss, liability, claim, damage or expense does not reduce the amount in the Trust Fund. -------------------------------------------------------------------------------- Good Harbor Partners Acquisition Corp. HCFP/Brenner Securities LLC Page 2   2. In order to minimize potential conflicts of interest which may arise from multiple affiliations, the undersigned agrees to present to the Company for its consideration, prior to presentation to any other person or entity, any suitable opportunity to acquire an operating business, until the earlier of the consummation by the Company of a Business Combination, the liquidation of the Trust Fund or until such time as the undersigned ceases to be an officer or director of the Company, subject to any pre-existing fiduciary obligations the undersigned might have.   3. The undersigned acknowledges and agrees that the Company will not consummate any Business Combination which involves a company which is affiliated with any of the Insiders unless the Company obtains an opinion from an independent investment banking firm reasonably acceptable to Brenner that the business combination is fair to the Company’s stockholders from a financial perspective.   4. Neither the undersigned, any member of the family of the undersigned, nor any affiliate (“Affiliate”) of the undersigned will be entitled to receive and will not accept any compensation or fees of any kind, including finder’s and consulting fees, prior to, or for services they rendered in order to effectuate, the Business Combination. The undersigned shall also be entitled to reimbursement from the Company for their out-of-pocket expenses incurred in connection with seeking and consummating a Business Combination.   5. Neither the undersigned, any member of the family of the undersigned, or any Affiliate of the undersigned will be entitled to receive or accept a finder’s fee or any other compensation in the event the undersigned, any member of the family of the undersigned or any Affiliate of the undersigned originates a Business Combination.   6. The undersigned agrees not to sell any of his Insider Securities until the Company’s completion of a Business Combination.   7. The undersigned has agreed to vote any shares of Class B common stock it holds or hereafter acquires in favor of any proposed Business Combination approved by the Company’s Board of Directors.   8. The undersigned agrees to be the President, Treasurer and a member of the Board of Directors of the Company until the earlier of the consummation by the Company of a Business Combination or the distribution of the Trust Fund. The undersigned’s biographical information furnished to the Company and Brenner and attached hereto as Exhibit A is true and accurate in all respects, does not omit any material information with respect to the undersigned’s background and contains all of the information required to be disclosed pursuant to Section 401 of Regulation S-K, promulgated under the Securities Act of 1933. The undersigned’s Questionnaire furnished to the Company and Brenner and annexed as Exhibit B hereto is true and accurate in all respects. The undersigned represents and warrants that:   (a) he is not subject to or a respondent in any legal action for, any injunction, cease-and-desist order or order or stipulation to desist or refrain from any act or practice relating to the offering of securities in any jurisdiction; -------------------------------------------------------------------------------- Good Harbor Partners Acquisition Corp. HCFP/Brenner Securities LLC Page 3   (b) he has never been convicted of or pleaded guilty to any crime (i) involving any fraud or (ii) relating to any financial transaction or handling of funds of another person, or (iii) pertaining to any dealings in any securities and he is not currently a defendant in any such criminal proceeding; and   (c) he has never been suspended or expelled from membership in any securities or commodities exchange or association or had a securities or commodities license or registration denied, suspended or revoked.   9. The undersigned has full right and power, without violating any agreement by which he is bound, to enter into this letter agreement and to serve as the President, Treasurer and a member of the Board of Directors of the Company.   10. The undersigned authorizes any employer, financial institution, or consumer credit reporting agency to release to Brenner and its legal representatives or agents (including any investigative search firm retained by Brenner) any information they may have about the undersigned’s background and finances (“Information”). Neither Brenner nor its agents shall be violating my right of privacy in any manner in requesting and obtaining the Information and the undersigned hereby releases them from liability for any damage whatsoever in that connection.   11. As used herein, (i) a “Business Combination” shall mean an acquisition by merger, capital stock exchange, asset or stock acquisition, reorganization or otherwise, of an operating business selected by the Company; (ii) “Insiders” shall mean all officers, directors and securityholders of the Company immediately prior to the IPO; (iii) “Insider Securities” shall mean all of the shares of common stock, Class W Warrants and Class Z Warrants (and all shares of common stock underlying such securities) of the Company owned by an Insider prior to the IPO; and (iv) “Trust Fund” shall mean that portion of the net proceeds of the IPO placed in trust for the benefit of the holders of the shares of Class B common stock issued in the Company’s IPO as contemplated by the Company’s prospectus relating to the IPO.   Thomas J. Colatosti /s/ Thomas J. Colatosti -------------------------------------------------------------------------------- Signature

  EXHIBIT 10.1 INVESTORS RIGHTS AGREEMENT      This Investors Rights Agreement dated as of August 14, 2006 (this “Agreement”) is entered into by and among Allis-Chalmers Energy Inc., a Delaware corporation (the “Company”), and the parties whose names appear on Exhibit A (collectively, the “Investors”).      WHEREAS, the Company and the Investors have entered into a Stock Purchase Agreement dated as of April 27, 2006 (the “Stock Purchase Agreement”) pursuant to which each of the Investors shall receive a number of shares of the common stock, par value $0.01 per share, of the Company (the "Common Stock”) to be determined as set forth therein;      WHEREAS, in order to induce each of the Investors to enter into the Stock Purchase Agreement, the Company has agreed to grant certain registration rights to the Investors with respect to such shares and certain Board designation rights, in each case, subject to the terms and conditions set forth herein;      NOW, THEREFORE, in consideration of the foregoing and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:      Section 1. Definitions. As used herein, the following terms have the indicated meanings, unless the context otherwise requires:      "Agreement” has the meaning given to such term in the preamble hereto.      "Beneficially Own,” “Beneficially Owned,” “Beneficial Ownership” and “Beneficial Owner” with respect to any securities means a Holder’s having such ownership, control or power to direct the voting with respect to, or which otherwise enables a Holder to legally act with respect to, such securities as contemplated hereby, including without limitation pursuant to any agreement, arrangement or understanding, regardless of whether in writing. Securities “Beneficially Owned” shall include securities Beneficially Owned by all other persons with whom a Holder would constitute a “group” as within the meaning of Section 13(d) of the Exchange Act.      "Blackout Period” means a period in each case commencing on the day immediately after the Company notifies the Holders that they are required, pursuant to Section 4(b)(vi), to suspend offers and sales of Registrable Securities during which the Company, in the good faith judgment of the Board, determines (because of the existence of, or in anticipation of, any acquisition, financing activity, or other transaction involving the Company, or the unavailability for reasons beyond the Company’s control of any required financial statements, disclosure of information which is in its best interest not to publicly disclose, or any other event or condition of similar significance to the Company) that the registration and distribution of (and/or the registration of the offer and sale of) the Registrable Securities covered or to be covered by the Registration Statement would be seriously detrimental to the Company and its stockholders and ending on the earlier of (a) the date upon which the material non-public information commencing the Blackout Period is disclosed to the public or ceases to be material and (b) such time as the Company notifies the selling Holders that the Company will no longer delay such filing of the Registration   --------------------------------------------------------------------------------   Statement, recommence taking steps to make such Registration Statement effective, or allow sales pursuant to such Registration Statement to resume; provided that no Blackout Period may last for more than 60 consecutive days; provided, further, that during any period of 365 consecutive days, Blackout Periods may not, in the aggregate, last for more than the greater of (a) zero days and (b) the result of 90 days minus the number of days that holders are required pursuant to Section 4(c) to discontinue and suspend disposition of Registrable Securities because of the happening of any event described in Section 4(b)(vi).      "Board” means the board of directors of the Company.      "Business Day” means any day of the year, other than a Saturday, Sunday, or other day on which the SEC is required or authorized to close.      "Closing Date” has the meaning given to such term in the Stock Purchase Agreement.      "Common Stock” has the meaning given to such term in the recitals hereto.      "Company” has the meaning given to such term in the preamble hereto.      "Designation Rights Termination Date” has the meaning given to such term in Section 2(b) hereto.      "Effectiveness Period” has the meaning given to such term in Section 4(b)(i) .      "Equity Securities Offering” means any underwritten registered offering of Relevant Securities, and any offering or placement of any Relevant Securities pursuant to Rule 144A under the Securities Act.      "Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC promulgated thereunder.      "Family Member” means (a) with respect to any individual, such individual’s spouse, any descendants (whether natural or adopted), any trust all of the beneficial interests of which are owned by any of such individuals or by any of such individuals together with any organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended, the estate of any such individual, and any corporation, association, partnership or limited liability company all of the equity interests of which are owned by those above described individuals, trusts or organizations and (b) with respect to any trust, the owners of the beneficial interests of such trust.      "Form S-1” means such form under the Securities Act as in effect on the date of this Agreement or any successor registration form thereto under the Securities Act subsequently adopted by the SEC.      "Form S-3” means such form under the Securities Act as in effect on the date of this Agreement or any successor registration form thereto under the Securities Act subsequently adopted by the SEC. 2 --------------------------------------------------------------------------------        "Holder” means each Investor or any of such Investor’s successors and Permitted Assignees who acquire rights in accordance with this Agreement with respect to the Registrable Securities directly or indirectly from another Holder (including from any Permitted Assignee).      "Inspector” means any attorney, accountant or other agent retained by a Holder for the purposes provided in Section 4(b)(x).      "Investor” has the meaning given to such term in the preamble hereto.      "Investor Director” means any member of the Board that was nominated for election to the Board by the Holders pursuant to and in accordance with Section 2(a).      "Market Standoff Period” with respect to each Equity Securities Offering, the period beginning on the date of first sale of securities pursuant to such Equity Securities Offering and ending on the date that shall be requested by the Company or the underwriters or initial purchasers retained by the Company to facilitate such Equity Securities Offering; provided, however, that each such period shall not be more than 90 days; provided further that (i) such period shall be no longer than the shortest period imposed by the Company or the underwriters upon any other person or entity and (ii) if any other person or entity receives a waiver with respect to any such matters, the Investors shall be given a waiver with respect to their Shares as well.      "NASD” means the National Association of Securities Dealers.      "Permitted Assignee” means (a) with respect to a partnership, its partners or former partners in accordance with their partnership interests, (b) with respect to a corporation, its stockholders in accordance with their interest in the corporation, (c) with respect to a limited liability company, its members or former members in accordance with their interest in the limited liability company, (d) with respect to an individual party, any Family Member of such party, (e) an entity that is controlled by, controls, or is under common control with a transferor, or (f) a party to this Agreement.      "register,” “registered,” and “registration” refer to a registration effected by preparing and filing a registration statement in compliance with the Securities Act, and the declaration or ordering of the effectiveness of such registration statement.      "Registrable Securities” means the Shares, excluding any such Shares (a) that have been publicly sold or may be sold immediately without registration or the requirement to make filings with the SEC under the Securities Act either pursuant to Rule 144 of the Securities Act or otherwise, (b) sold by a person in a transaction pursuant to a registration statement filed under the Securities Act or (c) that are at the time subject to an effective registration statement under the Securities Act (other than the Registration Statement contemplated hereby).      "Registration Expenses” has the meaning given to such term in Section 4(d).      "Registration Statement” has the meaning given to such term in Section 4(a). 3 --------------------------------------------------------------------------------        "Relevant Security” means the Shares, any other equity security of the Company or any of its subsidiaries and any security convertible into, or exercisable or exchangeable for, any Shares or other such equity security.      "SEC” means the Securities and Exchange Commission or any other federal agency at the time administering the Securities Act.      "SEC Effective Date” means the date the Registration Statement is originally declared effective by the SEC.      "Securities Act” means the Securities Act of 1933, as amended, or any similar federal statute promulgated in replacement thereof, and the rules and regulations of the SEC thereunder, all as the same shall be in effect from time to time.      "Selling Expenses” has the meaning given to such term in Section 4(d).      "Shares” means the shares of Common Stock issued to each Investor pursuant to the Stock Purchase Agreement and (a) any and all shares of capital stock or other equity securities of the Company which are added to or exchanged or substituted for such shares of Common Stock by reason of the declaration of any stock dividend or stock split, the issuance of any distribution or the reclassification, readjustment, recapitalization or other such modification of the capital structure of the Company; and (b) any and all shares of capital stock or other equity securities of any other corporation (now or hereafter organized under the laws of any state or other governmental authority) with which the Company is merged, which results from any consolidation or reorganization to which the Company is a party, or to which is sold all or substantially all of the shares or assets of the Company, for which such shares of Common Stock are exchanged or substituted in connection with such merger, consolidation, reorganization or sale, if immediately after such merger, consolidation, reorganization or sale, the Company or the stockholders of the Company own equity securities having in the aggregate more than 50% of the total voting power of such other corporation.      "Stock Purchase Agreement” has the meaning given to such term in the recitals hereto.      "Transfer” has the meaning given to such term in Section 3(a).      Section 2. Board Designation Rights.      (a) Designation. Until the Designation Rights Termination Date, the Investors shall have the right to designate two nominees for election to the Board.      (b) Termination of Designation Rights. The Investors shall not be entitled to designate any nominees for election to the Board pursuant to this Agreement from and after the date (the “Designation Rights Termination Date”) that is the first date on which the Shares Beneficially Owned by the Investors collectively represent less than twenty percent (20%) of the Shares initially acquired by the Investors pursuant to the Stock Purchase Agreement.      (c) Company Support. At all times prior to the Designation Rights Termination Date, the Company shall support the nominations of the persons designated by the Holders pursuant to Section 2(a), and the Company shall use its best efforts to cause the Board (and the Company’s 4 --------------------------------------------------------------------------------   nominating committee, if any) to recommend the inclusion of such persons in the slate of nominees recommended to stockholders for election as directors at each annual meeting of stockholders of the Company.      (d) Vacancies. If at any time prior to the Designation Rights Termination Date, a vacancy is created on the Board by reason of the incapacity, death, removal or resignation of any Investor Director, then the Company shall use its best efforts to cause the Board to appoint an individual designated by the Holders to fill such vacancy until the next meeting of the Company’s stockholders at which directors are elected.      Section 3. Market Standoff. Notwithstanding anything to the contrary set forth in this Agreement, with respect to each Equity Securities Offering conducted after the Closing Date, the following provisions of this Section 3 shall apply, if and only if (x) the underwriters or initial purchasers retained by the Company to facilitate such offering request, in connection with such offering, that the officers or directors or significant stockholders of the Company refrain from selling any Relevant Security during any period, and (y) either (1) any nominee designated by the Investors pursuant to Section 2(a) is a member of the Board, or (2) the Holders Beneficially Own shares of Common Stock representing at least 10% of the fully diluted equity interests in the Company (calculated giving effect to the exercise of all outstanding options, warrants and other rights to purchase to acquire any Common Stock of the Company):      (a) Without the prior written consent of the Company, during the Market Standoff Period applicable to such Equity Securities Offering, each Holder will not (i), directly or indirectly, offer, sell, agree to offer or sell, solicit offers to purchase, grant any call option or purchase any put option with respect to, pledge, borrow or otherwise dispose of any Relevant Security, or (ii) establish or increase any “put equivalent position” or liquidate or decrease any “call equivalent position” (in each case within the meaning of Section 16 of the Exchange Act) with respect to any Relevant Security, or otherwise enter into any swap, derivative or other transaction or arrangement that transfers to another, in whole or in part, any economic consequence of ownership of a Relevant Security (each of the transactions described in the immediately preceding clauses (i) and (ii), being referred to as a “Transfer”), regardless of whether such transaction is to be settled by delivery of Relevant Securities, other securities, cash or other consideration; provided, however, that a Transfer to a Permitted Assignee will not be subject to this Section 3 as long as (x) such Transfer is effected in accordance with applicable securities laws; (y) such transferee agrees in writing to become subject to the terms of this Agreement as a Holder; and (z) the Company is given written notice by such Holder of such Transfer, stating the name and address of the transferee and identifying the Shares being Transferred.      (b) Furthermore, each Holder hereby authorizes the Company during the Market Standoff Period to cause any transfer agent for the Relevant Securities to decline to transfer, and to note stop transfer restrictions on the stock register and other records relating to, any Relevant Securities for which such Holder is the record holder and, in the case of Relevant Securities for which such Holder is the Beneficial Owner but not the record holder, agrees during the Market Standoff Period to cause the record holder thereof to cause the relevant transfer agent to decline to transfer, and to note stop transfer restrictions on the stock register and other records relating to, such Relevant Securities. 5 --------------------------------------------------------------------------------        (c) Without the prior written consent of the Company, during the Market Standoff Period such Holder (x) will not participate in the filing with the SEC of any registration statement, or circulate or participate in the circulation of any preliminary or final prospectus or other disclosure document with respect to any proposed offering or sale of a Relevant Security and (y) will not exercise any rights the undersigned may have to require registration with the SEC of any proposed offering or sale of a Relevant Security (including without limitation pursuant to this Agreement).      Section 4. Registration Rights.      (a) Shelf Registration Statement. As promptly as reasonably practicable after the Closing Date (but no later than 30 after the Closing Date, unless a later date is agreed to in writing by the Holders of a majority of the Registrable Securities), the Company shall file with the SEC a shelf registration statement on Form S-1 (or, if the Company is eligible to use such form, Form S-3) relating to the registration of the offer and resale by the Holders of all of the Registrable Securities (the “Registration Statement”); provided, however, that the Company shall not be obligated to effect any such registration pursuant to this Section 4(a), or keep such registration or the Registration Statement effective pursuant to Section 4(b)(i), during any Blackout Period.      (b) Registration Procedures. In the case of each registration, qualification, or compliance effected by the Company pursuant to Section 4(a), the Company will keep each Holder including securities therein reasonably advised in writing (which may include e-mail) as to the initiation of each registration, qualification, and compliance and as to the completion thereof. In addition, the Company hereby agrees as follows with respect to the Registration Statement.       (i) The Company will use its commercially reasonable efforts to cause the Registration Statement to become and remain effective at least for a period ending with the first to occur of (A) the sale by the Holders of all Registrable Securities covered by the Registration Statement, (B) the availability under Rule 144 for the Holders to immediately, freely resell without restriction or filing with the SEC all Registrable Securities covered by the Registration Statement, or (C) the date that is two years after the SEC Effective Date (provided, however, that if the Company files the Registration Statement on Form S-1 and subsequently becomes eligible to use Form S-3, it may file a post-effective amendment to such Form S-1 on Form S-3 prior to the end of such period and use its commercially reasonable efforts to cause the Registration Statement as amended to become effective until the end of such period) (in any such case, the “Effectiveness Period”). At any time after the end of the Effectiveness Period, if (a) the Holders Beneficially Own Registrable Securities representing more than 10% of the fully diluted equity interests in the Company (calculated giving effect to the exercise of all outstanding options, warrants and other rights to purchase to acquire any Common Stock of the Company) or (b) any nominee designated by the Investors pursuant to Section 2(a) is a member of the Board, then (x) as promptly as reasonably practicable after the written request of Holders of greater than 50% of the Registrable Securities, the Company shall file with the SEC another shelf registration statement on Form S-1 (or, if the Company is eligible to use such form, Form S-3) relating to the registration of the offer and resale by the Holders of all of the Registrable Securities, (y) the provisions of this Agreement 6 --------------------------------------------------------------------------------   (including without limitation the provisions of Section 4(a) and Section 4(b)) shall apply to such registration statement and (z) such registration statement shall be deemed to be the Registration Statement (as defined in Section 4(a)) for purposes of this Agreement.       (ii) If the Registration Statement becomes subject to review by the SEC, the Company will promptly respond to all comments and diligently pursue resolution of any comments to the satisfaction of the SEC.       (iii) The Company will prepare and file with the SEC such amendments and supplements to the Registration Statement and any prospectus used in connection therewith as may be reasonably necessary to keep the Registration Statement effective during the Effectiveness Period, and will comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such Registration Statement during such period in accordance with the intended method(s) of disposition by the sellers thereof set forth in such Registration Statement.       (iv) The Company will furnish, without charge, to each Holder (A) a reasonable number of copies of the Registration Statement (including any exhibits thereto other than exhibits incorporated by reference), each amendment and supplement thereto as such Holder may request, (B) such number of copies of the prospectus included in such Registration Statement (including each preliminary prospectus and any other prospectus filed under Rule 424 under the Securities Act) as such Holder may request, in conformity with the requirements of the Securities Act, and (C) such other documents as such Holder may reasonably request in order to facilitate the disposition of the Registrable Securities owned by such Holder, but only during the Effectiveness Period.       (v) The Company will use its commercially reasonable efforts to register or qualify the Registrable Securities under such other applicable securities or blue sky laws of such jurisdictions as any Holder reasonably requests as may be necessary for the marketability of the Registrable Securities (such request to be made by the time the Registration Statement is deemed effective by the SEC) and do any and all other acts and things which may be reasonably necessary or advisable to enable such Holder to consummate the disposition in such jurisdictions of the Registrable Securities owned by such Holder; provided, however, that the Company shall not be required to (A) qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this paragraph (v), (B) subject itself to taxation in any such jurisdiction, or (C) consent to general service of process in any such jurisdiction.       (vi) As promptly as practicable after becoming aware of such event, the Company will notify each Holder of such Registrable Securities at any time when a prospectus relating thereto is required to be delivered under the Securities Act of the happening of any event which comes to the Company’s attention if as a result of such event the prospectus included in the Registration Statement contains an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and the Company shall promptly prepare and furnish to such Holder a supplement or amendment to such prospectus (or prepare and file appropriate reports under the Exchange Act) so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus shall 7 --------------------------------------------------------------------------------   not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, unless suspension of the use of such prospectus otherwise is authorized herein or in the event of a Blackout Period, in which case no supplement or amendment need be furnished (or Exchange Act filing made) until the termination of such suspension or Blackout Period.       (vii) The Company will comply, and continue to comply during the period that the Registration Statement is effective under the Securities Act, in all material respects with the Securities Act and the Exchange Act and with all applicable rules and regulations of the SEC with respect to the disposition of all securities covered by the Registration Statement.       (viii) As promptly as practicable after becoming aware of such event, the Company will notify each Holder of Registrable Securities being offered or sold pursuant to the Registration Statement of the issuance by the SEC of any stop order or other suspension of effectiveness of the Registration Statement.       (ix) The Company will permit the Holders of Registrable Securities being included in the Registration Statement and their legal counsel, at such Holders’ sole cost and expense to review and have a reasonable opportunity to comment on the Registration Statement and all amendments and supplements thereto at least two Business Days prior to their filing with the SEC.       (x) The Company will make available for inspection by any Holder and any Inspector retained by such Holder, at such Holder’s sole expense, all records as shall be reasonably necessary to enable such Holder to exercise its due diligence responsibility, and cause the Company’s officers, directors, and employees to supply all information which such Holder or any Inspector may reasonably request for purposes of such due diligence; provided, however, that such Holder shall hold in confidence and shall not make any disclosure of any record or other information which the Company determines in good faith to be confidential, and of which determination such Holder is so notified at the time such Holder receives such information, unless (w) such Holder had, or obtained, knowledge of such information without violation of or protection under any agreements with the Company or, to its knowledge any third party, (x) the disclosure of such record is reasonably necessary to avoid or correct a misstatement or omission in the Registration Statement and a reasonable time prior to such disclosure the Holder shall have informed the Company of the need to so correct such misstatement or omission and the Company shall have failed to correct such misstatement of omission, (y) the release of such record is ordered pursuant to a subpoena or other order from a court or governmental body of competent jurisdiction or (z) the information in such record has been made generally available to the public other than by disclosure in violation of this Agreement or any other agreement. The Company shall not be required to disclose any confidential information in such records to any Inspector until and unless such Inspector shall have entered into a confidentiality agreement with the Company with respect thereto, containing terms substantially similar to those set forth in this Section 4(b)(x), which agreement shall permit such Inspector to disclose records to the Holder who has retained such Inspector. Each Holder agrees that it shall, upon learning that disclosure of such 8 --------------------------------------------------------------------------------   records is sought in or by a court or governmental body of competent jurisdiction or through other means, give prompt notice to the Company and allow the Company, at the Company’s expense, to undertake appropriate action to prevent disclosure of, or to obtain a protective order for, the records deemed confidential. The Company shall hold in confidence and shall not make any disclosure of information concerning a Holder provided to the Company pursuant to this Agreement unless (A) disclosure of such information is reasonably necessary to comply with federal or state securities laws, (B) disclosure of such information to the SEC’s Staff of the Division of Corporation Finance is reasonably necessary to respond to comments raised by such staff in its review of the Registration Statement, (C) disclosure of such information is reasonably necessary to avoid or correct a misstatement or omission in the Registration Statement, (D) release of such information is ordered pursuant to a subpoena or other order from a court or governmental body of competent jurisdiction, or (E) such information has been made generally available to the public other than by disclosure in violation of this or any other agreement. The Company agrees that it shall, upon learning that disclosure of such information concerning a Holder is sought in or by a court or governmental body of competent jurisdiction or through other means, give prompt notice to such Holder and allow such Holder, at such Holder’s expense, to undertake appropriate action to prevent disclosure of, or to obtain a protective order for, such information.       (xi) The Company will use its commercially reasonable efforts to cause all the Registrable Securities covered by the Registration Statement to be listed or quoted on the principal securities market on which securities of the same class or series issued by the Company are then listed or traded.       (xii) The Company will provide a transfer agent and registrar, which may be a single entity, for the Registrable Securities at all times.       (xiii) The Company will cooperate with the Holders of Registrable Securities being offered pursuant to the Registration Statement to facilitate the timely preparation and delivery of certificates (not bearing any restrictive legends) representing Registrable Securities to be offered pursuant to the Registration Statement and enable such certificates to be in such denominations or amounts as the Holders may reasonably request and registered in such names as the Holders may request.       (xiv) The Company will take all other reasonable actions necessary to expedite and facilitate disposition by the Holders of the Registrable Securities pursuant to the Registration Statement, including without limitation making its chief executive officer, president, chief financial officer and other appropriate officers and personnel available to participate in marketing efforts with respect to any registered underwritten public offering.      (c) Suspension of Offers and Sales. Each Holder of Registrable Securities agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 4(b)(vi) or of the commencement of an Blackout Period, such Holder shall discontinue and suspend disposition of Registrable Securities pursuant to the Registration Statement until such Holder’s receipt of the copies of the supplemented or amended prospectus contemplated by Section 4(b)(vi) or notice of the end of the Blackout Period, and, if so directed 9 --------------------------------------------------------------------------------   by the Company, such Holder shall deliver to the Company (at the Company’s expense) all copies (including, without limitation, any and all drafts), other than permanent file copies, then in such Holder’s possession, of the prospectus covering such Registrable Securities current at the time of receipt of such notice.      (d) Registration Expenses. All expenses incident to the Company’s performance of or compliance with this Agreement, including without limitation all registration and filing fees, messenger and delivery expenses, printing expenses, internal expenses (including without limitation all salaries and expenses of its officers and employees performing legal or accounting duties), all fees and expenses associated with filings required to be made with the NASD, as may be required by the rules and regulations of the NASD, fees and expenses of compliance with securities or blue sky laws (including reasonable fees and disbursements of counsel in connection with blue sky qualifications of the Registrable Securities), rating agency fees, the fees and expenses incurred in connection with the listing of the securities to be registered on all securities exchanges on which similar securities issued by the Company are then quoted or listed, fees and disbursements of counsel for the Company and its independent certified public accountants, and the fees and expenses of any other persons retained by the Company, in connection with the registration hereunder (collectively, the “Registration Expenses”) will be borne by the Company, but not including any roadshow expenses, fees and expenses of counsel for the Holders and any underwriting, broker or dealer discounts or commissions attributable to the sale of Registrable Securities (which are hereinafter referred to as “Selling Expenses”). All Selling Expenses shall be borne solely by the Holders.      (e) Information by Holder. The Holder or Holders of Registrable Securities included in the Registration Statement shall furnish to the Company such information required under Regulation S-K under the Securities Act regarding such Holder or Holders and the distribution proposed by such Holder or Holders as the Company may request in writing. No Holder of Registrable Securities will be entitled to have such Registrable Securities included in a Registration Statement if such Holder does not furnish such information requested by the Company.      (f) Indemnification.       (i) In the event of the offer and sale of Registrable Securities held by Holders under the Securities Act, the Company shall, and hereby does, indemnify and hold harmless, to the fullest extent permitted by law, each Holder, its directors, officers, partners, each other person who participates as an underwriter in the offering or sale of such securities, and each other person, if any, who controls or is under common control with such Holder or any such underwriter within the meaning of Section 15 of the Securities Act, against any losses, claims, damages or liabilities, joint or several, and expenses to which the Holder or any such director, officer, partner or underwriter or controlling person may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages, liabilities or expenses (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in (A) the Registration Statement, any preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement thereto, or (B) in any materials or information provided to investors by, or with the written approval of, the 10 --------------------------------------------------------------------------------   Company in connection with the marketing of the offering of the Shares (“Marketing Materials”), including any road show or investor presentations made to investors by the Company (whether in person or electronically), or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein in light of the circumstances in which they were made not misleading, and the Company shall reimburse the Holder, and each such director, officer, partner, underwriter and controlling person for any legal or any other expenses reasonably incurred by them in connection with investigating, defending or settling any such loss, claim, damage, liability, action or proceeding; provided that the foregoing shall not apply, and the Company shall not be liable, in any such case (A) to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of or is based upon an untrue statement or alleged untrue statement in or omission or alleged omission from such Registration Statement, any such preliminary prospectus, final prospectus, summary prospectus, amendment or supplement in reliance upon and in conformity with written information furnished to the Company through an instrument duly executed by or on behalf of such Holder specifically stating that it is for use in the preparation thereof, or (B) to the extent that the Holders failed to comply with the terms of the plan of distribution mechanics described in the applicable prospectus. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of the Holders, or any such director, officer, partner, underwriter or controlling person and shall survive the transfer of such shares by the Holder.       (ii) As a condition to including any Registrable Securities to be offered by a Holder in the Registration Statement, each such Holder agrees to be bound by the terms of this Section 4(f) and to indemnify and hold harmless, to the fullest extent permitted by law, the Company, its directors and officers, and each other person, if any, who controls the Company within the meaning of Section 15 of the Securities Act, legal counsel and accountants for the Company, any underwriter, any other Holder selling securities in such Registration Statement and any controlling person within the meaning of the Securities Act of any such underwriter or other Holder, against any losses, claims, damages or liabilities, joint or several, to which the Company or any such director or officer or controlling person may become subject under the Securities Act or otherwise, (A) insofar as such losses, claims, damages or liabilities (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement in or omission or alleged omission from such Registration Statement, any preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement thereto, if such statement or alleged statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Company through an instrument duly executed by or on behalf of such Holder specifically stating that it is for use in the preparation thereof, or (B) to the extent that the Holders failed to comply with the terms of the plan of distribution mechanics described in the applicable prospectus. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of the Company, or any such director, officer, partner, underwriter or controlling person and shall survive the transfer of such shares by the Holder, and such Holder shall reimburse the Company, and each such director, officer, legal counsel and accountants, underwriter, other Holder, and controlling person for any legal or other expenses reasonably incurred by them in connection with investigating, defending, or 11 --------------------------------------------------------------------------------   settling and such loss, claim, damage, liability, action, or proceeding; provided, however, that such indemnity agreement found in this Section 4(f)(ii) shall in no event exceed the gross proceeds from the offering received by such Holder.       (iii) Promptly after receipt by an indemnified party of notice of the commencement of any action or proceeding involving a claim referred to in Section 4(f)(i) or Section 4(f)(ii) (including any governmental action), such indemnified party shall, if a claim in respect thereof is to be made against an indemnifying party, give written notice to the indemnifying party of the commencement of such action; provided, however, that the failure of any indemnified party to give notice as provided herein shall not relieve the indemnifying party of its obligations under Section 4(f)(i) or Section 4(f)(ii), except to the extent that the indemnifying party is actually prejudiced by such failure to give notice. In case any such action is brought against an indemnified party, unless in the reasonable judgment of counsel to such indemnified party a conflict of interest between such indemnified and indemnifying parties may exist or the indemnified party may have defenses not available to the indemnifying party in respect of such claim, the indemnifying party shall be entitled to participate in and to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party and, after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party shall not be liable to such indemnified party for any legal or other expenses subsequently incurred by the latter in connection with the defense thereof, unless in such indemnified party’s reasonable judgment a conflict of interest between such indemnified and indemnifying parties arises in respect of such claim after the assumption of the defenses thereof or the indemnifying party fails to defend such claim in a diligent manner, other than reasonable costs of investigation. Neither an indemnified nor an indemnifying party shall be liable for any settlement of any action or proceeding effected without its consent. No indemnifying party shall, without the consent of the indemnified party, consent to entry of any judgment or enter into any settlement, which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect of such claim or litigation. Notwithstanding anything to the contrary set forth herein, and without limiting any of the rights set forth above, in any event any party shall have the right to retain, at its own expense, counsel with respect to the defense of a claim.       (iv) In the event that an indemnifying party does or is not permitted to assume the defense of an action pursuant to Section 4(f)(iii) or in the case of the expense reimbursement obligation set forth in Section 4(f)(i) and Section 4(f)(ii), the indemnification required by Section 4(f)(i) and Section 4(f)(ii) shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills received or expenses, losses, damages, or liabilities are incurred.       (v) If the indemnification provided for in this Section 4(f) is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any loss, liability, claim, damage or expense referred to herein, the indemnifying party, in lieu of indemnifying such indemnified party hereunder, shall (A) contribute to the amount paid or payable by such indemnified party as a result of such loss, liability, claim, damage or expense as is appropriate to reflect the proportionate relative fault of the indemnifying party on the one hand and the indemnified party on the other (determined by reference to, 12 --------------------------------------------------------------------------------   among other things, whether the untrue or alleged untrue statement of a material fact or omission relates to information supplied by the indemnifying party or the indemnified party and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such untrue statement or omission), or (B) if the allocation provided by clause (A) above is not permitted by applicable law or provides a lesser sum to the indemnified party than the amount hereinafter calculated, not only the proportionate relative fault of the indemnifying party and the indemnified party, but also the relative benefits received by the indemnifying party on the one hand and the indemnified party on the other, as well as any other relevant equitable considerations. No indemnified party guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any indemnifying party who was not guilty of such fraudulent misrepresentation.       (vi) Indemnification similar to that specified in the preceding subsections of this Section 4(f) (with appropriate modifications) shall be given by the Company and each Holder of Registrable Securities with respect to any required registration or other qualification of securities under any federal or state law or regulation or governmental authority other than the Securities Act.      Section 5. Miscellaneous.      (a) Assignment of Rights; Successors and Permitted Assignees. No Holder may assign its rights under this Agreement to any party without the prior written consent of the Company; provided, however, that a Holder may assign its rights under this Agreement without such restrictions to a Permitted Assignee as long as (i) such transfer or assignment is effected in accordance with applicable securities laws; (ii) such transferee or assignee agrees in writing to become subject to the terms of this Agreement as a Holder; and (iii) the Company is given written notice by such Holder of such transfer or assignment, stating the name and address of the transferee or assignee and identifying the Shares with respect to which such rights are being transferred or assigned. Except as otherwise provided herein, the provisions of this Agreement shall inure to the benefit of, and be binding upon, the successors, Permitted Assignees, executors and administrators of the parties hereto.      (b) Notices. All notices or other communications which are required or permitted under this Agreement shall be in writing and sufficient if delivered by hand, by facsimile transmission, by registered or certified mail, postage pre-paid, by electronic mail, or by courier or overnight carrier, to the persons at the addresses set forth below (or at such other address as may be provided hereunder), and shall be deemed to have been delivered as of the date so delivered:             If to the Company:   Allis Chalmers Energy Inc. 5075 Westheimer, Suite 890 Houston, Texas 77056 Attention: Theodore F. Pound, General Counsel Facsimile: (713) 369-0555 13 --------------------------------------------------------------------------------               with a copy (which shall not constitute notice) to:   Andrews Kurth LLP 600 Travis, Suite 4200 Houston, Texas 77002 Attention: Robert V. Jewell Facsimile: (713) 238-7135               If to the Investors:   To each Investor at its address set forth on Exhibit A               with a copy (which shall not constitute notice) to:   Akin Gump Strauss Hauer & Feld LLP 1111 Louisiana Street, 44th Floor Houston, Texas 77002 Attention: Jack Langlois Facsimile: (713) 236-0822 or at such other address as any party shall have furnished to the other parties in writing.      (c) Specific Performance. Each party to this Agreement agrees that any breach by it of any provision of this Agreement would irreparably injure the other parties and that money damages would be an inadequate remedy therefor. Accordingly, each party agrees that the other parties shall be entitled to one or more injunctions enjoining any such breach and requiring specific performance of this Agreement and consents to the entry thereof, in addition to any other remedy to which such parties are entitled at law or in equity.      (d) Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be enforceable against the parties actually executing such counterparts, and all of which together shall constitute one instrument.      (e) Amendments. The provisions of this Agreement may be amended at any time and from time to time, and particular provisions of this Agreement may be waived, with and only with an agreement or consent in writing signed by the Company and by the holders of a majority of the number of shares of Registrable Securities outstanding as of the date of such amendment or waiver. The Investors acknowledge that by the operation of this Section 5(e), the holders of a majority of the outstanding Registrable Securities may have the right and power to diminish or eliminate all rights of the Holders under this Agreement.      (f) Headings and Cross References. The headings of the several sections and subsections of this Agreement are inserted for convenience only and shall not in any way affect the meaning or construction of any provision of this Agreement. Unless the context requires otherwise, all cross references in this Agreement refer to sections and subsections of this Agreement.      (g) Severability. In the case any provision of this Agreement shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.      (h) Entire Agreement. This Agreement constitutes the full and entire understanding and agreement between the parties with regard to the subject matter of this Agreement. 14 --------------------------------------------------------------------------------        (i) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York. (SIGNATURE PAGES FOLLOW) 15 --------------------------------------------------------------------------------        IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written.             THE COMPANY: ALLIS-CHALMERS ENERGY INC.       By:   /s/ Victor M. Perez         Name:   Victor M. Perez        Title:   Chief Financial Officer        INVESTORS: BRIDAS INTERNATIONAL HOLDINGS LTD.       By:   /s/ Giovanni Dell’Orto       Name:   Giovanni Dell’Orto       Title:   Attorney-in-fact       BRIDAS CENTRAL COMPANY, LTD.       By:   /s/ Nestor H. Falivene       Name:   Nestor H. Falivene       Title:   Attorney-in-fact       ASSOCIATED PETROLEUM INVESTORS LIMITED       By:   /s/ Giovanni Dell’Orto       Name:   Giovanni Dell’Orto       Title:   Attorney-in-fact   16 --------------------------------------------------------------------------------             EXHIBIT A Investor Information       Name                Address       Bridas International Holdings Ltd.   Beaufort House, Road Town Tortola, British Virgin Island Facsimile: 1-284-494-2704 Attention: Mr. Atilio Martín Palmeiro           With a concurrent copy (which shall not constitute notice) to:           Interservices Management Company Limited Avda. Leandro N. Alem 1134, Piso 14 (C1001AAT) Buenos Aires, Argentina Facsimile: 54 -11- 4310-4598 Attention: Mr. Silvestre Asurey       Bridas Central Company, Ltd.   Beaufort House, Road Town Tortola, British Virgin Island Facsimile: 1-284-494-2704 Attention: Mr. Giovanni Dell’ Orto           With a concurrent copy (which shall not constitute notice) to:           Bridas Energy International SpA Via Valtellina 17 — 7° piano 20159 Milano, Italy Facsimile: 39-02- 69556617 Attention: Nestor Hugo Falivene       Associated Petroleum Investors Limited   Beaufort House, Road Town Tortola , British Virgin Island Facsimile: 1-284-494-2704 Attention: Mr. Manuel Horacio Baña           With a concurrent copy (which shall not constitute notice) to:           Interservices Management Company Limited Avda. Leandro N. Alem 1134, Piso 14 (C1001AAT) Buenos Aires, Argentina Facsimile: 54 -11- 4312-9205 Attention: Mr. Alejandro Pedro Bulgheroni  

Exhibit 10.1 AMENDED AND RESTATED EMPLOYMENT AGREEMENT THIS AMENDED AND RESTATED AGREEMENT is made and entered into as of September 7, 2006, by and between Immucor, Inc., a Georgia corporation with its executive offices at 3130 Gateway Drive, Norcross, Georgia 30071 (herein referred to as “Employer” or the “Company”), and Edward L. Gallup, residing at 6190 Daffodil Lane, Norcross, Georgia 30092 (herein referred to as “Employee”). WITNESSETH WHEREAS, as of May 1, 2004, the parties entered into an agreement for Employer’s employment of Employee, and amended such agreement as of May 22, 2006; and WHEREAS, the parties desire to amend the agreement again and to restate it to recognize Employee’s pending retirement; NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements herein contained, the parties hereby agree as follows: 1.                                       RELATIONSHIP ESTABLISHED Employer hereby employs Employee to assist Employer’s Chief Executive Officer and Board of Directors with the management transition occasioned by Employee’s retirement. 2.                                       EXTENT OF SERVICES Employee will perform the services specified in Section 1 above at such times as Employer may reasonably request, but for not more than 20 hours a week.  While performing those services, Employee shall devote all his attention, skill and efforts to that performance and shall use his best efforts to promote the success of the Employer’s business. Employee shall not be required to work at any location other than Employer’s offices located in Norcross, Georgia. 3.                                       TERM OF EMPLOYMENT (A)                                  EMPLOYEE’S EMPLOYMENT HEREUNDER SHALL COMMENCE ON MAY 1, 2004 AND SHALL CONTINUE THROUGH JANUARY 31, 2007 (THE “TERM”), UNLESS SOONER TERMINATED BY THE FIRST TO OCCUR OF THE FOLLOWING: (I)                                     THE DEATH OR COMPLETE DISABILITY OF EMPLOYEE. “COMPLETE DISABILITY”, AS USED HEREIN, SHALL MEAN THE INABILITY OF EMPLOYEE, DUE TO ILLNESS, ACCIDENT OR ANY OTHER PHYSICAL OR MENTAL INCAPACITY, TO PERFORM THE SERVICES PROVIDED FOR HEREUNDER FOR AN AGGREGATE OF 12 MONTHS DURING THE TERM HEREOF. (II)                                  THE DISCHARGE OF EMPLOYEE BY EMPLOYER FOR CAUSE.  EMPLOYEE’S DISCHARGE SHALL BE “FOR CAUSE” IF DUE TO ANY OF THE FOLLOWING: -------------------------------------------------------------------------------- (A)                      EMPLOYEE’S DISHONESTY, (B)                        AN ACT OF DEFALCATION COMMITTED BY EMPLOYEE, OR (C)                        EMPLOYEE’S MORAL TURPITUDE. Disability because of illness or accident or any other physical or mental disability shall not constitute a basis for discharge for Cause. (III)                               AT EMPLOYEE’S REQUEST AND WITH THE EXPRESS PRIOR WRITTEN CONSENT OF EMPLOYER. (IV)                              AT EMPLOYEE’S ELECTION UPON 120 DAYS NOTICE (OR SUCH LESSER NOTICE AS EMPLOYER MAY ACCEPT), WITHOUT THE EXPRESS PRIOR WRITTEN CONSENT OF EMPLOYER. (B)                                 IF EMPLOYEE’S EMPLOYMENT HEREUNDER TERMINATES FOR ANY REASON, OTHER THAN A TERMINATION FOR CAUSE UNDER SECTION 3(A)(II) ABOVE, ANY OUTSTANDING, UNEXERCISED OPTION GRANTED TO EMPLOYEE BEFORE MAY 1, 2006 UNDER THE COMPANY’S 1990 STOCK OPTION PLAN, 1995 STOCK OPTION PLAN, 1998 STOCK OPTION PLAN OR 2003 STOCK OPTION PLAN SHALL IMMEDIATELY VEST AND BECOME EXERCISABLE IN FULL AND SHALL REMAIN EXERCISABLE FOR THE FULL TERM STATED IN SUCH OPTION PLAN OR IN ANY WRITTEN AGREEMENT BETWEEN THE COMPANY AND THE EMPLOYEE WITH RESPECT TO SUCH OPTION. THIS WILL NOT APPLY TO ANY OPTION GRANTED TO EMPLOYEE UNDER ANY PLAN OR OTHERWISE ON OR AFTER MAY 1, 2006, AND THE TERMS OF ANY SUCH OPTION SHALL BE GOVERNED BY THE PLAN UNDER WHICH IT IS GRANTED, IF ANY, AND ANY WRITTEN AGREEMENT BETWEEN THE COMPANY AND THE EMPLOYEE WITH RESPECT TO SUCH OPTION. 4.                                       COMPENSATION (A)                                  SUBJECT TO THE PROVISIONS OF SECTION 4(C), EMPLOYER WILL PAY TO EMPLOYEE AS BASE COMPENSATION FOR THE SERVICES TO BE PERFORMED BY HIM HEREUNDER THE BASE COMPENSATION SPECIFIED ON SCHEDULE A ATTACHED HERETO. (B)                                 AS LONG AS EMPLOYEE IS EMPLOYED HEREUNDER, EMPLOYER, AT ITS ELECTION, WILL EITHER (A) SUPPLY TO EMPLOYEE AN AUTOMOBILE OF A TYPE CONSISTENT WITH HIS DUTIES AND SALARY, AND WILL PAY THE REASONABLE EXPENSES OF OPERATING, MAINTAINING THE AUTOMOBILE AND INSURING THE AUTOMOBILE AND ITS DRIVER, OR (B) PROVIDE EMPLOYEE AN AUTOMOBILE ALLOWANCE AS SPECIFIED ON SCHEDULE A ATTACHED HERETO, AND WILL PAY THE REASONABLE EXPENSES OF OPERATING, MAINTAINING THE AUTOMOBILE AND INSURING THE AUTOMOBILE AND ITS DRIVER. SCHEDULE A MAY BE AMENDED FROM TIME TO TIME UPON THE PARTIES’ REVISION AND RE-EXECUTION THEREOF WHEREUPON THE AMENDED SCHEDULE A SHALL BE ATTACHED HERETO; PROVIDED, HOWEVER, THE AMENDED SCHEDULE A SHALL BE EFFECTIVE UPON RE-EXECUTION, WHETHER OR NOT IT IS ATTACHED HERETO. (C)                                  IN THE EVENT EMPLOYEE’S EMPLOYMENT SHALL TERMINATE UNDER SECTION 3(A)(I), 3(A)(II), 3(A)(III) OR 3(A)(IV) HEREOF, ALL OF EMPLOYER’S OBLIGATIONS TO EMPLOYEE 2 -------------------------------------------------------------------------------- HEREUNDER WILL CEASE AUTOMATICALLY AND EMPLOYEE SHALL ONLY BE ENTITLED TO COMPENSATION ACCRUED THROUGH THE DATE OF TERMINATION. 5.                                       EXPENSES Employee shall be entitled to receive reimbursement for, or payment directly by the Employer of, all reasonable expenses incurred by Employee at the request of the Employer in the performance of his duties under this Agreement, provided that Employee accounts therefor in writing and that such expenses are ordinary and necessary business expenses of the Employer within the meaning of Section 162 of the Internal Revenue Code of 1986 as amended. 6.                                       INSURANCE AND OTHER FRINGE BENEFITS (A)                                  DURING THE TERM, EMPLOYER WILL PROVIDE EMPLOYEE WITH (A) HEALTH INSURANCE, DENTAL INSURANCE, LONG-TERM DISABILITY INSURANCE, PAID VACATIONS AND OTHER FRINGE BENEFITS IN THE FORM AND IN DOLLAR AMOUNTS SUBSTANTIALLY EQUIVALENT TO THE BENEFITS PROVIDED TO THE EMPLOYER’S OTHER EMPLOYEES IN A SIMILAR POSITION AND WITH SIMILAR RESPONSIBILITIES, AND (B) LIFE INSURANCE FOR THE BENEFIT OF THE EMPLOYEE AND/OR THE EMPLOYER, AS PROVIDED ON SCHEDULE B ATTACHED HERETO. (B)                                 IF EMPLOYEE’S EMPLOYMENT HEREUNDER TERMINATES BECAUSE THE TERM EXPIRES UNDER SECTION 3(A) HEREOF, OR IF EMPLOYEE’S EMPLOYMENT HEREUNDER TERMINATES UNDER THE CIRCUMSTANCES DESCRIBED IN SECTION 7(B) HEREOF, THEN AFTER SUCH TERMINATION AND FOR AS LONG AS EMPLOYEE SHALL LIVE, EMPLOYER WILL PROVIDE EMPLOYEE WITH MEDICAL BENEFITS SUBSTANTIALLY EQUIVALENT TO THE MEDICAL BENEFITS EMPLOYER PROVIDES ITS EXECUTIVES GENERALLY DURING THIS PERIOD, ON THE CONDITION THAT IN CONNECTION THEREWITH EMPLOYEE PAYS TO EMPLOYER AN AMOUNT EQUAL TO THE PORTION OF ANY PREMIUMS OR OTHER CHARGES PAYABLE FOR EMPLOYER’S EXECUTIVES FOR SUCH COVERAGE.  IN CONNECTION THEREWITH, EMPLOYEE WILL ELECT MEDICARE AS HIS PRIMARY MEDICAL COVERAGE IF SO REQUESTED BY EMPLOYER, AND EMPLOYEE WILL TAKE ALL OTHER STEPS REASONABLY REQUESTED BY EMPLOYER, WITH RESPECT TO MEDICARE COVERAGE OR OTHERWISE, AS WILL REDUCE EMPLOYER’S OVERALL FINANCIAL BURDEN UNDER THIS SECTION 6(B).  IF EMPLOYER PROPOSES TO ENTER INTO A MERGER, SALE OF BUSINESS OR OTHER TRANSACTION PURSUANT TO WHICH EMPLOYER WOULD CEASE TO EXIST IN ITS CURRENT FORM, PRIOR TO CONSUMMATING SUCH A TRANSACTION EMPLOYER SHALL USE ITS BEST EFFORTS TO CAUSE EMPLOYER’S SUCCESSOR TO ASSUME EMPLOYER’S OBLIGATIONS UNDER THIS SECTION 6(B). (C)                                  IN THE EVENT THAT EMPLOYEE BECOMES ENTITLED TO THE MEDICAL BENEFITS SPECIFIED IN SECTION 6(B) ABOVE AND/OR THE PAYMENT SPECIFIED IN SECTION 7(B) BELOW UPON A CHANGE OF CONTROL (COLLECTIVELY, THE “BENEFITS”) AND (II) ANY OF THE BENEFITS WILL BE SUBJECT TO THE EXCISE TAX IMPOSED PURSUANT TO SECTION 4999 OF THE INTERNAL REVENUE CODE (“EXCISE TAX”), WHICH TAX MAY BE IMPOSED IF THE PAYMENTS MADE TO EMPLOYEE ARE DEEMED TO BE “EXCESS PARACHUTE PAYMENTS” WITHIN THE MEANING OF SECTION 280G OF THE CODE, THEN EMPLOYER SHALL PAY TO EMPLOYEE AN ADDITIONAL AMOUNT (THE “GROSS-UP PAYMENT”) SUCH THAT THE NET AMOUNT RETAINED BY 3 -------------------------------------------------------------------------------- EMPLOYEE, AFTER DEDUCTION OF ANY EXCISE TAX ON THE BENEFITS AND ANY FEDERAL, STATE AND LOCAL INCOME TAXES, EXCISE TAX, AND FICA AND MEDICARE WITHHOLDING TAXES UPON THE PAYMENT PROVIDED FOR BY THIS SECTION, WILL BE EQUAL TO THE BENEFITS SO THAT EMPLOYEE SHALL BE, AFTER PAYMENT OF ALL TAXES, IN THE SAME FINANCIAL POSITION AS IF NO TAXES UNDER SECTION 4999 HAD BEEN IMPOSED UPON HIM.  FOR PURPOSES OF THIS SECTION 6(C), EMPLOYEE WILL BE DEEMED TO PAY FEDERAL INCOME TAXES AT THE HIGHEST MARGINAL RATE OF FEDERAL INCOME TAXATION IN THE CALENDAR YEAR IN WHICH THE EXCISE TAX IS (OR WOULD BE) PAYABLE AND STATE AND LOCAL INCOME TAXES AT THE HIGHEST MARGINAL RATE OF TAXATION IN THE STATE AND LOCALITY OF EMPLOYEE’S RESIDENCE ON THE DATE OF TERMINATION, NET OF THE REDUCTION IN FEDERAL INCOME TAXES THAT COULD BE OBTAINED FROM DEDUCTION OF SUCH STATE AND LOCAL TAXES (CALCULATED BY ASSUMING THAT ANY REDUCTION UNDER SECTION 68 OF THE INTERNAL REVENUE CODE IN THE AMOUNT OF ITEMIZED DEDUCTIONS ALLOWABLE TO EMPLOYEE APPLIES FIRST TO REDUCE THE AMOUNT OF SUCH STATE AND LOCAL INCOME TAXES THAT WOULD OTHERWISE BE DEDUCTIBLE BY EMPLOYEE). 7.                                       TERMINATION OF EMPLOYMENT UPON SALE OR CHANGE OF CONTROL OF EMPLOYER’S BUSINESS; SEVERANCE (A)                                  NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS AGREEMENT, EITHER EMPLOYER OR EMPLOYEE MAY TERMINATE EMPLOYEE’S EMPLOYMENT HEREUNDER IF ANY OF THE FOLLOWING EVENTS OCCUR: (I)                                     SALE OF EMPLOYER’S ASSETS.  THE CLOSING OF THE SALE OF ALL OR SUBSTANTIALLY ALL OF EMPLOYER’S ASSETS TO A SINGLE PURCHASER OR GROUP OF ASSOCIATED PURCHASERS, WHETHER IN A SINGLE TRANSACTION OR A SERIES OF RELATED TRANSACTIONS. (II)                                  SALE OF EMPLOYER’S SHARES.  THE CLOSING OF THE SALE, EXCHANGE, OR OTHER DISPOSITION, IN ONE TRANSACTION, OR IN A SERIES OF RELATED TRANSACTIONS, OF TWENTY PERCENT (20%) OR MORE OF EMPLOYER’S OUTSTANDING SHARES OF CAPITAL STOCK. (III)                               MERGER OR CONSOLIDATION.  THE CLOSING OF THE MERGER OR CONSOLIDATION OF EMPLOYER IN A TRANSACTION OR SERIES OF TRANSACTIONS IN WHICH EMPLOYER’S SHAREHOLDERS RECEIVE OR RETAIN LESS THAN FIFTY PERCENT (50%) OF THE OUTSTANDING VOTING SHARES OF THE NEW OR SURVIVING CORPORATION. (B)                                 IF, WITHIN 60 DAYS AFTER AN EVENT DESCRIBED IN SECTIONS 7(A)(I), (A)(II) OR (A)(III) (A “CHANGE OF CONTROL”), THE EMPLOYEE VOLUNTARILY TERMINATES HIS EMPLOYMENT WITH THE EMPLOYER, OR IF DURING THE TERM OF THIS AGREEMENT AFTER A CHANGE OF CONTROL EMPLOYER TERMINATES EMPLOYEE’S EMPLOYMENT (WHETHER FOR CAUSE OR WITHOUT CAUSE), THEN EMPLOYER SHALL PAY EMPLOYEE AN AMOUNT EQUAL TO FIVE TIMES THE EMPLOYEE’S AVERAGE ANNUAL COMPENSATION (AS DEFINED BELOW), TO BE PAID IN A SINGLE PAYMENT AT THE TIME OF TERMINATION.  IN CONSIDERATION OF SUCH PAYMENT AND HIS EMPLOYMENT HEREUNDER THROUGH THE DATE OF SUCH TERMINATION, EMPLOYEE AGREES TO REMAIN BOUND BY THE PROVISIONS OF THIS AGREEMENT WHICH SPECIFICALLY RELATE TO 4 -------------------------------------------------------------------------------- PERIODS, ACTIVITIES OR OBLIGATIONS UPON OR SUBSEQUENT TO THE TERMINATION OF EMPLOYEE’S EMPLOYMENT. (C)                                  UPON A CHANGE OF CONTROL, ANY OUTSTANDING, UNEXERCISED OPTION GRANTED TO EMPLOYEE BEFORE MAY 1, 2006 UNDER THE COMPANY’S 1990 STOCK OPTION PLAN, 1995 STOCK OPTION PLAN, 1998 STOCK OPTION PLAN OR 2003 STOCK OPTION PLAN SHALL IMMEDIATELY VEST AND BECOME EXERCISABLE IN FULL AND SHALL REMAIN EXERCISABLE FOR THE FULL TERM STATED IN SUCH OPTION PLAN OR IN ANY WRITTEN AGREEMENT BETWEEN THE COMPANY AND THE EMPLOYEE WITH RESPECT TO SUCH OPTION. THIS WILL NOT APPLY TO ANY OPTION GRANTED TO EMPLOYEE UNDER ANY PLAN OR OTHERWISE ON OR AFTER MAY 1, 2006, AND THE TERMS OF ANY SUCH OPTION SHALL BE GOVERNED BY THE PLAN UNDER WHICH IT IS GRANTED, IF ANY, AND ANY WRITTEN AGREEMENT BETWEEN THE COMPANY AND THE EMPLOYEE WITH RESPECT TO SUCH OPTION. (D)                                 FOR PURPOSES OF THIS SECTION, “AVERAGE ANNUAL COMPENSATION” SHALL MEAN THE EMPLOYEE’S ANNUAL BASE COMPENSATION PAYABLE TO EMPLOYEE UNDER SCHEDULE A IN ACCORDANCE WITH THE PAYMENT SCHEDULE SET FORTH ON SCHEDULE A TOGETHER WITH HIS AVERAGE BONUS.  “AVERAGE BONUS” SHALL MEAN THE AVERAGE OF THE BONUSES PAID TO EMPLOYEE OVER THE LAST TWO YEARS (OR SUCH LESSER NUMBER OF YEARS IN WHICH EMPLOYEE WAS ELIGIBLE TO RECEIVE A BONUS) IN WHICH THE EMPLOYEE WAS ELIGIBLE TO RECEIVE A BONUS. (E)                                  EMPLOYER SHALL PROMPTLY REIMBURSE EMPLOYEE FOR ANY AND ALL LEGAL FEES AND EXPENSES INCURRED BY HIM AS A RESULT OF A TERMINATION OF EMPLOYMENT DESCRIBED IN SECTION 7(B), INCLUDING WITHOUT LIMITATION ALL FEES AND EXPENSES INCURRED TO ENFORCE THE PROVISIONS OF THIS AGREEMENT. 8.                                       PROHIBITED PRACTICES During the term of Employee’s employment hereunder, for a period of two years after such employment is terminated for any reason, in consideration of the compensation being paid to Employee hereunder, Employee shall: (A)                                  NOT SOLICIT BUSINESS FROM ANYONE WHO IS OR BECOMES AN ACTIVE OR ACTIVELY-SOUGHT PROSPECTIVE CUSTOMER OF EMPLOYER OR ITS AFFILIATES AND WITH WHOM THE EMPLOYEE HAD DEALT WITH OR HAD MATERIAL CONTACT DURING HIS TERM OF EMPLOYMENT UNDER THIS AGREEMENT, WITH A VIEW TO SELLING OR PROVIDING TO SUCH CUSTOMER OR PROSPECTIVE CUSTOMER ANY PRODUCT OR SERVICE OF A TYPE SOLD OR PROVIDED BY EMPLOYER TO SUCH CUSTOMER OR PROSPECTIVE CUSTOMER. (B)                                 NOT SOLICIT FOR EMPLOYMENT OR HIRE ANY EMPLOYEE OF EMPLOYER OR ITS AFFILIATES THAT THE EMPLOYEE HAD CONTACT WITH DURING HIS TERM OF EMPLOYMENT UNDER THIS AGREEMENT. 9.                                       NON-DISCLOSURE (A)                                  PROTECTION OF TRADE SECRETS.  EMPLOYEE ACKNOWLEDGES THAT DURING THE COURSE OF HIS OR HER EMPLOYMENT, EMPLOYEE WILL HAVE SIGNIFICANT ACCESS TO, AND 5 -------------------------------------------------------------------------------- INVOLVEMENT WITH, THE COMPANY’S TRADE SECRETS AND CONFIDENTIAL INFORMATION.  EMPLOYEE AGREES TO MAINTAIN IN STRICT CONFIDENCE AND, EXCEPT AS NECESSARY TO PERFORM HIS OR HER DUTIES FOR THE COMPANY, EMPLOYEE AGREES NOT TO USE OR DISCLOSE ANY TRADE SECRETS OF THE COMPANY DURING OR AFTER HIS OR HER EMPLOYMENT.  EMPLOYEE AGREES THAT THE PROVISIONS OF THIS SUBSECTION SHALL BE DEEMED SUFFICIENT TO PROTECT TRADE SECRETS OF THIRD PARTIES PROVIDED TO THE COMPANY UNDER, AN OBLIGATION OF SECRECY.  AS PROVIDED BY GEORGIA STATUTES, “TRADE SECRET” SHALL MEAN ANY INFORMATION (INCLUDING, BUT NOT LIMITED TO, TECHNICAL OR NONTECHNICAL DATA, A FORMULA, A PATTERN, A COMPILATION, A PROGRAM, A DEVICE, A METHOD, A TECHNIQUE, A DRAWING, A PROCESS, FINANCIAL DATA, FINANCIAL PLANS, PRODUCT PLANS, OR A LIST OF ACTUAL OR POTENTIAL CUSTOMERS) THAT: (I) DERIVES ECONOMIC VALUE, ACTUAL OR POTENTIAL, FROM NOT BEING GENERALLY KNOWN TO, AND NOT BEING READILY ASCERTAINABLE BY PROPER MEANS BY, OTHER PERSONS WHO CAN OBTAIN ECONOMIC VALUE FROM ITS DISCLOSURE OR USE; AND (II) IS THE SUBJECT OF EFFORTS THAT ARE REASONABLE UNDER THE CIRCUMSTANCES TO MAINTAIN ITS SECRECY. (B)                                 PROTECTION OF OTHER CONFIDENTIAL INFORMATION.  IN ADDITION, EMPLOYEE AGREES TO MAINTAIN IN STRICT CONFIDENCE AND, EXCEPT AS NECESSARY TO PERFORM HIS OR HER DUTIES FOR THE COMPANY, NOT TO USE OR DISCLOSE ANY CONFIDENTIAL INFORMATION OF THE COMPANY DURING HIS OR HER EMPLOYMENT AND FOR A PERIOD OF 12 MONTHS FOLLOWING TERMINATION OF EMPLOYEE’S EMPLOYMENT.  “CONFIDENTIAL INFORMATION” SHALL MEAN ANY INTERNAL, NON-PUBLIC INFORMATION (OTHER THAN TRADE SECRETS ALREADY ADDRESSED ABOVE) CONCERNING (WITHOUT LIMITATION) THE COMPANY’S FINANCIAL POSITION AND RESULTS OF OPERATIONS (INCLUDING REVENUES, ASSETS, NET INCOME, ETC.); ANNUAL AND LONG-RANGE BUSINESS PLANS; PRODUCT OR SERVICE PLANS; MARKETING PLANS AND METHODS; TRAINING, EDUCATIONAL AND ADMINISTRATIVE MANUALS; SUPPLIER INFORMATION AND PURCHASE HISTORIES; CUSTOMERS OR CLIENTS; PERSONNEL AND SALARY INFORMATION; AND EMPLOYEE LISTS.  EMPLOYEE AGREES THAT THE PROVISIONS OF THIS SUBSECTION SHALL BE DEEMED SUFFICIENT TO PROTECT CONFIDENTIAL INFORMATION OF THIRD PARTIES PROVIDED TO THE COMPANY UNDER AN OBLIGATION OF SECRECY. (C)                                  RIGHTS TO WORK PRODUCT.  EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT, THE COMPANY ALONE SHALL BE ENTITLED TO ALL BENEFITS, PROFITS AND RESULTS ARISING FROM OR INCIDENTAL TO EMPLOYEE’S PERFORMANCE OF HIS OR HER JOB DUTIES TO THE COMPANY.  TO THE GREATEST EXTENT POSSIBLE, ANY WORK PRODUCT, PROPERTY, DATA, INVENTION, “KNOW-HOW”, DOCUMENTATION OR INFORMATION OR MATERIALS PREPARED, CONCEIVED, DISCOVERED, DEVELOPED OR CREATED BY EMPLOYEE IN CONNECTION WITH PERFORMING HIS OR HER EMPLOYMENT RESPONSIBILITIES DURING EMPLOYEE’S EMPLOYMENT WITH THE COMPANY SHALL BE DEEMED TO BE “WORK MADE FOR HIRE” AS DEFINED IN THE COPYRIGHT ACT, 17 U.S.C.A. § 101 ET SEQ., AS AMENDED, AND OWNED EXCLUSIVELY AND PERPETUALLY BY THE COMPANY.  EMPLOYEE HEREBY UNCONDITIONALLY AND IRREVOCABLY TRANSFERS AND ASSIGNS TO THE COMPANY ALL INTELLECTUAL PROPERTY OR OTHER RIGHTS, TITLE AND INTEREST EMPLOYEE MAY CURRENTLY HAVE (OR IN THE FUTURE MAY HAVE) BY OPERATION OF LAW OR OTHERWISE IN OR TO ANY WORK PRODUCT.  EMPLOYEE AGREES TO EXECUTE AND DELIVER TO THE COMPANY ANY TRANSFERS, ASSIGNMENTS, DOCUMENTS OR OTHER INSTRUMENTS WHICH THE COMPANY MAY DEEM NECESSARY OR APPROPRIATE TO VEST COMPLETE AND PERPETUAL TITLE AND OWNERSHIP OF ANY WORK PRODUCT AND ALL ASSOCIATED 6 -------------------------------------------------------------------------------- RIGHTS EXCLUSIVELY IN THE COMPANY.  THE COMPANY SHALL HAVE THE RIGHT TO ADAPT, CHANGE, REVISE, DELETE FROM, ADD TO AND/OR REARRANGE THE WORK PRODUCT OR ANY PART THEREOF WRITTEN OR CREATED BY EMPLOYEE, AND TO COMBINE THE SAME WITH OTHER WORKS TO ANY EXTENT, AND TO CHANGE OR SUBSTITUTE THE TITLE THEREOF, AND IN THIS CONNECTION EMPLOYEE HEREBY WAIVES THE “MORAL RIGHTS” OF AUTHORS AS THAT TERM IS COMMONLY UNDERSTOOD THROUGHOUT THE WORLD INCLUDING, WITHOUT LIMITATION, ANY SIMILAR RIGHTS OR PRINCIPLES OF LAW WHICH EMPLOYEE MAY NOW OR LATER HAVE BY VIRTUE OF THE LAW OF ANY LOCALITY, STATE, NATION, TREATY, CONVENTION OR OTHER SOURCE.  UNLESS OTHERWISE SPECIFICALLY AGREED, EMPLOYEE SHALL NOT BE ENTITLED TO ANY ADDITIONAL COMPENSATION, BEYOND HIS OR HER SALARY, FOR ANY EXERCISE BY THE COMPANY OF ITS RIGHTS SET FORTH IN THE PRECEDING SENTENCE. (D)                                 RETURN OF MATERIALS.  EMPLOYEE SHALL SURRENDER TO THE COMPANY, PROMPTLY UPON ITS REQUEST AND IN ANY EVENT UPON TERMINATION OF EMPLOYEE’S EMPLOYMENT, ALL MEDIA, DOCUMENTS, NOTEBOOKS, COMPUTER PROGRAMS, HANDBOOKS, DATA FILES, MODELS, SAMPLES, PRICE LISTS, DRAWINGS, CUSTOMER LISTS, PROSPECT DATA, OR OTHER MATERIAL OF ANY NATURE WHATSOEVER (IN TANGIBLE OR ELECTRONIC FORM) IN THE EMPLOYEE’S POSSESSION OR CONTROL, INCLUDING ALL COPIES THEREOF, RELATING TO THE COMPANY, ITS BUSINESS, OR ITS CUSTOMERS.  UPON THE REQUEST OF THE COMPANY, EMPLOYEE SHALL CERTIFY IN WRITING COMPLIANCE WITH THE FOREGOING REQUIREMENT. 10.                                 SEVERABILITY It is the intention of the parties that if any of the restrictions or covenants contained herein is held to cover a geographic area or to be for a length of time or to apply to business activities which is not permitted by applicable law, or in any way construed to be too broad or to any extent invalid, such provision shall not be construed to be null, void and of no effect, but to the extent such provision would be valid or enforceable under applicable law, a court of competent jurisdiction shall construe and interpret or reform this Section to provide for a covenant having the maximum enforceable geographic area, time period and any other provisions (not greater than those contained herein) as shall be valid and as shall be valid and enforceable under such applicable law. If any provision contained in this Section shall for any reason be held invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this Section, but this Section shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein. 11.                                 WAIVER OF PROVISIONS Failure of either party to insist, in one or more instances, on performance by the other in strict accordance with the terms and conditions of this Agreement shall not be deemed a waiver or relinquishment of any right granted hereunder or of the future performance of any such term or condition or of any other term of condition of this Agreement, unless such waiver’s contained in a writing signed by the party against whom the waiver or relinquishment is sought to be enforced. 7 -------------------------------------------------------------------------------- 12.           Notices Any notice or other communication to a party required or permitted hereunder shall be in a writing and shall be deemed sufficiently given when received by the party (regardless of the method of delivery), or if sent by registered or certified mail, postage and fees prepaid, addressed to the party as follows, on the third business day after mailing: (a)   If to Employer:   3130 Gateway Drive         Norcross, GA 30071           (b)   If to Employee:   6190 Daffodil Lane         Norcross, GA 30092   or in each case to such other address as the party may time to time designate in writing to the other party. 13.                                 GOVERNING LAW This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Georgia. 14.                                 ENFORCEMENT In the event of any breach or threatened breach by Employee of any covenant contained in Sections 8 or 9 hereof, the resulting injuries to the Company would be difficult or impossible to estimate accurately, even though irreparable injury or damages would certainly result.  Accordingly, an award of legal damages, if without other relief, would be inadequate to protect the Company. Employee, therefore, agrees that in the event of any such breach, the Company shall be entitled to obtain from a court of competent jurisdiction an injunction to restrain the breach or anticipated breach of any such covenant, and to obtain any other available legal, equitable, statutory, or contractual relief.  Should the Company have cause to seek such relief, no bond shall be required from the Company, and Employee shall pay all attorney’s fees and court costs which the Company may incur to the extent the Company prevails in its enforcement action. 15.                                 ENTIRE AGREEMENT; MODIFICATION AND AMENDMENT This Agreement contains the sole and entire agreement between the parties and supersedes all prior discussions and agreements between the parties with respect to the matters addressed herein, and any such prior agreement shall, from and after the date hereof, be null and void.  This Agreement and the attached Schedules shall not be modified or amended except by an instrument in writing signed by the parties hereto. 8 -------------------------------------------------------------------------------- 16.                                 PARTIES BENEFITED This Agreement shall insure to the benefit of, and be binding upon, Employee, his heirs, executors and administrators, and Employer, its subsidiaries, affiliates, successors and assigns. IN WITNESS WHEREOF, the parties hereto have executed and delivered this Amended and Restated Agreement as of the date first mentioned above.   IMMUCOR, INC.   EMPLOYEE             By: /s/ Gioacchino DeChirico     By: /s/ Edward L. Gallup     Gioacchino DeChirico     Edward L. Gallup   Chief Executive Officer       9 -------------------------------------------------------------------------------- SCHEDULE A [Effective June 1, 2006] EMPLOYMENT AGREEMENT DATED MAY 1, 2004 BY AND BETWEEN IMMUCOR, INC. AND EDWARD L. GALLUP, AS AMENDED MAY 22 AND SEPTEMBER 7, 2006 Base compensation:  $387,000 a year payable in 26 installments every two weeks. Automobile Allowance: $9,600 a year payable in 12 monthly installments.   (This Schedule A supersedes and replaces any Schedule A previously executed by the parties hereto.) 10 -------------------------------------------------------------------------------- SCHEDULE B EMPLOYMENT AGREEMENT DATED MAY 1, 2004 BY AND BETWEEN IMMUCOR, INC. AND EDWARD L. GALLUP, AS AMENDED MAY 22 AND SEPTEMBER 7, 2006 Life Insurance for the Benefit of Employer: N/A Insured: Face Amount: $ Owner of Policy: Policy Number: Insurance Company: Life Insurance for the Benefit of Employee: Insured: Edward L. Gallup Face Amount: $1,000,000 Owner of Policy:  Edward L. Gallup Policy Number: 15547360 Insurance Company: Mass Mutual (This Schedule B supersedes and replaces any Schedule B previously executed by the parties hereto.) 11 --------------------------------------------------------------------------------

Exhibit 10.7 CERTAIN PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT UNDER RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934. THE OMITTED MATERIALS HAVE BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. PRIME VENDOR AGREEMENT This Prime Vendor Agreement (“Agreement”) is made as of May 1, 2006 (“Effective Date”) by AmerisourceBergen Drug Corporation, a Delaware corporation (“ABDC”), and NMHCRx Mail Order, Inc., dba NMHC Mail, a Delaware corporation (“Customer”). A. ABDC is a national distributor of pharmaceutical and other products, including prescription (“Rx”) and over-the-counter (“OTC”) Pharmaceuticals, nutritional, health and beauty care (“HBC”) and home health care (“DME”) products (“Product” or “Products”), and services (“Services”); B. Customer owns and operates one or more alternate care pharmacies (“Facilities”); and C. The parties intend by this Agreement to set forth their obligations to each other for an arrangement under which ABDC will provide Products and Services to Customer (“Program”). NOW THEREFORE, the parties agree as follows:   1. PRICING AND PAYMENT TERMS ABDC will be the Primary Vendor of all requirements of Customer’s Facilities for Products. Customer will pay, within terms, Product costs and Program fees pursuant to payment terms in Exhibit “1” (“Pricing/Payment Terms”). “Primary Vendor” means Customer purchases from ABDC no less than 90% of all prescription pharmaceutical Products it purchases, as verified quarterly, and meets minimum periodic purchase levels in Paragraph 3(A) of the Pricing/Payment Terms. Orders for Products will be electronically transmitted (including Schedule II controlled substances when allowed) and will describe Products that ABDC will provide to Customer, the quantity and designated delivery location. All payment plans (except pre-pay) must be by electronic funds transfer (EFT).   2. PRO GENERICS PROGRAM PARTICIPATION Customer must elect to participate in ABDC’s preferred generic formulary program (“Preferred Rx Options” or “PRxO Generics”) pursuant to requirements as amended from time to time by ABDC. Customer will purchase no less than 3% of its total purchases from ABDC’s PRxO Generics program. Customer authorizes ABDC as its sole agent to develop and implement a generic pharmaceutical Product list for the Term. Customer will purchase from ABDC each calendar quarter no less than the minimum Net Purchase volume of generic pharmaceutical Products as set forth in the Pricing/Payment Terms.   3. CUSTOMER LOCATIONS & DELIVERIES ABDC will deliver Products to each Facility five days a week (Monday-Friday), once a day except holidays and warehouse physical inventory days. Additionally, Customer will be entitled to three emergency deliveries per calendar quarter per pharmacy location at no additional charge. Customer may be charged for each additional emergency order. Facility means each of Customer’s alternate care pharmacies, together with any other facilities Customer acquires, is affiliated with or operates during the Term in the United States. Newly acquired facilities with existing agreements with other distributors will become Facilities under this Agreement upon the earlier of expiration of such existing agreement or the date Customer may terminate such agreement, with or without cause, without breaching it or paying a material termination penalty; provided, however, service to Facilities outside ABDC’s normal service area (which does not include Alaska, Hawaii or U.S. territories) may be subject to a delivery surcharge.   1 -------------------------------------------------------------------------------- 4. RETURNED GOODS POLICY Customer will only return Products to ABDC in accordance with ABDC’s standard policy for returned Products (“Returned Goods Policy”), as amended from time to time by ABDC. If Customer returns more than 3% of its OTC Net Purchases, or 3% of its pharmaceutical Net Purchases in any quarter, Customer may be assessed an additional restocking fee over any standard stocking fee in the Returned Goods Policy or ABDC may adjust the Price of Goods or both. Customer will return only Product purchased from ABDC for which Customer has submitted the invoice number and date of purchase. ABDC may reject returns not accompanied by the invoice number and date of purchase or that exceed in amount either the 3% return limit or the amount on the referenced invoice number. ABDC reserves the right to refuse all future returns from Customer in the event that Customer submits any counterfeit Product for return.   5. ADDITIONAL SERVICES & PROVISIONS. Services are listed in Exhibit “2”. Terms, conditions and other provisions are set forth in Exhibit “3” (“Provisions”). ABDC may, from time to time, develop policies and procedures relative to new or existing Services offered to customers, on an interim or as-needed basis. If ABDC develops such policies or procedures or changes current ones, ABDC will notify Customer in writing at least thirty (30) days before such changes are effective. If Customer is materially adversely affected by such policy or procedure, Customer may terminate this Agreement upon thirty (30) days written notice to ABDC.   6. TERM OF AGREEMENT Subject to Paragraph 5 of the Provisions, the Term will be from the Effective Date until April 30, 2010 . The Term will, thereafter, be extended on a month-to-month basis until either party gives at least ninety (90) days prior written notice to the other of its intention not to extend this Agreement.   7. RECORDS To the extent required by 42 U.S.C. §1395x(v)(1), until four (4) years after termination of this Agreement, ABDC will make available upon written request to the Secretary of the U.S. Department of Health & Human Services (“HHS”), the Comptroller General, or their authorized representatives, a copy of this Agreement and all records required to certify the nature and extent of costs of Products and Services provided by ABDC under this Agreement. ABDC will ensure, to the extent it carries out its duties through a subcontract with a value or cost of $10,000 or more in a twelve (12) month period with a related organization, such subcontract will contain similar provisions. Notwithstanding the foregoing, ABDC will have no obligation to make public documents subject to attorney-client privilege.   8. NOTICES Notices must be in writing and sent certified mail, prepaid, return receipt requested, or sent by facsimile to the address or facsimile number below. Parties may change this information by written notice to the other party. Pursuant to the Telephone Consumer Protection Act of 1991, 47 U.S.C. §227, Customer consents to receiving notices, including product updates, recalls, new product launches and programs, advertisements and other marketing materials by telephone facsimile (“fax”) machine from ABDC, its affiliates and their related companies, to the fax number set forth below.   2 -------------------------------------------------------------------------------- To Customer:    NMHCRx Mail Order, Inc., dba NMHC Mail 9994 Premiere Parkway Miramar, FL 33025    Attn:    President    Fax:    954-443-9654 To ABDC:    AmerisourceBergen Drug Corporation 1300 Morris Drive Chesterbrook, PA 19087-5594    Attn:    Vice President, Health Systems    Fax:    610-727-3601 with a copy to:    AmerisourceBergen Corporation 1300 Morris Drive Chesterbrook, Pennsylvania 19087-5594    Attn:    General Counsel    Fax:    (610) 727-3612   9. EXHIBITS The following exhibits to this Agreement are incorporated by this reference.     1 Pricing/Payment Terms     2 Value-Added Services     3 Provisions IN WITNESS WHEREOF, the parties have had a duly authorized officer, partner or principal execute this Prime Vendor Agreement as of the Effective Date.   CUSTOMER:     ABDC: NMHCRx Mail Order, Inc., dba NMHC Mail     AmerisourceBergen Drug Corporation By:      /s/ Jay Flanick     By:   /s/ Carleton E. Jones Name:      Jay Flanick     Name:   Carleton E. Jones Title:      Chief Mail Officer     Title:   Vice President, Alternate Care Sales   3 -------------------------------------------------------------------------------- CONFIDENTIAL TREATMENT REQUESTED EXHIBIT 1 TO PRIME VENDOR AGREEMENT PRICING / PAYMENT TERMS In addition to payment for Products, Customer will pay ABDC the following Program and other fees for ABDC’s Product distribution and Services for Customer and its Facilities. Except as otherwise provided, payments are due within ten (10) days from ABDC’s invoice date. Pricing does not reflect any administrative or other fee to a group purchasing organization or buying group (“GPO”). If Customer contracts with a GPO, Customer will pay any such fees to the applicable GPO. In any event, ABDC will not pay a GPO fee unless and until a group designation form signed by Customer is filed with ABDC. Customer will pay any increase in GPO administrative fees during the Term of this Agreement.   1. PROGRAM FEES A. Price of Goods. Customer will pay the following Price of Goods based upon the definition of “Cost” below, subject to the following adjustments for payment terms, for Products other than Products and Services designated as ABDC Special Price Products. ABDC will add to the billed amount any applicable sales, use, business and occupation, gross receipts or other tax.   Pricing   Price of Goods* Branded Rx Pharmaceutical Products—Average Total Monthly Volume   Weekly [*]   [*]   [*] [*]   [*]   [*]   * “Cost” with respect to any Product means the lower of (i) the price of the Product on a supplier’s price list on the date the Product is allocated to Customer or (ii) any applicable Customer/GPO contract price for the Product authorized by a supplier and maintained in an ABDC bid file, in each case exclusive of discounts for prompt payment given to ABDC by its manufacturers. Cost outside the continental U.S. may be higher than manufacturer’s/supplier’s normal price list. Selected Products (“ABDC Special Price Products”) including but not limited to drop shipments, food, gift items, HBC/OTC items, home healthcare (DME), items deemed operationally difficult to manage (refrigerated, schedules, etc.), items purchased from suppliers not offering cash discounts of 2% or better, deliveries FOB destination or other standard terms, generics, nutritional, private label, school and office items, slow-moving items, supplies (bottles & vials)) and Services will not be billed based upon ABDC’s Cost (as defined above), but will instead be billed in accordance with the terms and conditions established by ABDC from time to time for such Products and Services. “Slow-moving items” are defined as items of which 10 or less are sold through a single distribution center per month. Insulin, refrigerated items and Schedule II through V narcotics shall not be ABDC Special Price Products. Purchases of ABDC Special Price Products count toward total Monthly Net Purchase volume. B. PRxO Generics Rebates. If Customer continues to use ABDC as its Primary Vendor and otherwise complies with ABDC’s PRxO Generics requirements, ABDC will issue a credit to Customer equal to [*]% of Customer’s Net Purchases of PRxO Generics during the preceding calendar quarter if Customer’s PRxO Generics purchases are [*]% or more of Customer’s total Rx Net Purchase volume. Calculations are quarterly, with no carryover from one quarter to the next. Customer’s PRxO Generics purchases will be invoiced at ABDC’s standard ABDC Special Price. Pending rebates will be noted in Customer’s invoices and statements. Customer hereby indemnifies ABDC pursuant to Provisions Paragraph 6 for any inappropriate use of such invoices. ABDC will issue any credit to Customer within forty-five (45) days of the end of each calendar quarter. If Net Purchases of PRxO Generics are less than [*]% of total Rx Net Purchases, no rebate credit will be given and ABDC may reasonably adjust Price of Goods to reflect the lower than expected purchase volume. Customer must be compliant with payment terms to be eligible for any rebate under this paragraph. -------------------------------------------------------------------------------- [*] Confidential Portion Omitted and filed Separately with the Commission   4 -------------------------------------------------------------------------------- CONFIDENTIAL TREATMENT REQUESTED   C. Compliance Rebate. At the end of each contract year, if Customer complies with all terms of this Agreement during the contract year, Customer shall receive a discount in the form of a rebate equal to [*]% off the first $[*] of Net Purchases purchased in the last month of the contract year, payable in the form of a credit memo no later than 45 days after April 30 of each year of the Agreement, commencing April 30, 2007. “Net Purchases” shall mean purchases less returns. Customer must be compliant with all terms of this Agreement to be eligible for any rebate under this paragraph. D. Additional Value-Added Services. The additional value-added Services in Exhibit “2” will be provided to Customer by ABDC for $0.00 per month per Facility for Facilities that meet minimum Net Purchase levels. E. Ordering Hardware/Software. In addition to the foregoing value-added Services fee, Customer will pay the per-month fees in Exhibit “2” for ordering and reporting software and hardware selected by Customer for each installation on system hardware at Customer’s Facilities and other locations. F. Contract Administration. In administering Customer’s GPO/supplier contracts, Customer must (i) provide a copy of new contracts, (ii) comply with supplier’s terms, (iii) use all products for its “own use” (as defined in judicial and legislative interpretations), (iv) notify ABDC at least forty-five (45) days before it changes suppliers, and (v) upon changing suppliers, assist ABDC in disposing of any excess inventory acquired for Customer. Additionally, Customer will notify ABDC before discontinuing purchases of any special inventory that it has requested that ABDC stock (whether or not pursuant to a contract) and assist ABDC in disposing of any excess of such inventory. When invoiced, Customer will promptly reimburse ABDC for any unpaid chargebacks that are (x) denied by a GPO or manufacturer/supplier or (y) not paid within forty-five (45) days and, in either case, Customer will look solely to such GPO or manufacturer/supplier for redress. G. Security Deposit. Within five (5) days of execution of this Agreement, Customer will deposit with ABDC the sum of $0.00 as a deposit for Customer’s performance of its obligations under this Agreement. Upon request, ABDC will return such deposit within thirty (30) days if Customer has fully performed its obligations under this Agreement, including having no late payments, for a period of 0 months prior to such request. Upon the expiration or termination of this Agreement, ABDC may deduct from such deposit any unpaid amount, including payment for Products and Services. ABDC will return to Customer any balance remaining within thirty (30) days of the expiration or termination of this Agreement.   2. PAYMENT TERMS A. Options. Customer agrees to the following payment terms for Product purchases. (Check only one box below): Monthly Prepay ¨ Prior to commencement of deliveries, Customer will make a prepayment deposit for an estimated one month’s purchases to ABDC. Thereafter, payment for invoices dated the 1st through the last day of each calendar month must be received by the 10th of the following calendar month. Semi-Monthly Prepay ¨ Prior to commencement of deliveries, Customer will make a prepayment deposit for an estimated one-half of one month’s average purchases to ABDC. Thereafter, payment for invoices dated the 1st through the 15th must be received by the 25th of the same month. Payment for invoices dated the 16th through the last day of each calendar month must be received by the 10th of the following calendar month. Weekly Prepay ¨ Prior to commencement of deliveries, Customer will make a prepayment deposit for an estimated one week’s average purchases to ABDC. Thereafter, payment for invoices for purchases made Saturday through Friday must be received the following Wednesday by EFT. Next Day Pay ¨ Payment for each daily invoice must be received on the following day by EFT. Weekly Pay x Payment for invoices for purchases made Saturday through Friday must be received the following Wednesday by EFT. Semi-Monthly Pay (Default if no box checked). ¨ Payment for invoices dated the 1st through the 15th must be received by the 25th of the same month. Payment for invoices dated the 16th through the last day of each calendar month must be received by the 10th of the following calendar month. -------------------------------------------------------------------------------- [*] Confidential Portion Omitted and filed Separately with the Commission   5 -------------------------------------------------------------------------------- CONFIDENTIAL TREATMENT REQUESTED   Monthly Pay ¨ Payment for invoices dated the 1st through the last day of each calendar month must be received by the 10th of the following calendar month. 45-Day Pay ¨ Payment for invoices must be received by the 10th calendar day following the end of each 45-day period. B. Pre-Payment. All pre-pay payment plans are subject to the following terms: The pre-payment amount is based on Customer’s average Net Purchases over the three (3) previous months. Payment must be received by ABDC prior to the first day of the period to which the prepayment applies. A reconciliation statement will be produced at month end. A final reconciliation for Customer will be performed upon termination of the Agreement, followed by a final invoice with, as appropriate, a return of all or a part of the deposit or a charge for any additional amount owed. C. Terms. All payments must be received for deposit to ABDC’s account by the due date by EFT. ABDC may change available payment plans from time to time. Payment term changes may affect Price of Goods. If Customer does not select an option or the option selected is not available, ABDC will bill Customer on Semi-Monthly terms until otherwise notified by Customer. Subject to credit approval, Customer may change payment terms upon thirty (30) days written notice prior to the beginning of a calendar month. Price of Goods adjustments for different payment terms are subject to change from time to time by ABDC to reflect ABDC’s cost of money and any resulting credit risk.   3. MINIMUM ORDER VOLUME A. Annual Purchases. Customer’s minimum annual Net Purchase (total purchases less returns, credits, rebates, late payment fees and similar items) volume during Year 1 is $[*]. Year 1 is from the Effective Date to April 30, 2007. Subsequent contract years are the following twelve (12) month periods. Customer’s Net Purchases during subsequent years are projected to increase at a rate of [*]% per year during each year of the Term. Customer’s aggregate Net Purchase volume over the life of this Agreement will be no less than $[*]. Additionally, total monthly PRxO Generics Net Purchases from all Facilities will be at least [*]% of total Rx purchases from all Facilities. Total monthly Home Health Care Net Purchases from all Facilities will be at least [*]% of total Net Purchases from all Facilities. Total monthly Private Label Net Purchases from all Facilities will be at least [*]% of total Net Purchases from all Facilities. Calculations are quarterly, with no carryover from one quarter to the next. B. Small Order Charge. If Customer purchases less than $[*] per month, a delivery charge of $[*] per delivery will be assessed for each order that is less than $[*]. ABDC may adjust the per-delivery charge from time to time to reflect ABDC’s shipping and handling costs. C. Price of Goods Adjustments. Customer acknowledges that Price of Goods and Program fees available under this Agreement are based upon Customer’s meeting such minimum annual, aggregate and PRxO Generics and other Net Purchases and, if Customer fails to do so, in addition to any other remedies, ABDC may reasonably adjust Price of Goods and Program fees on 10 days notice to reflect lower than expected Net Purchase volume. If ABDC exercises its right to adjust the Price of Goods and Program fees under this section, Customer may terminate this Agreement upon 60 days written notice. -------------------------------------------------------------------------------- [*] Confidential Portion Omitted and filed Separately with the Commission   6 -------------------------------------------------------------------------------- EXHIBIT 2 TO PRIME VENDOR AGREEMENT ADDITIONAL VALUE-ADDED SERVICES The following Services are offered to Customer by ABDC for the monthly fees in Paragraph 1 (B) of Pricing/Payment Terms.     •   Bar-Coded Shelf Labels     •   DEA Scheduled Pharmaceuticals Purchased Report or an alternative report of Customer’s choosing upon ABDC’s approval in its sole discretion.     •   Monthly Usage and 80/20 Report     •   Price stickers–Rx and OTC ABDC may discontinue any Services as it deems appropriate, in which case ABDC will make a reasonable proportionate reduction in the monthly fee based upon the value of the discontinued Services. In addition, from time to time ABDC may offer such new Services, at such additional fees as it determines. Ordering & Reporting Software and Hardware     •   Custom Reporting software for $0 per month per installation.     •   Internet ordering software (Catalog and Order Entry (COE), iECHO or similar software, as appropriate) for $0 per month per installation.     •   IScan hardware technology for a purchase fee of $0 per unit and iScan software and maintenance for $0 per month per installation.     •   UltraPhase/Telxon handheld electronic order entry terminal (two per pharmacy) for no additional charge per month per installation.     •   No hardware will be included for Customer at a cost of $0.00 per month per installation. Any such hardware may be used solely with ABDC’s ordering and reporting software. Customer is responsible for hardware maintenance and repair. ABDC retains title to all ordering and reporting hardware and software and, pursuant to Provisions Paragraph 5.3, Customer must return them upon termination of this Agreement. Additional computer consulting and related services will be offered at ABDC’s then-current standard charges for such services. Recalls ABDC will notify Customer of all recalls as instructed in the supplier’s notification. Drop Ship Service ABDC provides drop ship service when Customer’s needs dictate this approach and the supplier meets ABDC’s liability insurance and other requirements. Drop shipments may be subject to an additional charge.   7 -------------------------------------------------------------------------------- EXHIBIT 3 TO PRIME VENDOR AGREEMENT PROVISIONS 1. DUTIES OF ABDC 1.1 Orders. Orders may be subject to minimum order size requirements. Other than supplier back-ordered Products, ABDC will make reasonable efforts to deliver orders placed by ABDC’s normal order cut-off time by the next delivery day. Hawaii, Alaska, U.S. territories and foreign deliveries may be subject to a delivery surcharge. 1.2 Emergency Orders. ABDC will use commercially reasonable efforts to meet a requested delivery time for emergency orders, which may be subject to an additional charge. If ABDC cannot do so, Customer may fill emergency orders outside the Program on such occasions using another provider notwithstanding minimum purchase commitments in this Agreement. 1.3 Records, Audits. ABDC will maintain records of transactions during the Term and for one year after. Customer’s employees may audit such records only pursuant to ABDC’s audit policies, as modified from time to time. Such audits may be conducted only during ordinary business hours and upon reasonable notice and may only cover ninety (90) days prior to the request or any shorter period set by the manufacturer for chargeback audits. No audit may cover any period previously audited. All costs will be borne by Customer, including costs to produce records. If an audit shows net overcharges or undercharges and ABDC agrees with such findings, ABDC will credit or charge Customer within thirty (30) days of receipt of written notice of the net overcharge (or, if later, within thirty (30) days of receiving an applicable supplier’s credit) or undercharge. 2. DUTIES OF CUSTOMER 2.1 Primary Vendor Orders. For Products required by Facilities, Customer will submit an electronic order for all Products. If allowed, non-electronic orders may be subject to additional charges. 2.2 Disclosure. Customer will comply with all laws, including reporting or reflecting discounts, rebates and other price reductions pursuant to 42 U.S.C. §1320a-7b(b)(3)(A) on cost reports or claims submitted to federal or state healthcare programs, retaining invoices and related pricing documentation and making them available on request to healthcare program representatives. 2.3 Notice of Changes. Customer will promptly notify ABDC of changes in ownership, name, business form (e.g., sole proprietorship, partnership or corporation) or state of incorporation or formation, or any intent to sell, close, move or modify its operations. 2.4 No Set-Off. Customer’s obligation to pay for Products will be absolute, unconditional and not subject to reduction, set-off, counterclaim or delay. 2.5 Billing Statements. Billing disputes must be brought to the attention of ABDC’s accounts receivable department within twelve (12) months after receipt of the first statement containing the amount in dispute or Customer will be deemed to accept the accuracy of such statements and to waive its right to dispute the amount. 2.6 Late Payment. All payments must be received in ABDC’s account during normal business hours on the date due. Drivers and other ABDC employees cannot accept cash. Price of Goods reflects a prompt payment discount. If payment is not received by the due date and the failure to pay is not cured within three (3) days of written notice of the failure to pay. ABDC will verbally notify customer and invoice Customer such unearned discount by recalculating Price of Goods based on Cost + 2% (or, if greater, 2% more than the invoiced Price of Goods) effective as of the due date. Thereafter, if payment is delinquent, ABDC may withhold any payments to Customer and will assess a per-day late payment fee of the lower of 0.05% (18%/360) or the maximum rate permitted by law on the outstanding balance until paid, beginning on the first (1st) business day after such due date. Additionally, ABDC may adjust future Price of Goods to reflect Customer’s payment history. Such rights are in addition to ABDC’s other remedies and will not relieve Customer of its obligation to make prompt payment in accordance with this Agreement. 2.7 Title And Risk Of Loss. All goods are F.O.B. Customer’s location, with freight prepaid for normal delivery. Expedited delivery is extra. Title and risk of loss pass upon delivery to Customer. 2.8 Extension Of Credit. Payment terms are an extension of credit based upon an evaluation of Customer’s financial condition upon commencement of this Agreement as reflected in written information from Customer. Customer will abide by ABDC’s standard credit terms as amended from time to time by ABDC. Customer will promptly notify ABDC in writing of any Claim that, with an unfavorable result, would have a material adverse effect on Customer’s financial condition or operation. Upon request, Customer will furnish ABDC complete annual and quarterly financial statements and other evidence of its financial condition necessary to establish, in ABDC’s opinion, Customer’s ability to perform its obligations. If ABDC reasonably believes Customer’s ability to make payments is impaired or its financial condition has materially deteriorated, ABDC may from time to time amend Customer’s payment terms, require past due amounts to be paid and/or require posting of adequate security or such other documents as ABDC may require. Pending receipt of requested items, ABDC may withhold delivery of Products and providing Services; place Customer on a C.O.D. basis if ABDC has not received payment when due after giving notice by 10:00 a.m. and giving Customer until 2:00 p.m. the same day for ABDC to receive payment; and/or require Customer to pay part or all of any past due amount as a condition to continued service. 3. NO WARRANTIES Customer acknowledges that ABDC is not the manufacturer of any Products and ABDC DISCLAIMS ALL WARRANTIES, EXPRESS OR IMPLIED, INCLUDING THOSE OF MERCHANTABILITY, NON-INFRINGEMENT AND FITNESS FOR A PARTICULAR PURPOSE, FOR PRODUCTS AND SERVICES. No oral or written information provided by ABDC, its employees or other representatives will create any such warranty. In no event will ABDC be liable for any special, incidental or consequential damages in connection with or related to Products, hardware, Software, including ordering software, or Services. 4. CONFIDENTIALITY Each party and its employees or representatives (“Receiving Party”) will protect all proprietary and confidential information (“Confidential Information”) disclosed by the other (“Disclosing Party”) and not use or disclose it except in connection with the Program or as otherwise agreed. Confidential Information does not include information (i) available on a non-confidential basis, (ii) known or able to be formulated by Receiving Party, or (iii) required to be disclosed by law. Pricing and payment terms are confidential and may not be shared with any third party. Customer will remove Exhibit “1” (or request confidential treatment) if it discloses this Agreement for any reason, including in a Securities and Exchange Commission filing. 5. TERMINATION OF AGREEMENT 5.1 Termination without Cause. Either party may terminate this Agreement at any time upon one hundred eighty (180) days written notice. 5.2 Default. In addition to other available remedies, either party may immediately terminate this Agreement for cause upon written notice to the other party upon the other party’s: (a) (i) filing an application for or consenting to appointment of a trustee, receiver or custodian of its assets; (ii) having an order for relief entered in Bankruptcy Code proceedings; (iii) making a general assignment for the benefit of creditors; (iv) having a trustee, receiver or custodian of its assets appointed unless proceedings and the person appointed are dismissed within thirty (30) days; (v) insolvency within the meaning of Uniform Commercial Code Section 1-201 or failing generally to pay its debts as they become due within the meaning of Bankruptcy Code Title 11, Section 303(h)(1) (11 U.S.C. §303(h)(1)), as amended; or (vi) certification in writing of its inability to pay its debts as they become due (and either party may periodically require the other to certify its ability to pay its debts as they become due) (collectively, “Bankruptcy”);   8 -------------------------------------------------------------------------------- (b) The sale or transfer of the business of Customer, in whole or in part, or a “Change in Control” in Customer. As used herein, “Change in Control” means (if applicable) the sale, transfer or assignment of all or substantially all of the assets of the Customer or of 25% or more of the voting equity in Customer or a change in the power to vote 25% or more of the voting interest in Customer; or (c) Failure to pay any amount due and such failure continues five (5) days after written notice; (d) Failure to perform any other material obligation of this Agreement or any other agreement now or hereafter entered into between the parties and such failure continues for thirty (30) days after it receives notice of such breach from the non-breaching party; provided, however, if the other party has commenced to cure such breach within such thirty (30) days, but such cure is not completed within such thirty (30) days, it will have a reasonable time to complete its cure if it diligently pursues the cure until completion; and further provided that if such breach occurs more than three times during any twelve (12) month period, the non-breaching party may terminate this Agreement upon thirty (30) days written notice. “For cause” does not include Customer’s receiving a more favorable offer from an ABDC competitor. 5.3 Survival Upon Termination. Within five (5) days of expiration or earlier termination of this Agreement for any reason, all amounts owed by Customer will be immediately due and payable, Customer will (i) pay ABDC any amount owed and (ii) return to ABDC all hardware, Software and other equipment, including ordering devices and totes, or pay to ABDC the replacement cost of such items that are not returned. Obligations in Provisions Paragraphs 4, 5.2, 6 and 9 and any provision the context of which shows the parties intended it to survive will remain in effect after the Term. 6. INDEMNIFICATION Each party (“Indemnifying Party”) will indemnify and defend the other, its employees and representatives (“Indemnified Party”) against all claims and damages (including expenses and attorneys’ fees) (“Claim”) to the extent arising out of Indemnifying Party’s obligations under this Agreement. Failure to give prompt written notice of a Claim will not relieve Indemnifying Party of liability except to the extent caused by such failure. Indemnifying Party will defend a Claim with counsel reasonably satisfactory to Indemnified Party and Indemnified Party will cooperate fully in such defense. 7. CUSTOMER’S INSURANCE Customer will maintain sufficient insurance to cover all unpaid inventory in its possession. Customer will provide ABDC with a detailed description of its insurance coverage within thirty (30) days of execution of this Agreement. ABDC will approve or reject Customer’s insurance coverage within thirty days. If rejected, Customer will have thirty days to increase coverage to a level deemed adequate by ABDC, or ABDC shall have the right to terminate this Agreement upon written notice to Customer. ABDC may reasonably increase required limits from time to time. 8. SOFTWARE LICENSE 8.1 License. ABDC grants Customer a non-exclusive, nontransferable and revocable license to use software and related documentation ABDC provides for use in the Program (“Software”). Customer may not make, or allow others to make, copies except one backup copy. Customer must include all proprietary notices in permitted copies. Customer may not modify Software or create derivative works and may not translate, reverse engineer, disassemble or decompile Software. 3.1 Limited Warranty. ABDC warrants that, for ninety (90) days from the Effective Date, (i) Software will perform substantially in accordance with its documentation if operated as directed and (ii) hardware provided by ABDC and diskettes, CD-ROMs or other media on which the Software is provided will be free from defects under normal use. ABDC DISCLAIMS ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING THOSE OF MERCHANTABILITY, NON-INFRINGEMENT AND FITNESS FOR A PARTICULAR PURPOSE, FOR HARDWARE AND SOFTWARE, AND ACCURACY OF ANY DATA. ALL DATA IS PROVIDED “AS IS.” DUE TO THE NATURE OF SOFTWARE, HARDWARE AND DATA, ERRORS AND INTERRUPTIONS MAY OCCUR AND CUSTOMER HAS ALL RISKS FOR QUALITY AND PERFORMANCE. No oral or written information provided by ABDC, its employees or other representatives will create any warranty. 8.3 Remedy. ABDC’s liability and Customer’s exclusive remedy for breach of warranties in Paragraph 8.2 will be, at ABDC’s option, to (i) repair or replace Software or hardware so it performs substantially in accordance with its documentation; (ii) advise Customer how to achieve substantially the same functionality using different procedures, or (iii) replace defective media returned within ninety (90) days of the Effective Date. Such replacement will not extend such ninety (90) day period. 9. MISCELLANEOUS 9.1 Force Majeure. If ABDC’s performance is prevented or delayed by labor disputes, fire, terrorism, acts of God or any other cause beyond its control, including unavailability of Products, transportation, materials or fuel, delays by suppliers, loss of facilities, internet, telecommunication or electrical system failures or interruptions, voluntary foregoing a right in order to comply with or accommodate government orders or requests, compliance with any law or any other cause beyond its control (“Force Majeure”), ABDC may reduce or eliminate Products without (liability or obligation during the Force Majeure period. In addition, if Force Majeure affects ABDC’s cost of operations, ABDC may, at its discretion, add to the cost of Products its increased fuel costs, including taxes, and other costs associated with Product handling or operations, so long as Force Majeure affects its costs. 9.2 Security Interest. In addition to any security interest previously or hereafter provided by Customer to ABDC, Customer hereby grants to ABDC a security interest which may be a purchase money security interest in Products that Customer has not paid for and in Customer’s or any third party’s proceeds from Products until all amounts are paid. ABDC may do such things as are necessary to achieve the purposes of this Paragraph. 9.3 Assignment. This Agreement inures to the benefit of and is binding upon the heirs, successors and assigns of each party; provided, however that Customer may only assign its rights or delegate its duties under this Agreement, including by merger, change of control, asset sale, operation of law or otherwise, with ABDC’s written consent. Customer hereby consents to ABDC’s assigning part or all of its obligations to any affiliate and to assigning or granting a security interest in this Agreement in connection with any financing or securitization by ABDC or any affiliate. 9.4 EEO Requirements. ABDC warrants it does not and will not discriminate against any employee or applicant for employment because of race, creed, color, national origin, religion, gender, sexual preference, veteran status, handicap or as otherwise may be prohibited by law and will meet affirmative action obligations as are imposed by law. 9.5 Miscellaneous. The successful party in any legal action, including in a Bankruptcy proceeding, may recover all costs, including reasonable attorneys’ fees. New York law will govern this Agreement without reference to conflict of laws provisions. Any waiver or delay in enforcing this Agreement will not deprive a party of the right to act at another time or due to another breach. All provisions are severable. In the event of a conflict between a prior document between the parties and this Agreement, this Agreement will control. This Agreement supersedes prior oral or written representations by the parties that relate to its subject matter other than the security interest, which is in addition to and not in lieu of any security interest created in other agreements. Captions are intended for convenience of reference only. The parties may not modify this Agreement other than by a subsequent writing signed by each party. This Agreement will be interpreted as if written jointly by the parties. The parties are independent contractors.   9

Exhibit 10.1 SEVENTH AMENDED AND RESTATED BANCFIRST CORPORATION STOCK OPTION PLAN   1. PURPOSE. This Seventh Amended and Restated BancFirst Corporation Stock Option Plan (i) incorporates the Sixth Amendment to and Restatement of the BancFirst Corporation Stock Option Plan (the “Sixth Restatement”), adopted by the Board of Directors of BancFirst Corporation (the “Corporation”) on June 24, 2004, (ii) incorporates an Amendment to the Sixth Restatement adopted by the stockholders of the Corporation on April 27, 2006, and (iii) incorporates an Amendment to the Sixth Restatement adopted by the stockholders of the Corporation on May 25, 2006. The Plan is intended as an incentive and to encourage stock ownership by certain key employees and officers of the Corporation in order to increase their proprietary interest in the Corporation’s success.   2. DEFINITIONS. As used herein, the following terms shall have the corresponding meanings:     2.1. “Committee” shall mean the Board of Directors of the Corporation, or a duly constituted committee of the Board consisting of three or more members.     2.2 “Common Stock” shall mean the common stock, par value $1.00 per share, of the Corporation.     2.3. “Date of Grant” shall mean the date of grant of a Stock Option granted hereunder as set forth in the Stock Option Agreement. In the event of a grant conditioned, among other things, upon stockholder ratification of this Plan, the date of such conditional grant shall be the Date of Grant for purposes of this Plan.     2.4. “Employee” shall mean any common-law employee of the Corporation. The determination of whether or not a person is an Employee of the Corporation with respect to the grant or exercise of an Incentive Stock Option shall be made in accordance with the rule of Income Tax Regulation Section 1.421-7(h) (or successor regulation).     2.5. “Fair Market Value” shall mean, with respect to the exercise of an option under the Plan, (a) if the Common Stock is listed on a national securities exchange or the NASDAQ National Market System, the closing price of the Common Stock for the business day immediately preceding the day for which the determination is being made, or (b) if the Common Stock is not then listed on an exchange, the average of the closing bid and asked prices per share for the Common Stock in the over-the-counter market as quoted on NASDAQ for the business day immediately preceding the day for which the determination is being made, or (c) if the Common Stock is not then listed on any exchange or quoted on NASDAQ, an amount determined in good --------------------------------------------------------------------------------   faith by the Committee to be the fair market value of the Common Stock, after consideration of all relevant factors.     2.6 “Nonqualified Stock Option” shall mean a Stock Option which is not intended to qualify for tax treatment as an “incentive stock option” under Section 422 of the Code.     2.7. “Option Exercise Price” shall mean the price paid for Shares upon the exercise of a Stock Option granted hereunder.     2.8. “Optionee” shall mean any person entitled to exercise a Stock Option pursuant to the terms of the Plan.     2.9. “Stock Option” shall mean a stock option giving an Optionee the right to purchase shares of the Corporation’s Common Stock. Stock Options granted under the Plan shall be Nonqualified Stock Options.   3. ADMINISTRATION.     3.1 AUTHORITY; INDEMNIFICATION. Within the limitations described herein, the Committee shall administer the Plan, select the Employees of the Corporation, including officers of the Corporation, to whom Stock Options shall be granted, determine the number of Shares to be subject to each grant, determine the method of payment upon exercise of each Stock Option, determine all other terms of Stock Options granted hereunder and interpret, construe and implement the provisions of the Plan. All questions of interpretation of the Plan or any Stock Option granted under the Plan shall be determined by the Committee, and such decisions shall be binding upon all persons having an interest in the Plan and/or any Stock Option. No member of the Committee shall be liable for any action or determination made in good faith, and the members shall be entitled to indemnification and reimbursement in the manner provided in the Corporation’s Certificate of Incorporation, or as otherwise permitted by law.     3.2 RULE 16B-3 COMPLIANCE. With respect to the participation of eligible participants who are subject to Section 16(b) of the Exchange Act, the Plan shall be administered in compliance with the requirements of Rule 16b-3.     3.3 SECTION 162(M) COMPLIANCE. In the event the Corporation is a “publicly held corporation” as defined in paragraph (2) of section 162(m) of the Code, as amended by the Revenue Reconciliation Act of 1993 (P.L. 103-66), and the regulations promulgated thereunder (“Section 162(m)”), the Corporation shall establish a committee of outside directors meeting the requirements of Section 162(m) to approve the grant of Stock Options which might reasonably be anticipated to result in the payment of employee remuneration that would otherwise exceed the   2 --------------------------------------------------------------------------------   limit on employee remuneration deductible for income tax purposes pursuant to Section 162(m).   4. ELIGIBILITY. The individuals who shall be eligible to participate in the Plan shall be such key Employees (including officers) of BancFirst Corporation, or of any corporation (“Subsidiary”) in which the Corporation has proprietary interest by reason of stock ownership or otherwise, including any corporation in which the Corporation acquires a proprietary interest after the adoption of this Plan (but only if the Corporation owns, directly or indirectly, stock possessing not less than 50% of the total combined voting power of all classes of stock in the corporation), as the Committee shall determine from time to time.   5. STOCK. The stock subject to Stock Options and other provisions of the Plan shall be shares of the Corporation’s authorized but unissued Common Stock or treasury stock, as determined by the Committee. Subject to adjustment in accordance with the provisions of Subparagraph 6.7 hereof, the total number of shares of Common Stock of the Corporation on which Stock Options may be granted under the Plan shall not exceed in the aggregate 2,500,000 shares. In the event that any outstanding Stock Option under the Plan for any reason expires or is terminated prior to the end of the period during which Stock Options may be granted, the shares of the Common Stock allocable to the unexercised portion of such Stock Option may again be subject to a Stock Option under the Plan.   6. TERMS AND CONDITIONS OF STOCK OPTIONS. Stock Options granted pursuant to the Plan shall be evidenced by agreements in such form as the Committee shall, from time to time, approve. Agreements shall comply with and be subject to the following terms and conditions:     6.1 MEDIUM AND TIME OF PAYMENT. The Option Exercise Price shall be payable in United States Dollars upon the exercise of the Stock Option and may be paid in cash or by certified check, bank draft or money order payable to the order of the Corporation, unless otherwise determined by the Committee.     6.2 NUMBER OF SHARES. The Stock Option shall state the total number of shares to which it pertains.     6.3 OPTION EXERCISE PRICE. The Option Exercise Price shall be not less than the Fair Market Value of the Common Stock on the Date of Grant.     6.4 TERM OF STOCK OPTIONS. The period during which Stock Options shall be exercisable shall be fixed by the Committee, but in no event shall a Stock Option be exercisable after the expiration of fifteen (15) years from the date such Stock Option is granted. Subject to the foregoing, Stock Options shall be exercisable at such times and be subject to such restrictions and conditions as the Committee shall in each   3 --------------------------------------------------------------------------------   instance determine, which restrictions and conditions need not be the same for all Stock Options.     6.5 DATE OF EXERCISE. Unless otherwise determined by the Committee at the time of granting a Stock Option, Stock Options shall be exercisable at the rate set forth below beginning four years from the Date of Grant. After becoming exercisable, the Stock Option may be exercised at any time and from time to time in whole or in part until termination of the Stock Option as set forth in Sections 6.4 or 6.6.   Elapsed Years from Date of Grant    Percent of Shares     Cumulative Percent of Shares   less than 4 years    0 %   0 % 4 to 5 years    25 %   25 % 5 to 6 years    25 %   50 % 6 to 7 years    25 %   75 % more than 7 years    25 %   100 %     6.6 TERMINATION OF EMPLOYMENT. In the event that an Optionee’s employment by the Corporation shall terminate, his Stock Option whether or not then exercisable shall terminate immediately; provided, however, that if the termination is not as a result of embezzlement, theft or other violation of the law, the Optionee shall have the right to exercise his option (to the extent exercisable at the time of termination) at any time within 30 days after such termination; provided, further, that if any termination of employment is related to the Optionee’s retirement with the consent of the Corporation, the Optionee shall have the right to exercise his Stock Option (to the extent exercisable up to the date of retirement) at any time within three months after such retirement; and provided, further, that if the Optionee shall die while in the employment of the Corporation or within the period of time after termination of employment or retirement during which he was entitled to exercise his option as hereinabove provided, his estate, personal representative, or beneficiary shall have the right to exercise his Stock Option (to the extent exercisable at the date of death) at any time within twelve (12) months from the date of his death.     6.7 RECAPITALIZATION. The aggregate number of shares of Common Stock on which Stock Options may be granted to persons participating under the Plan, the number of shares thereof covered by each outstanding Stock Option, and the price per share thereof in each such Stock Option, shall all be proportionately adjusted for any increase or decrease in the number of issued shares of Common Stock of the Corporation resulting from a subdivision or consolidation of shares or other capital   4 --------------------------------------------------------------------------------   adjustment, or the payment of a stock dividend or other increase or decrease in such shares, effected without receipt of consideration by the Corporation; provided, however, that any fractional shares resulting from such adjustment shall be eliminated. In the event of a change in the Corporation’s Common Stock which is limited to a change in the designation thereof to “Capital Stock” or other similar designation, or a change in the par value thereof, or from par value to no par value, without increase in the number of issued shares, the shares resulting from any such change shall be deemed to be Common Stock within the meaning of the Plan.     6.8 REORGANIZATION OF CORPORATION. Subject to any required action by the stockholders, if the Corporation shall be the surviving or resulting corporation in any merger or consolidation which does not result in change of control of the Corporation, any Stock Option granted hereunder shall pertain to and apply to the securities to which a holder of the number of shares of Common Stock subject to the Stock Option would have been entitled. In the event of a dissolution or liquidation of the Corporation or a merger or consolidation in which the Corporation is not the surviving or resulting corporation or which results in a change in control of the Corporation, or a tender or exchange offer which results in a change in control of the Corporation, the Committee shall determine: (i) whether all or any part of the unexercisable portion (as set forth in section 6.5) of any Stock Option outstanding under the Plan shall terminate; (ii) whether the Stock Options shall become immediately exercisable; or (iii) whether such Stock Options may be exchanged for options covering securities of any such surviving or resulting corporation, subject to the agreement of any such surviving or resulting corporation, on terms and conditions substantially similar to a Stock Option hereunder.     6.9 ASSIGNABILITY. Except as provided in this Section, no Stock Option shall be assignable or transferable except as follows:     (a) by will or by the laws of descent and distribution.     (b) for the purpose of making a charitable gift as permitted by Section 6.13.     (c) to the Optionee as trustee, or to the Optionee and one or more others as co-trustees, of a revocable trust which allows the Optionee to amend or revoke the trust at any time. If the Optionee relinquishes his power to amend or revoke the trust or resigns as a trustee, the Optionee shall withdraw the Stock Option from the trust prior to the relinquishment of such power or his resignation as trustee and shall revest title to the Stock Option in the Optionee’s individual name. If the trust becomes irrevocable due to the death of the Optionee, the successor or remaining trustee(s) shall have the same power to exercise the Stock Option under Section 6.6 hereof as the personal   5 --------------------------------------------------------------------------------   representative. If the Optionee becomes incapacitated, the date of incapacity shall be deemed for purposes of this Plan as the date of termination of employment under Section 6.6 (whether or not Optionee’s employment has actually terminated), and the successor or remaining trustee(s) of the trust shall have the same right to exercise the Stock Option as a terminated Optionee has under Section 6.6. The Optionee as trustee and any successor or remaining trustee(s) shall be bound by all the terms and conditions of the Plan and the Stock Option Agreement entered into by the Company and Optionee under this Plan.     (d) to the extent set forth in the Stock Option Agreement governing such Stock Option.     6.10 OPTIONEE’S AGREEMENT. If, at the time of the exercise of any Stock Option, it is necessary or desirable, in order to comply with any applicable laws or regulations relating to the sale of securities, that the Optionee exercising the Stock Option shall agree that he will purchase the shares that are subject to the Stock Option for investment and not with any present intention to resell the same, the Optionee will, upon the request of the Corporation, execute and deliver to the Corporation an agreement to such effect.     6.11 RIGHTS AS A STOCKHOLDER. An Optionee shall have no rights as a stockholder with respect to shares covered by his Stock Option until the date of issuance of the shares to him and only after such shares are fully paid.     6.12 OTHER PROVISIONS. The Stock Option Agreements authorized under the Plan may contain such other provisions as the Committee shall deem advisable.     6.13 CHARITABLE GIFT. An Optionee shall be permitted to assign his Stock Option without consideration, either in full or in one or more partial assignments from time to time, to any organization that has been recognized by the Internal Revenue Service as qualifying under Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (a “Charity”). Assignment(s) may be made during the Optionee’s lifetime or may be effective upon his death. If a Stock Option is assigned to a Charity, in whole or in part, it shall continue to be subject to the restrictions of Sections 6.5 and 6.6 hereof, which shall thereafter apply to the same extent as if the Stock Option were still held by the Optionee himself (if he is living), or by his estate, personal representative or beneficiary (if he is deceased).   7. MARKETABILITY OF SHARES. The Common Stock is currently traded on the NASDAQ National Market System. As a result, its liquidity varies widely in response to   6 --------------------------------------------------------------------------------   supply and demand. Consequently, the Corporation can give no assurances as to the marketability of shares acquired under the Plan.   8. TAX IMPLICATIONS. It is anticipated that Stock Options granted under the Plan will be treated as Nonqualified Stock Options by the Internal Revenue Service. As such, exercise of the Stock Option would generate a taxable event with the difference between the original Option Exercise Price and the Fair Market Value of the Common Stock at the time of exercise being treated as ordinary income. If a Stock Option is transferred to a Charity as permitted by Sections 6.9(b) and 6.13 hereof, the Optionee should expect to have ordinary income attributed to him at the time the Charity exercises the Stock Option, in the same amount and with the same effect as if the Optionee himself exercised the Stock Option.   9. TERM OF PLAN. No Stock Option may be granted after December 31, 2011.   10. NO OBLIGATION TO EXERCISE OPTION. The granting of a Stock Option shall impose no obligation upon the Optionee to exercise such Stock Option.   11. AMENDMENTS. The Board of Directors may from time to time amend, alter, suspend, or discontinue the Plan or alter or amend (including decrease of the Option Exercise Price by cancellation and substitution of options or otherwise) any and all option agreements granted thereunder; provided, however, that after the first registration of the Common Stock under Section 12 of the Securities Exchange Act of 1934, no such action of the Board of Directors may, without approval of the stockholders of the Corporation, alter the provisions of the Plan so as to (a) materially increase the benefits accruing to participants under the Plan; (b) materially increase the number of securities which may be issued under the Plan; or (c) materially modify the requirements as to eligibility for participation in the Plan; and provided, further, that no amendment may, without the consent of the Optionee, affect any then outstanding Stock Options or unexercised portions thereof. In addition, the approval of the Corporation’s stockholders shall be sought for any amendment to the Plan or a Stock Option for which the Committee deems stockholder approval necessary in order to comply with Rule 16b-3.   7

De Beira Goldfields inc. 30 Ledgar Road Balcatta, Western Australia 6021 June 15, 2006 Emco Corporation World Trade Center Panama Calle 53, Aptdo. 871295 Marbella, Panamá República de Panamá Fax 507-269-4991 Attention: Francisco Carrano Dear Sirs: Re: Acquisition of 80% interest of Minera Nanguita CA (“MINANCA”) This letter will confirm our previous discussions concerning the proposed acquisition of an 80% interest in MINANCA (the “Subsidiary”) by De Beira Goldfields Inc. (“De Beira”). This letter agreement sets forth the terms and conditions of the proposed acquisition, which, when accepted by Emco Corporation (“Emco”), will form a binding agreement between us, with such terms and conditions to be embodied in due course in a more formal agreement (the “Formal Agreement”), which will form a binding agreement among De Beira, Emco and the Subsidiary. Based on our previous discussions and correspondence, De Beira agrees to acquire an 80% interest in the Subsidiary by acquiring 17,200 shares in the capital of the Subsidiary from Emco (the “Shares”) for an aggregate purchase price comprising of 3 million restricted common shares in the capital of De Beira at a deemed price of not less than US$10.00 per common share and a cash payment of US$400,000. The Formal Agreement and the closing will be conditional upon the following: a.   De Beira paying a deposit of US$500,000 to Emco on the acceptance of this letter agreement by Emco (funds to be wire transferred prior to public announcement).   b.   De Beira will be allowed to conduct due diligence on the property owned by the Subsidiary (collectively, the “Mine”). c.   The due diligence to be conducted by De Beira will be completed by July 7, 2006. If the Formal Agreement is not completed and closing does not occur by the close of business on July 10, 2006, Emco will immediately thereafter refund the full amount of US$500,000 to De Beira, subject to the terms and conditions of paragraph 3 below. The Formal Agreement will provide, among other terms and conditions, the following: 1.   Upon satisfactory completion and closing of the transaction proposed by this letter agreement, the US$500,000 deposit paid by De Beira will be utilized and deemed to be for the following purposes: i.   US$400,000 as comprising the cash portion of the purchase price for the Shares and paid to existing shareholders of the Subsidiary; and ii.   US$100,000 as a loan from De Beira to the Subsidiary for expenditure on the Mine. 2.   De Beira will advance a further sum of US$7,000,000 to the Subsidiary for the following purposes: i.   US$1,500,000 within 15 days of the completion of De Beira’s due diligence on the Mine to be used for upgrade expenditures on the Mine; ii.   US$400,000 to be used for upgrades to the Mine by July 31, 2006; iii.   US$1,375,000 by October 2, 2006 to be paid to the Bank of Guayaquil for existing debt owed by the Subsidiary to the Bank of Guayaquil; and iv.   the balance of US$3,725,000 to be used for exploration expenditures on the Mine and to be paid equally over a period of five months beginning September 1, 2006 with the final payment due on January1, 2007. 3.   The Subsidiary will undertake to grant a mortgage over all its assets to De Beira as security against the loan funds provided by De Beira under the terms of the previous paragraphs. The loan will be repaid from cash surpluses generated from production by the Subsidiary prior to any dividend or distribution payments to shareholders of the Subsidiary. 4.   The Shares will be held in escrow until the purchase price for the Shares is paid in full. 5.   The Subsidiary will appoint De Beira as the Joint Operator of the Mine with the existing operator, Overton SA. 6.   De Beira will be responsible for keeping the Mine and all permits in good standing during the term of the Formal Agreement. Miscellaneous 1. It is understood that contained in the Formal Agreement will be the normal and usual covenants and warranties for a transaction of this nature, including among other things, but without limitation, due existence and good standing of the Subsidiary and the Mine. The Formal Agreement will also disclose and contain warranties concerning, without limitation, the correctness and accuracy of the financial statements; taxes; the holdings of permits, licences, consents and authorities necessary to carry on the business; the amount or value of liabilities, accounts receivable, all commitments for the payment of dividends, bonuses, salaries, management fees and employee benefits; all purchase orders and other obligations; and all outstanding guarantees and performance bonds. 2. Pending the closing of the transaction, De Beira and its representatives will have, at reasonable times and with minimal disruption, access to the Subsidiary’s books and records, financial and operating data, material contracts and other information with respect to the business as De Beira will reasonably request. 3. All information will be kept confidential and will be divulged by the parties only to their respective principals and professional advisors, unless required by law to be disclosed. 4. Each of the parties will pay their own costs, expenses and fees (including, without limitation, legal counsel) incurred in connection with the preparation, execution and the consummation of this letter agreement and the Formal Agreement. 5. This letter agreement and the Formal Agreement will be interpreted in accordance with the laws of the State of Nevada and will enure to the benefit of and be binding upon De Beira and Emco, and their respective heirs, successors and permitted assigns. 6. De Beira and Emco agree to sign such further and other deeds and documents, including without limitation, the Formal Agreement and to give such further and other assurances as may be necessary to fully implement this letter agreement.   [The remainder of this page was intentionally left blank] If the foregoing accurately sets forth your understanding of our agreement, please sign this letter agreement where indicated below, which will then form a binding agreement between us, subject only to the terms and conditions aforesaid. We will then immediately begin preparation of the Formal Agreement. Yours truly, De Beira Goldfields Inc. Per: /s/ Reg Gillard        c/s   Authorized Signatory ACCEPTED AND AGREED TO THIS 15th DAY OF JUNE, 2006: Emco Corporation c/s     Per: /s/ Francisco Carrano  Francisco Carrano, President 

Exhibit 10.4     REGISTRATION RIGHTS AGREEMENT   This Registration Rights Agreement (this “Agreement”) is made and entered into as of March 29, 2006, among VendingData Corporation, a Nevada corporation (the “Company”), Bricoleur Partners, L.P., Bricoleur Enhanced, L.P., BRIC 6, L.P. and Bricoleur Offshore Ltd. (collectively the “Lenders”), and the several purchasers signatory hereto (each such purchaser is a “Purchaser” and collectively, the “Purchasers”).   R E C I  T A L S    A.  WHEREAS, pursuant to a Securities Purchase Agreement entered into between the Company and each Purchaser (the “Securities Purchase Agreement”), the Company will sell to the Purchasers an aggregate of 2,400,000 shares of the Company’s Common Stock (as defined below).   B.  WHEREAS, concurrent with close of the purchase and sale of shares of Common Stock pursuant to the Securities Purchase Agreement, the Company will (i) sell $7 million of 7% Senior Secured Notes to the Lenders pursuant to that certain Note Purchase Agreement (“Note Purchase Agreement”) of the same date herewith between the Company and the Lenders, and, in addition, (ii) acquire a put option to sell, from time to time, up to $5 million of the Company’s Common Stock to the Lenders pursuant that certain Equity Put Agreement (“Equity Put Agreement”) of the same date herewith between the Company and the Lenders.   A G R E E< u>M E N T  NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for other good and valuable consideration the receipt and adequacy of which are hereby acknowledged, the Company, the Lenders and each Purchaser agree as follows:   1.  Definitions. Capitalized terms used and not otherwise defined herein that are defined in the Securities Purchase Agreement shall have the meanings given such terms in the Securities Purchase Agreement. As used in this Agreement, the following terms shall have the following meanings:   “Advice” shall have the meaning set forth in Section 6(d).   “Effectiveness Date” means, with respect to the initial Registration Statement required to be filed hereunder, the 75th calendar day following the date hereof (the 90th calendar day in the case of a “full review” by the Commission.   “Effectiveness Period” shall have the meaning set forth in Section 2.   “Filing Date” means, with respect to the initial Registration Statement required hereunder, the 30th calendar day following the Closing Date.   1 --------------------------------------------------------------------------------   “Holder” or “Holders” means the holder or holders, as the case may be, from time to time of Registrable Securities.   “Indemnified Party” shall have the meaning set forth in Section 5(c).   “Indemnifying Party” shall have the meaning set forth in Section 5(c).   “Losses” shall have the meaning set forth in Section 5(a).   “Plan of Distribution” shall have the meaning set forth in Section 2.   “Prospectus” means the prospectus included in a Registration Statement (including, without limitation, a prospectus that includes any information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated under the Securities Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Registrable Securities covered by a Registration Statement, and all other amendments and supplements to the Prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such Prospectus.   “Registrable Securities” means all of (i) the Shares issuable to the Purchasers pursuant to the Securities Purchase Agreement, (ii) the shares of Common Stock underlying the common stock purchase warrant issued to the Lenders pursuant to the Note Purchase Agreement, (iii) the shares of Common Stock issuable to the Lenders from time to time pursuant to the Equity Put Agreement, and (iv) any shares of Common Stock issued or issuable upon any stock split, dividend or other distribution, recapitalization or similar event with respect to the foregoing; provided, however, a security shall no longer be a Registrable Security once it has been sold, or may be sold, without volume restrictions pursuant to Rule 144(k) or sold pursuant to a Registration Statement.   “Registration Statement” means the registration statements required to be filed hereunder, including (in each case) the Prospectus, amendments and supplements to such registration statement or Prospectus, including pre- and post-effective amendments, all exhibits thereto, and all material incorporated by reference or deemed to be incorporated by reference in such registration statement.   “Rule 415” means Rule 415 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.   “Rule 424” means Rule 424 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.   2 --------------------------------------------------------------------------------   “Selling Shareholder Questionnaire” shall have the meaning set forth in Section 3(a).   2.  Shelf Registration. On or prior to the Filing Date, the Company shall prepare and file with the Commission a “Shelf” Registration Statement covering the resale of the Registrable Securities for an offering to be made on a continuous basis pursuant to Rule 415. The Registration Statement shall be on Form S-3 (except if the Company is not then eligible to register for resale the Registrable Securities on Form S-3, in which case such registration shall be on another appropriate form in accordance herewith) and shall contain substantially the “Plan of Distribution” attached hereto as Annex A, as modified by the Company as necessary to conform to comments from the Commission. Subject to the terms of this Agreement, the Company shall use its best efforts to cause a Registration Statement to be declared effective under the Securities Act as promptly as possible after the filing thereof, but in any event prior to the applicable Effectiveness Date, and shall use its best efforts to keep such Registration Statement continuously effective under the Securities Act until all Registrable Securities covered by such Registration Statement have been sold, or may be sold without volume restrictions pursuant to Rule 144(k), as determined by the counsel to the Company pursuant to a written opinion letter to such effect, addressed and acceptable to the Company’s transfer agent and the affected Holders (the “Effectiveness Period”). Within two Trading Days after the Registration Statement is declared effective, the Company shall (i) file a final Prospectus with the Commission pursuant to Rule 424 and (ii) notify the Holders via facsimile of effectiveness of the Registration Statement.   3.  Registration Procedures   In connection with the Company’s registration obligations hereunder, the Company shall:   (a)  Not less than five Trading Days prior to the filing of each Registration Statement and not less than two Trading Day prior to the filing of any related amendment or supplement thereto, the Company shall, (i) furnish to each Holder the selling stockholder and plan of distribution sections made a part thereof, along with any other section that specifically references a Holder, and (ii) cause its officers, directors and counsel to respond to all reasonable inquiries from the Holders as shall be necessary for each Holder to conduct a reasonable investigation within the meaning of the Securities Act. Each Holder agrees to be named in the Registration Statement and to carry out the offer and sale of Registrable Securities held by such Holder in a conformance with the Plan of Distribution attached hereto as Annex A, as modified by the Company as necessary to conform to comments from the Commission. Each Holder agrees to furnish to the Company a completed Questionnaire in the form attached to this Agreement as Annex B (a “Selling Shareholder Questionnaire”) by the end of the fourth Trading Day following the date on which such Holder receives the Selling Shareholder Questionnaire and draft materials in accordance with this Section.   3 --------------------------------------------------------------------------------   (b)  (i) Prepare and file with the Commission such amendments, including post-effective amendments, to a Registration Statement and the Prospectus used in connection therewith as may be necessary to keep a Registration Statement continuously effective as to the applicable Registrable Securities for the Effectiveness Period; (ii) cause the related Prospectus to be amended or supplemented by any required Prospectus supplement (subject to the terms of this Agreement), and as so supplemented or amended to be filed pursuant to Rule 424; (iii) respond as promptly as reasonably possible to any comments received from the Commission with respect to a Registration Statement or any amendment thereto; and (iv) comply in all material respects with the provisions of the Securities Act and the Exchange Act applicable to the Company with respect to the disposition of all Registrable Securities covered by a Registration Statement during the applicable period in accordance with the intended methods of disposition by the Holders thereof set forth in such Registration Statement as so amended or in such Prospectus as so supplemented.   (c)  Notify the Holders of Registrable Securities to be sold (which notice shall, pursuant to clauses (ii) through (iv) hereof, be accompanied by an instruction to suspend the use of the Prospectus until the requisite changes have been made) as promptly as reasonably possible (i) with respect to a Registration Statement or any post-effective amendment, when the same has become effective; (ii) of the issuance by the Commission or any other federal or state governmental authority of any stop order suspending the effectiveness of a Registration Statement covering any or all of the Registrable Securities; (iii) of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction; or (iv) of the occurrence of any event or passage of time that makes the financial statements included in a Registration Statement ineligible for inclusion therein or any statement made in a Registration Statement or Prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires any revisions to a Registration Statement, Prospectus or other documents so that, in the case of a Registration Statement or the Prospectus, as the case may be, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. Any and all of such information contemplated by subparagraphs (i) through (iv) shall remain confidential to each Holder until such information otherwise becomes public, unless disclosure by a Holder is required by law.   (d)  Use its best efforts to avoid the issuance of, or, if issued, obtain the withdrawal of (i) any order suspending the effectiveness of a Registration Statement, or (ii) any suspension of the qualification (or exemption from qualification) of any of the Registrable Securities for sale in any jurisdiction, at the earliest practicable moment.   4 --------------------------------------------------------------------------------   (e)  Furnish to each Holder, without charge, at least one conformed copy of each such final Prospectus and each final amendment or supplement thereto, promptly after the filing of such documents with the Commission, for Holder’s delivery in connection with a sale of the Registrable Securities.   (f)  Subject to the terms of this Agreement, the Company hereby consents to the use of each Prospectus and each amendment or supplement thereto, provided by the Company pursuant to subpart (e) above, by each of the selling Holders in connection with the offering and sale of the Registrable Securities covered by such Prospectus and any amendment or supplement thereto, except after the giving of any notice pursuant to Section 3(d).   (g)  If NASDR Rule 2710 requires any broker-dealer to make a filing prior to executing a sale by a Holder, the Company shall (i) make an Issuer Filing with the NASDR, Inc. Corporate Financing Department pursuant to proposed NASDR Rule 2710(b)(10)(A)(i), (ii) respond within five Trading Days to any comments received from NASDR in connection therewith, and (iii) pay the filing fee required in connection therewith.   (h)  Prior to any resale of Registrable Securities by a Holder, use its commercially reasonable efforts to register or qualify or cooperate with the selling Holders in connection with the registration or qualification (or exemption from the Registration or qualification) of such Registrable Securities for the resale by the Holder under the securities or Blue Sky laws of such jurisdictions within the United States as any Holder reasonably requests in writing, to keep each registration or qualification (or exemption therefrom) effective during the Effectiveness Period and to do any and all other acts or things reasonably necessary to enable the disposition in such jurisdictions of the Registrable Securities covered by each Registration Statement; provided, that the Company shall not be required to qualify generally to do business in any jurisdiction where it is not then so qualified, subject the Company to any material tax in any such jurisdiction where it is not then so subject or file a general consent to service of process in any such jurisdiction.   (i)  If requested by the Holders, cooperate with the Holders to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be delivered to a transferee pursuant to a Registration Statement, which certificates shall be free, to the extent permitted by the Securities Act, of all restrictive legends, and to enable such Registrable Securities to be in such denominations and registered in such names as any such Holders may request.   5 --------------------------------------------------------------------------------   (j)  Upon the occurrence of any event contemplated by this Section 3, as promptly as reasonably possible under the circumstances taking into account the Company’s good faith assessment of any adverse consequences to the Company and its stockholders of the premature disclosure of such event, prepare a supplement or amendment, including a post-effective amendment, to a Registration Statement or a supplement to the related Prospectus or any document incorporated or deemed to be incorporated therein by reference, and file any other required document so that, as thereafter delivered, neither a Registration Statement nor such Prospectus will contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. If the Company notifies the Holders in accordance with clauses (ii) through (iv) of Section 3(c) above to suspend the use of any Prospectus until the requisite changes to such Prospectus have been made, then the Holders shall suspend use of such Prospectus. The Company will use its best efforts to ensure that the use of the Prospectus may be resumed as promptly as is practicable. The Company shall be entitled to exercise its right under this Section 3(j) to suspend the availability of a Registration Statement and Prospectus, for a period not to exceed 60 calendar days (which need not be consecutive days) in any 12 month period.   (k)  Comply with all applicable rules and regulations of the Commission.   (l)  The Company may require each selling Holder to furnish to the Company a certified statement as to (i) the number of shares of Common Stock beneficially owned by such Holder, (ii) the natural persons thereof that have voting and dispositive control over the shares of Common Stock, and (iii) any affiliation between the Holder and either the Company’s independent accountants or any member of the NASD.   6 --------------------------------------------------------------------------------   4.  Registration Expenses. All fees and expenses incident to the performance of or compliance with this Agreement by the Company shall be borne by the Company whether or not any Registrable Securities are sold pursuant to a Registration Statement. The fees and expenses referred to in the foregoing sentence shall include, without limitation, (i) all registration and filing fees (including, without limitation, fees and expenses (A) with respect to filings required to be made with any Trading Market on which the Common Stock is then listed for trading, (B) in compliance with applicable state securities or Blue Sky laws reasonably agreed to by the Company in writing (including, without limitation, fees and disbursements of counsel for the Company in connection with Blue Sky qualifications or exemptions of the Registrable Securities) and (C) if not previously paid by the Company in connection with an Issuer Filing, with respect to any filing that may be required to be made by any broker through which a Holder intends to make sales of Registrable Securities with NASD Regulation, Inc. pursuant to the NASD Rule 2710, so long as the broker is receiving no more than a customary brokerage commission in connection with such sale, (ii) printing expenses incurred by the Company (including, without limitation, expenses of printing certificates for Registrable Securities, (iii) messenger, telephone and delivery expenses incurred by the Company, (iv) fees and disbursements of counsel for the Company, (v) Securities Act liability insurance incurred by the Company, if the Company so desires such insurance, and (vi) fees and expenses of all other Persons retained by the Company in connection with the consummation of the transactions contemplated by this Agreement. In addition, the Company shall be responsible for all of its internal expenses incurred in connection with the consummation of the transactions contemplated by this Agreement (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expense of any annual audit and the fees and expenses incurred in connection with the listing of the Registrable Securities on any securities exchange as required hereunder. In no event shall the Company be responsible for any broker or similar commissions of any Holder or, except to the extent provided for in the Transaction Documents, any legal fees or other costs of the Holders.   5.  Indemnification   (a)  Indemnification by the Company. The Company shall, notwithstanding any termination of this Agreement, indemnify and hold harmless each Holder, the officers, directors, members, partners, employees of each of them, each Person who controls any such Holder (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) and the officers, directors, members, shareholders, partners, and employees of each such controlling Person, to the fullest extent permitted by applicable law, from and against any and all losses, claims, damages, liabilities, costs (including, without limitation, reasonable attorneys’ fees) and expenses (collectively, “Losses”), as incurred, arising out of or relating to (1) any untrue statement of a material fact contained in a Registration Statement, any Prospectus or any form of prospectus or in any amendment or supplement thereto or in any preliminary prospectus, or arising out of or relating to any omission of a material fact required to be stated therein or necessary to make the statements therein (in the case of any Prospectus or form of prospectus or supplement thereto, in light of the circumstances under which they were made) not misleading, or (2) any violation by the Company of the Securities Act, Exchange Act or any state securities law, or any rule or regulation thereunder, in connection with the performance of its obligations under this Agreement, except to the extent, but only to the extent, that (i) such untrue statements or omissions are based solely upon information regarding such Holder furnished in writing to the Company by such Holder expressly for use therein, or to the extent that such information relates to such Holder or such Holder’s proposed method of distribution of Registrable Securities and was reviewed and expressly approved in writing by such Holder expressly for use in a Registration Statement, such Prospectus or such form of Prospectus or in any amendment or supplement thereto (it being understood that the Holder has approved Annex A hereto for this purpose), (ii) in the case of an occurrence of an event of the type specified in Section 3(c)(ii)-(iv), the use by such Holder of an outdated or defective Prospectus after the Company has notified such Holder in writing that the Prospectus is outdated or defective and prior to the receipt by such Holder of the Advice contemplated in Section 6(d), or (iii) any such untrue statement, omission or violation is directly related to and primarily the result of a material breach of this Agreement or violation of law by Holder.   7 --------------------------------------------------------------------------------   (b)  Indemnification by Holders. Each Holder shall, severally and not jointly, indemnify and hold harmless the Company, its directors, officers, agents, attorneys and employees, each Person who controls the Company (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, agents, attorneys or employees of such controlling Persons, to the fullest extent permitted by applicable law, from and against all Losses, as incurred, to the extent arising out of or based solely upon: (x) such Holder’s failure to comply with the prospectus delivery requirements of the Securities Act, (y) a material breach of this Agreement or violation of law by Holder, or (z) any untrue or alleged untrue statement of a material fact contained in any Registration Statement, any Prospectus, or any form of prospectus, or in any amendment or supplement thereto or in any preliminary prospectus, or arising out of or relating to any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading (i) to the extent, but only to the extent, that such untrue statement or omission is contained in any information so furnished in writing by such Holder to the Company specifically for inclusion in such Registration Statement or such Prospectus or (ii) to the extent that such information relates to such Holder’s proposed method of distribution of Registrable Securities and was reviewed and expressly approved in writing by such Holder expressly for use in a Registration Statement (it being understood that the Holder has approved Annex A hereto for this purpose), such Prospectus or such form of Prospectus or in any amendment or supplement thereto or (iii) in the case of an occurrence of an event of the type specified in Section 3(c)(ii)-(iv), the use by such Holder of an outdated or defective Prospectus after the Company has notified such Holder in writing that the Prospectus is outdated or defective and prior to the receipt by such Holder of the Advice contemplated in Section 6(d). In no event shall the liability of any selling Holder hereunder be greater in amount than the dollar amount of the net proceeds received by such Holder upon the sale of the Registrable Securities giving rise to such indemnification obligation.   (c)  Conduct of Indemnification Proceedings. If any Proceeding shall be brought or asserted against any Person entitled to indemnity hereunder (an “Indemnified Party”), such Indemnified Party shall promptly notify the Person from whom indemnity is sought (the “Indemnifying Party”) in writing, and the Indemnifying Party shall have the right to assume the defense thereof, including the employment of counsel reasonably satisfactory to the Indemnified Party and the payment of all fees and expenses incurred in connection with defense thereof; provided, that the failure of any Indemnified Party to give such notice shall not relieve the Indemnifying Party of its obligations or liabilities pursuant to this Agreement, except (and only) to the extent that such failure shall have prejudiced the Indemnifying Party.   8 --------------------------------------------------------------------------------   An Indemnified Party shall have the right to employ separate counsel in any such Proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party or Parties unless: (1) the Indemnifying Party has agreed in writing to pay such fees and expenses; (2) the Indemnifying Party shall have failed promptly to assume the defense of such Proceeding and to employ counsel reasonably satisfactory to such Indemnified Party in any such Proceeding; or (3) the named parties to any such Proceeding (including any impleaded parties) include both such Indemnified Party and the Indemnifying Party, and a material conflict of interest is likely to exist if the same counsel were to represent such Indemnified Party and the Indemnifying Party, in which case, if such Indemnified Party notifies the Indemnifying Party in writing that it elects to employ separate counsel at the expense of the Indemnifying Party, the Indemnifying Party shall not have the right to assume the defense thereof and the reasonable fees and expenses of no more than one separate counsel shall be at the expense of the Indemnifying Party. The Indemnifying Party shall not be liable for any settlement of any such Proceeding effected without its written consent.   Subject to the terms of this Agreement, all reasonable fees and expenses of the Indemnified Party owing under this Section 5 (including reasonable fees and expenses to the extent incurred in connection with investigating or preparing to defend such Proceeding in a manner not inconsistent with this Section) shall be paid to the Indemnified Party.   (d)  Contribution. If the indemnification under Section 5(a) or 5(b) is unavailable to an Indemnified Party or insufficient to hold an Indemnified Party harmless for any Losses, then each Indemnifying Party shall contribute to the amount paid or payable by such Indemnified Party, in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party and Indemnified Party in connection with the actions, statements or omissions that resulted in such Losses as well as any other relevant equitable considerations. The relative fault of such Indemnifying Party and Indemnified Party shall be determined by reference to, among other things, whether any action in question, including any untrue statement of a material fact or omission of a material fact, has been taken or made by, or relates to information supplied by, such Indemnifying Party or Indemnified Party, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such action, statement or omission. The amount paid or payable by a party as a result of any Losses shall be deemed to include, subject to the limitations set forth in this Agreement, any reasonable attorneys’ or other fees or expenses incurred by such party in connection with any Proceeding to the extent such party would have been indemnified for such fees or expenses if the indemnification provided for in this Section was available to such party in accordance with its terms.   9 --------------------------------------------------------------------------------   The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 5(d) were determined by pro rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to in the immediately preceding paragraph. Notwithstanding the provisions of this Section 5(d), no Holder shall be required to contribute, in the aggregate, any amount in excess of the amount by which the proceeds actually received by such Holder from the sale of the Registrable Securities subject to the Proceeding exceeds the amount of any damages that such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission, except in the case of fraud by such Holder.   The indemnity and contribution agreements contained in this Section are in addition to any liability that the Indemnifying Parties may have to the Indemnified Parties.   6.  Miscellaneous   (a)  Remedies. In the event of a breach by the Company or by a Holder, of any of their respective obligations under this Agreement, each Holder or the Company, as the case may be, in addition to being entitled to exercise all rights granted by law and under this Agreement, including recovery of damages, will be entitled to specific performance of its rights under this Agreement. The Company and each Holder agree that monetary damages would not provide adequate compensation for any losses incurred by reason of a breach by it of any of the provisions of this Agreement and hereby further agrees that, in the event of any action for specific performance in respect of such breach, it shall not assert or shall waive the defense that a remedy at law would be adequate.   (b)  No Piggyback on Registrations. Except as set forth on Schedule 6(b) attached hereto, neither the Company nor any of its security holders (other than the Holders in such capacity pursuant hereto) may include securities of the Company in the initial Registration Statement other than the Registrable Securities.   (c)  Compliance. Each Holder covenants and agrees that it will comply with the prospectus delivery requirements of the Securities Act as applicable to it in connection with sales of Registrable Securities pursuant to a Registration Statement.   (d)  Discontinued Disposition. Each Holder agrees by its acquisition of Registrable Securities that, upon receipt of a notice from the Company of the occurrence of any event of the kind described in Section 3(c), such Holder will forthwith discontinue disposition of such Registrable Securities under a Registration Statement until it is advised in writing (the “Advice”) by the Company that the use of the applicable Prospectus (as it may have been supplemented or amended) may be resumed. The Company will use its best efforts to ensure that the use of the Prospectus may be resumed as promptly as it practicable.   10 --------------------------------------------------------------------------------   (e)  Piggy-Back Registrations. If at any time during the Effectiveness Period there is not an effective Registration Statement covering all of the Registrable Securities and the Company shall determine to prepare and file with the Commission a registration statement relating to an offering for its own account or the account of others under the Securities Act of any of its equity securities, other than on Form S-4 or Form S-8 (each as promulgated under the Securities Act) or their then equivalents relating to equity securities to be issued solely in connection with any acquisition of any entity or business or equity securities issuable in connection with the stock option or other employee benefit plans, then the Company shall send to each Holder a written notice of such determination and, if within fifteen days after the date of such notice, any such Holder shall so request in writing, the Company shall include in such registration statement all or any part of such Registrable Securities such Holder requests to be registered.   (f)  Amendments and Waivers. The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the same shall be in writing and signed by the Company and the Holders of at least a majority the then outstanding Registrable Securities. Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of Holders and that does not directly or indirectly affect the rights of other Holders may be given by Holders of all of the Registrable Securities to which such waiver or consent relates; provided, however, that the provisions of this sentence may not be amended, modified, or supplemented except in accordance with the provisions of the immediately preceding sentence.   (g)  Notices. Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be delivered as set forth in the Securities Purchase Agreement, Note Purchase Agreement or Equity Put Agreement, as the case may be.   (h)  Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and permitted assigns of each of the parties and shall inure to the benefit of each Holder. The Company may not assign its rights (except by merger) or obligations hereunder without the prior written consent of at least a majority of the Holders of the then-outstanding Registrable Securities. Each Holder may assign their respective rights hereunder only (i) to a Permitted Transferee (as such term is defined in the Note Purchase Agreement and Equity Put Agreement ) or (ii) in connection with the transfer of all of their Registrable Securities in the manner and to the Persons as permitted under the Securities Purchase Agreement, Note Purchase Agreement or Equity Put Agreement, as the case may be.   (i)  No Inconsistent Agreements. Neither the Company nor any of its Subsidiaries has entered, as of the date hereof, nor shall the Company or any of its Subsidiaries, on or after the date of this Agreement, enter into any agreement with respect to its securities, that would have the effect of impairing the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof.   11 --------------------------------------------------------------------------------   (j)  Execution and Counterparts. This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature page were an original thereof.   (k)  Governing Law. All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of California, without regard to the principles of conflicts of law thereof. Each party agrees that all legal proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Agreement (whether brought against a party hereto or its respective affiliates, directors, officers, shareholders, employees or agents) shall be commenced exclusively in the state and federal courts sitting in the San Diego, California. The parties hereby waive all rights to a trial by jury. If either party shall commence an action or proceeding to enforce any provisions of this Agreement, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its reasonable attorneys’ fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding..   (l)  Cumulative Remedies. The remedies provided herein are cumulative and not exclusive of any other remedies provided by law.   (m)  Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their commercially reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable.   (n)  Headings. The headings in this Agreement are for convenience only, do not constitute a part of this Agreement, and shall not be deemed to limit or affect any of the provisions hereof.   12 --------------------------------------------------------------------------------   (o)  Independent Nature of Holders’ Obligations and Rights. The obligations of each Holder hereunder are several and not joint with the obligations of any other Holder hereunder, and no Holder shall be responsible in any way for the performance of the obligations of any other Holder hereunder. Nothing contained herein or in any other agreement or document delivered at any closing, and no action taken by any Holder pursuant hereto or thereto, shall be deemed to constitute the Holders as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Holders are in any way acting in concert with respect to such obligations or the transactions contemplated by this Agreement. Each Holder shall be entitled to protect and enforce its rights, including without limitation the rights arising out of this Agreement, and it shall not be necessary for any other Holder to be joined as an additional party in any proceeding for such purpose.   [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK SIGNATURE PAGES FOLLOW] 13 -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement as of the date first written above.           VENDINGDATA CORPORATION               By:       -------------------------------------------------------------------------------- Mark R. Newburg,   President and Chief Executive Officer           BRICOLEUR PARTNERS, L.P.     By:    Bricoleur Capital Management, LLC,  Its General Partner   By:       -------------------------------------------------------------------------------- Robert Poole, Member of   Management Board           BRICOLEUR ENHANCED, L.P.     By:    Bricoleur Capital Management, LLC,  Its General Partner   By:       -------------------------------------------------------------------------------- Robert Poole, Member of   Management Board           BRIC 6, L.P.     By:    Bricoleur Capital Management, LLC,  Its General Partner   By:       -------------------------------------------------------------------------------- Robert Poole, Member of   Management Board           BRICOLEUR OFFSHORE LTD.     By:    Bricoleur Capital Management, LLC,  Its General Partner   By:       -------------------------------------------------------------------------------- Robert Poole, Member of   Management Board [SIGNATURE PAGE OF PURCHASERS FOLLOWS] 14 -------------------------------------------------------------------------------- [SIGNATURE PAGE OF HOLDERS TO VNX RRA] Name of Holder: __________________________ Signature of Authorized Signatory of Holder: __________________________ Name of Authorized Signatory: _________________________ Title of Authorized Signatory: __________________________   [SIGNATURE PAGES CONTINUE] 15 -------------------------------------------------------------------------------- ANNEX A   Plan of Distribution   The selling stockholders may, from time to time, sell any or all of their shares of common stock on any stock exchange, market or trading facility on which the shares are traded or in private transactions. These sales may be at fixed or negotiated prices. The selling stockholders may use any one or more of the following methods when selling shares:   ·   ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;   ·   block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction;   ·   purchases by a broker-dealer as principal and resale by the broker-dealer for its account;   ·   an exchange distribution in accordance with the rules of the applicable exchange;   ·   privately negotiated transactions;   ·   short sales;   ·   broker-dealers may agree with the selling stockholders to sell a specified number of such shares at a stipulated price per share;   ·   a combination of any such methods of sale; and   ·   any other method permitted pursuant to applicable law.   The selling stockholders may also sell shares under Rule 144 under the Securities Act, if available, rather than under this prospectus.   The selling stockholders may also engage in puts and calls and other transactions in our securities or derivatives of our securities and may sell or deliver shares in connection with these trades.   Broker-dealers engaged by the selling stockholders may arrange for other brokers-dealers to participate in sales. Broker-dealers may receive commissions or discounts from the selling stockholders (or, if any broker-dealer acts as agent for the purchaser of shares, from the purchaser) in amounts to be negotiated. The selling stockholders do not expect these commissions and discounts to exceed what is customary in the types of transactions involved. Any profits on the resale of shares of common stock by a broker-dealer acting as principal might be deemed to be underwriting discounts or commissions under the Securities Act. Discounts, concessions, commissions and similar selling expenses, if any, attributable to the sale of shares will be borne by a selling stockholder. The selling stockholders may agree to indemnify any agent, dealer or broker-dealer that participates in transactions involving sales of the shares if liabilities are imposed on that person under the Securities Act.   The selling stockholders may from time to time pledge or grant a security interest in some or all of the shares of common stock owned by them and, if they default in the performance of their secured obligations, the pledgees or secured parties may offer and sell the shares of common stock from time to time under this prospectus after we have filed a supplement to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act of 1933 amending the list of selling stockholders to include the pledgee, transferee or other successors in interest as selling stockholders under this prospectus.   The selling stockholders also may transfer the shares of common stock in other circumstances, in which case the transferees, pledgees or other successors in interest will be the selling beneficial owners for purposes of this prospectus and may sell the shares of common stock from time to time under this prospectus after we have filed a supplement to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act of 1933 amending the list of selling stockholders to include the pledgee, transferee or other successors in interest as selling stockholders under this prospectus.   The selling stockholders and any broker-dealers or agents that are involved in selling the shares of common stock may be deemed to be "underwriters" within the meaning of the Securities Act in connection with such sales. In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the shares of common stock purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act.   We are required to pay all fees and expenses incident to the registration of the shares of common stock. We have agreed to indemnify the selling stockholders against certain claims, damages and liabilities, including liabilities under the Securities Act.   The selling stockholders have advised us that they have not entered into any agreements, understandings or arrangements with any underwriters or broker-dealers regarding the sale of their shares of common stock, nor is there an underwriter or coordinating broker acting in connection with a proposed sale of shares of common stock by any selling stockholder. If we are notified by any selling stockholder that any material arrangement has been entered into with a broker-dealer for the sale of shares of common stock, if required, we will file a supplement to this prospectus. If the selling stockholders use this prospectus for any sale of the shares of common stock, they will be subject to the prospectus delivery requirements of the Securities Act.   The anti-manipulation rules of Regulation M under the Securities Exchange Act of 1934 may apply to sales of our common stock and activities of the selling stockholders.   16 -------------------------------------------------------------------------------- Annex B   VendingData Corporation   Selling Securityholder Notice and Questionnaire   The undersigned beneficial owner of common stock, par value $0.001 per share (the “Common Stock”), of VendingData Corporation, a Nevada corporation (the “Company”), (the “Registrable Securities”) understands that the Company has filed or intends to file with the Securities and Exchange Commission (the “Commission”) a registration statement on Form S-3 (the “Registration Statement”) for the registration and resale under Rule 415 of the Securities Act of 1933, as amended (the “Securities Act”), of the Registrable Securities, in accordance with the terms of the Registration Rights Agreement, dated as of March _, 2006 (the “Registration Rights Agreement”), among the Company and the Holders named therein. A copy of the Registration Rights Agreement is available from the Company upon request at the address set forth below. All capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Registration Rights Agreement.   Certain legal consequences arise from being named as a selling securityholder in the Registration Statement and the related prospectus. Accordingly, holders and beneficial owners of Registrable Securities are advised to consult their own securities law counsel regarding the consequences of being named or not being named as a selling securityholder in the Registration Statement and the related prospectus.   NOTICE   The undersigned beneficial owner (the “Selling Securityholder”) of Registrable Securities hereby elects to include the Registrable Securities owned by it and listed below in Item 3 (unless otherwise specified under such Item 3) in the Registration Statement.   17 -------------------------------------------------------------------------------- The undersigned hereby provides the following information to the Company and represents and warrants that such information is accurate:   QUESTIONNAIRE   1. Name.     (a) Full Legal Name of Selling Securityholder         (b) Full Legal Name of Registered Holder (if not the same as (a) above) through which Registrable Securities Listed in Item 3 below are held:         (c) Full Legal Name of Natural Control Person (which means a natural person who directly or indirectly alone or with others has power to vote or dispose of the securities covered by the questionnaire):         2. Address for Notices to Selling Securityholder:         Telephone:___________________________________________________________________________________________ Fax:_________________________________________________________________________________________________ Contact Person:                                                                     3. Beneficial Ownership of Registrable Securities:     (a) Type and Number of Registrable Securities beneficially owned:             18 -------------------------------------------------------------------------------- 4. Broker-Dealer Status:     (a) Are you a broker-dealer?   Yes o  No o     (b) If “yes” to Section 4(a), did you receive your Registrable Securities as compensation for investment banking services to the Company.   Yes o  No o     Note: If no, the Commission’s staff has indicated that you should be identified as an underwriter in the Registration Statement.     (c) Are you an affiliate of a broker-dealer?   Yes  o No o     (d) If you are an affiliate of a broker-dealer, do you certify that you bought the Registrable Securities in the ordinary course of business, and at the time of the purchase of the Registrable Securities to be resold, you had no agreements or understandings, directly or indirectly, with any person to distribute the Registrable Securities?   Yes o  No o     Note: If no, the Commission’s staff has indicated that you should be identified as an underwriter in the Registration Statement.   5. Beneficial Ownership of Other Securities of the Company Owned by the Selling Securityholder.   Except as set forth below in this Item 5, the undersigned is not the beneficial or registered owner of any securities of the Company other than the Registrable Securities listed above in Item 3.     (a) Type and Amount of Other Securities beneficially owned by the Selling Securityholder:           19 -------------------------------------------------------------------------------- 6. Relationships with the Company:   Except as set forth below, neither the undersigned nor any of its affiliates, officers, directors or principal equity holders (owners of 5% of more of the equity securities of the undersigned) has held any position or office or has had any other material relationship with the Company (or its predecessors or affiliates) during the past three years.   State any exceptions here:           7. Relationships with the Company’s Independent Accountant:   Except as set forth below, neither the undersigned nor any of its affiliates, officers, directors or principal equity holders (owners of 5% of more of the equity securities of the undersigned) has held any position or office or has had any other material relationship with the Company’s independent accountants, Piercy Bowler Taylor & Kern, of Las Vegas , Nevada (or its predecessors or affiliates) during the past three years.   State any exceptions here:           The undersigned agrees to promptly notify the Company of any inaccuracies or changes in the information provided herein that may occur subsequent to the date hereof at any time while the Registration Statement remains effective.   By signing below, the undersigned consents to the disclosure of the information contained herein in its answers to Items 1 through 7 and the inclusion of such information in the Registration Statement and the related prospectus and any amendments or supplements thereto. The undersigned understands that such information will be relied upon by the Company in connection with the preparation or amendment of the Registration Statement and the related prospectus.   20 -------------------------------------------------------------------------------- IN WITNESS WHEREOF the undersigned, by authority duly given, has caused this Notice and Questionnaire to be executed and delivered either in person or by its duly authorized agent.      Dated:                                                                             Beneficial Owner:___________________       By:                                                                      Name: Title:   PLEASE FAX A COPY OF THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE, AND RETURN THE ORIGINAL BY OVERNIGHT MAIL, TO:   Daniel Donahue, Esq. Preston Gates Ellis LLP 1900 Main Street, Suite 600 Irvine, CA 92614 Fax: 949-253-0902 21 -------------------------------------------------------------------------------- SCHEDULE 6(B)   PIGGYBACK REGISTRATIONS   The Company intends to include on the initial Registration Statement: 1. 3,000,000 common shares underlying the warrants issued to the lenders pursuant to that certain credit agreement with the Company dated October 6, 2005.   22 --------------------------------------------------------------------------------

EXHIBIT 10.1 PERFORMANCE AND TIME-BASED RESTRICTED STOCK UNITS AWARD AGREEMENT This Award Agreement (the “Agreement”) is entered into as of October 4, 2006, by and between Electro Scientific Industries, Inc., an Oregon corporation (the “Company”), and Nicholas Konidaris (“Recipient”), for the grant of restricted stock units with respect to the Company’s Common Stock (“Common Stock”). On October 4, 2006, the Compensation Committee of the Company’s Board of Directors made a restricted stock units award to Recipient pursuant to the Company’s 2004 Stock Incentive Plan (the “Plan”). Recipient desires to accept the award subject to the terms and conditions of this Agreement. IN CONSIDERATION of the mutual covenants and agreements set forth in this Agreement, the parties agree to the following. 1. Grant and Terms of Restricted Stock Units. The Company grants to Recipient under the Company’s Plan 4,000 restricted stock units (subject to adjustment pursuant to Section 1(b)), subject to the restrictions, terms and conditions set forth in this Agreement. (a) Rights under Restricted Stock Units. A restricted stock unit (a “RSU”) represents the unsecured right to require the Company to deliver to Recipient on the applicable delivery date one share of Common Stock for each RSU. The number of shares of Common Stock deliverable with respect to each RSU is subject to adjustment as determined by the Board of Directors of the Company as to the number and kind of shares of stock deliverable upon any merger, reorganization, consolidation, recapitalization, stock dividend, spin-off or other change in the corporate structure affecting the Common Stock generally. (b) Vesting and Delivery Dates. The RSUs issued under this Agreement shall initially be 100% unvested and subject to forfeiture. The number of RSUs subject to this Agreement shall be reduced to a number equal to the sum of the following: (1) 1,000 RSUs multiplied by the percentage achievement of performance measure #1 set forth on Exhibit A; (2) 1,000 RSUs multiplied by the percentage achievement of performance measure #2 set forth on Exhibit A; (3) 1,000 RSUs multiplied by the percentage achievement of performance measure #3 set forth on Exhibit A; and (4) 1,000 RSUs multiplied by the percentage achievement of performance measure #4 set forth on Exhibit A. The achievement of the performance measures shall be determined by the Compensation Committee in its sole discretion at its first regularly scheduled meeting following the end of the -------------------------------------------------------------------------------- Company’s fiscal year 2007. Subject to this Section 1(b), the RSUs shall vest on the fifth anniversary of the date of grant. The RSUs shall become vested on the vesting date only if Recipient continues to be an employee of the Company at all times from the date of this Agreement to and including the vesting date. Except as provided in Section (1)(g), the delivery date for a RSU shall be the date on which such RSU vests. (c) Acceleration before Vesting Date. (1) Acceleration on Death or Total Disability. If Recipient ceases to be an employee of the Company by reason of Recipient’s death or disability, outstanding but unvested RSUs shall become immediately vested in an amount determined by multiplying the total number of RSUs subject to this Agreement (after adjustment pursuant to Section 1(b)) by a percentage calculated by dividing the number of whole months elapsed from the date of this Agreement to the date of termination of employment by 60 (the “Pro Rata Percentage”); provided, however, that the number of RSUs so vested shall be reduced by the number of any RSUs that previously vested pursuant to Section 1(b) and provided further that if termination occurs on or prior to June 2, 2007, no RSUs shall vest pursuant to this Section (1)(c)(1). Except as provided in Section (1)(g), the delivery date for a RSU shall be the date on which such RSU vests. The term “disability” means that Recipient is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months. Disability shall be deemed to have occurred on the first day after the two independent physicians have furnished their written opinion of total disability to the Company and the Company has reached an opinion of total disability. (2) Acceleration on Normal Retirement. If Recipient terminates his employment with the Company following normal retirement under the Company’s retirement policy in place at such time and after Recipient’s 65th birthday, outstanding but unvested RSUs shall become immediately vested in an amount determined by multiplying the total number of RSUs subject to this Agreement (after adjustment pursuant to Section 1(b)) by the Pro Rata Percentage; provided, however, that the number of RSUs so vested shall be reduced by the number of any RSUs that previously vested pursuant to Section 1(b) and provided further that if termination occurs on or prior to June 2, 2007, no RSUs shall vest pursuant to this Section (1)(c)(2). Except as provided in Section (1)(g), the delivery date for a RSU shall be the date on which such RSU vests. (3) Acceleration on Termination Other Than for Cause. If the Company terminates Recipient’s employment with the Company other than for cause, outstanding but unvested RSUs shall become immediately vested in an amount determined by multiplying the total number of RSUs subject to this Agreement (after adjustment pursuant to Section 1(b)) by the Pro Rata Percentage; provided, however, that the number of RSUs so vested shall be   2 -------------------------------------------------------------------------------- reduced by the number of any RSUs that previously vested pursuant to Section 1(b) and provided further that if termination occurs on or prior to June 2, 2007, no RSUs shall vest pursuant to this Section (1)(c)(3). Except as provided in Section (1)(g), the delivery date for a RSU shall be the date on which such RSU vests. The term “cause” shall mean (i) the willful and continued failure by Recipient to perform substantially Recipient’s reasonably assigned duties with the Company, other than a failure resulting from Recipient’s incapacity due to physical or mental illness, after a written demand for performance has been delivered to Recipient by the Company which specifically identifies the manner in which the Company believes that Recipient has not substantially performed Recipient’s duties, (ii) the conviction of guilty or entering of a nolo contendere plea to a felony which is materially and demonstrably injurious to the Company, or (iii) the commission of an act by Recipient, or the failure of Recipient to act, which constitutes gross negligence or gross misconduct. For purposes of this Section 1(c)(3), no act, or failure to act, on Recipient’s part shall be considered “willful” unless done, or omitted to be done, by Recipient in knowing bad faith. Any act, or failure to act based upon authority given pursuant to a resolution duly adopted by the Board of Directors or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by Recipient in good faith. (4) Treatment on Change in Control. (i) If as a result of a Change in Control, the Company’s Common Stock ceases to be listed for trading on a national securities exchange (an “Exchange”), any RSUs subject to this award that are unvested on the date of the Change in Control shall continue to vest according to the terms and conditions of this award; provided that such award is replaced with an award for voting securities of the resulting corporation or the acquiring corporation, as the case may be (including without limitation, the voting securities of any corporation which as a result of the Change in Control owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries) (the “Surviving Company”) which are traded on an Exchange (a “Replacement Award”), which Replacement Award shall consist of RSUs with a value (determined using the Surviving Company’s stock price as of the date of the Change in Control) equal to the value of the replaced award of RSUs (determined using the Company’s stock price as of the date of the Change in Control), with vesting and any other terms continuing in the manner as the replaced award; provided, however, that in the event of a termination by the Company without Cause or by Recipient for Good Reason during the vesting period of any Replacement Award, the Replacement Award shall immediately vest; and provided further that upon the vesting date of all or a portion of a Replacement Award (or such later date as provided in Section (1)(g)), Recipient shall be entitled to receive a lump sum cash payment equal to the decrease, if any, in the value of a share of the Surviving Company’s stock from the date of the   3 -------------------------------------------------------------------------------- Change in Control (as increased on a calendar quarterly basis using an annual interest rate, as of the last business day of the calendar quarter, for zero-coupon U.S. government securities with a constant maturity closest in length to the time period between the date of the Change in Control and the date of vesting of the Replacement Award) to the time of vesting multiplied by the total number of RSUs vesting on such date. If any RSUs that are unvested at the time of the Change in Control are not replaced with Replacement Awards, such RSUs shall immediately vest. (ii) If as a result of a Change in Control, the Company’s Common Stock continues to be listed for trading on an Exchange, any RSUs that are unvested on the date of the Change of Control shall continue to vest according to the terms and conditions of this award; provided however, that, in the event of a termination by the Company without Cause or by Recipient for Good Reason during the vesting period of this award such award shall immediately vest; and provided further that upon the vesting date of all or portion of this award (or such later date as provided in Section (1)(g)), Recipient shall be entitled to receive a lump sum cash payment equal to the decrease, if any, in the value of a share of the Company’s stock from the date of the Change in Control (as increased on a calendar quarterly basis using an annual interest rate, as of the last business day of the calendar quarter, for zero-coupon U.S. government securities with a constant maturity closest in length to the time period between the date of the Change in Control and the (iii) date of the vesting) to the time of vesting, multiplied by the total number of RSUs vesting on such date. (iv) For purposes of this Agreement, a “Change in Control” of the Company shall mean the occurrence of any of the following events: (A) Any consolidation, merger or plan of share exchange involving the Company (a “Merger”) as a result of which the holders of outstanding securities of the Company ordinarily having the right to vote for the election of directors (“Voting Securities”) immediately prior to the Merger do not continue to hold at least 50% of the combined voting power of the outstanding Voting Securities of the surviving or continuing corporation immediately after the Merger, disregarding any Voting Securities issued or retained by such holders in respect of securities of any other party to the Merger; (B) Any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, the assets of the Company;   4 -------------------------------------------------------------------------------- (C) The adoption of any plan or proposal for the liquidation or dissolution of the Company; (D) At any time during a period of two consecutive years, individuals who at the beginning of such period constituted the Board of Directors (“Incumbent Directors”) shall cease for any reason to constitute at least a majority thereof, unless each new director elected during such two-year period was nominated or elected by two-thirds of the Incumbent Directors then in office and voting (with new directors nominated or elected by two-thirds of the Incumbent Directors also being deemed to be Incumbent Directors); or (E) Any Person (as hereinafter defined) shall, as a result of a tender or exchange offer, open market purchases, or privately negotiated purchases from anyone other than the Company, have become the beneficial owner (within the meaning of Rule 13d-3 under the Securities Exchange Act of 1934), directly or indirectly, of Voting Securities representing fifty percent (50%) or more of the combined voting power of the then outstanding Voting Securities. Notwithstanding anything in the foregoing to the contrary, no Change in Control shall be deemed to have occurred for purposes of this Agreement if (1) Recipient acquires (other than on the same basis as all other holders of the Company Common Stock) an equity interest in an entity that acquires the Company in a Change in Control otherwise described under subparagraph (A) or (B) above, or (2) Recipient is part of group that constitutes a Person which becomes a beneficial owner of Voting Securities in a transaction that otherwise would have resulted in a Change in Control under subparagraph (E) above. Notwithstanding anything in the foregoing to the contrary, no Change in Control shall be deemed to have occurred for purposes of this Agreement unless the Change in Control constitutes a change in the ownership or effective control of the Company, or in the ownership of a substantial portion of the assets of the Company, within the meaning on Section 409A(a)(2)(A)(v) of the Internal Revenue Code of 1986, as amended (the “Code”). (v) For purposes of this Agreement, the term “Person” shall mean and include any individual, corporation, partnership, group, association or other “person”, as such term is used in Section 14 (d) of the Securities Exchange Act of 1934 (the “Exchange Act”), other than the Company, a wholly owned subsidiary of the Company or any employee benefit plan(s) sponsored by the Company.   5 -------------------------------------------------------------------------------- (vi) For purposes of this Agreement, termination by Recipient of his or her employment for “Good Reason” shall mean termination based on: (A) a diminution of Recipient’s status, title, position(s) or responsibilities from Recipient’s status, title, position(s) and responsibilities as in effect immediately prior to the Change in Control or the assignment to Recipient of any duties or responsibilities which are inconsistent with such status, title, position(s) or responsibilities (in either case other than is isolated, insubstantial or inadvertent actions which are remedied after notice), or any removal of Recipient from such position(s), except in connection with the termination of Recipient’s employment for Cause, total disability (as defined in Section 1(c)(1)) or as a result of Recipient’s death or voluntarily by Recipient other than for Good Reason; (B) a reduction by the Company or Surviving Company in Recipient’s rate of base salary, bonus or incentive opportunity or a substantial reduction in benefits (other than reductions that do not impact Recipient’s compensation opportunity, taken as a whole, or a reduction in benefits applicable to substantially all employees); or (C) the Company’s or Surviving Company’s requiring Recipient to be based more than fifty miles from the principal office at in which Recipient is based immediately prior to the Change in Control, except for reasonably required travel on the Company’s business. (d) Forfeiture of RSUs on Other Terminations of Service. If Recipient ceases to be an employee of the Company for any reason that does not result in acceleration of vesting pursuant to Section 1(c), Recipient shall immediately forfeit all outstanding but unvested RSUs granted pursuant to this Agreement and Recipient shall have no right to receive the related Common Stock. (e) Restrictions on Transfer and Delivery on Death. Recipient may not sell, transfer, assign, pledge or otherwise encumber or dispose of the RSUs. Recipient may designate beneficiaries to receive stock if Recipient dies before the delivery date by so indicating on Exhibit B, which is incorporated into and made a part of this agreement. If Recipient fails to designate beneficiaries on Exhibit B, the shares will be delivered to Recipient’s estate. (f) Reinvestment of Dividend Equivalents. On each date on which the Company pays a dividend on shares of Common Stock underlying a RSU, Recipient shall receive additional whole or fractional RSUs in an amount equal to the value of the dividends that would have been paid on the stock deliverable pursuant to the RSUs (if such shares were outstanding), divided by the closing stock price on the dividend payment date.   6 -------------------------------------------------------------------------------- (g) Extension of Delivery Date; Delivery. Notwithstanding any other provision of this Agreement, if Recipient is a “specified employee” within the meaning on Section 409A(a)(2)(B) of the Code, the delivery date for any shares or other payment hereunder shall be made on the later of the date otherwise provided for in this Agreement or the date which is six months after Recipient’s separation of service with the Company (or, if earlier, death of Recipient). As soon as practicable following the delivery date for a RSU, the Company shall deliver a certificate for the number of shares represented by all vested RSUs having a delivery date on the same date, rounded down to the whole share. No fractional shares of Common Stock shall be issued. The Company shall pay to Recipient in cash an amount equal to the value of any fractional shares that would otherwise have been issued, valued as of the delivery date. (h) Recipient’s Rights as Shareholder. Recipient shall have no rights as a shareholder with respect to the RSUs or the shares underlying them until the Company delivers the shares to Recipient on the delivery date. (i) Tax Withholding. Recipient acknowledges that, at the delivery date, the value of such vested RSUs will be treated as ordinary compensation income for federal and state income and FICA tax purposes, and that the Company will be required to withhold taxes on this income amount. Promptly following the delivery date, the Company will notify Recipient of the required withholding amount. Concurrently with or prior to the delivery of the certificate referred to in Section 1(g), Recipient shall pay to the Company the required withholding amount in cash or, at the election of Recipient, by surrendering to the Company for cancellation shares of the Company’s Common Stock to be issued with respect to the RSUs or other shares of the Company’s Common Stock valued at the closing market price for the Company’s Common Stock on the last trading day preceding the date of Recipient’s election to surrender such shares. If Recipient pays the withholding amount in shares of Common Stock, the Company shall pay to Recipient in cash the amount of any resulting over payment. (j) Section 409A. The award made pursuant to this Agreement is intended to comply with the provisions of Section 409A the Code and shall be interpreted in accordance with Section 409A and Treasury regulations and other interpretive guidance issued thereunder, including without limitation any such regulations or other guidance issued after the grant of the award. Notwithstanding any provision of the award to the contrary, in the event that the Company determines that the award is or may be subject to Section 409A, the Company may adopt such corrections or amendments to the award or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, that the Company determines are necessary or appropriate to (i) allow the award to be not subject to Section 409A, or (ii) comply with the requirements of Section 409A. 2. Miscellaneous. (a) Entire Agreement; Amendment. This Agreement constitutes the entire agreement of the parties with regard to the subjects hereof and may be amended only by written agreement between the Company and Recipient. (b) Notices. Any notice required or permitted under this Agreement shall be in writing and shall be deemed sufficient when delivered personally to the party to whom it is   7 -------------------------------------------------------------------------------- addressed or when deposited into the United States mail as registered or certified mail, return receipt requested, postage prepaid, addressed to Electro Scientific Industries, Inc., Attention: Corporate Secretary, at its principal executive offices or to Recipient at the address of Recipient in the Company’s records, or at such other address as such party may designate by ten (10) days’ advance written notice to the other party. (c) Rights and Benefits. The rights and benefits of this Agreement shall inure to the benefit of and be enforceable by the Company’s successors and assigns and, subject to the restrictions on transfer of this Agreement, be binding upon Recipient’s heirs, executors, administrators, successors and assigns. (d) Further Action. The parties agree to execute such further instruments and to take such further action as may reasonably be necessary to carry out the intent of this Agreement. (e) Applicable Law; Attorneys’ Fees. The terms and conditions of this Agreement shall be governed by the laws of the State of Oregon. In the event either party institutes litigation hereunder, the prevailing party shall be entitled to reasonable attorneys’ fees to be set by the trial court and, upon any appeal, the appellate court. (f) Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original.   ELECTRO SCIENTIFIC INDUSTRIES, INC. By:         Nicholas Konidaris, Recipient   8 -------------------------------------------------------------------------------- EXHIBIT A PERFORMANCE MEASURES   9 -------------------------------------------------------------------------------- EXHIBIT B DESIGNATION OF BENEFICIARY   Name                                                                                           Social Security Number             -            -                  I designate the following person(s) to receive any restricted stock units outstanding upon my death under the Restricted Stock Units Award Agreement with Electro Scientific Industries, Inc.:   A. Primary Beneficiary(ies)   Name                                                                                      Social Security Number             -            -                  Birth Date                                                                              Relationship                                                                Address                                                                                 City                         State                 Zip                    Name                                                                                      Social Security Number             -            -                  Birth Date                                                                              Relationship                                                                Address                                                                                 City                         State                 Zip                    Name                                                                                      Social Security Number             -            -                  Birth Date                                                                              Relationship                                                                Address                                                                                 City                         State                 Zip                    If more than one primary beneficiary is named, the units will be divided equally among those primary beneficiaries who survive the undersigned.   B. Secondary Beneficiary(ies) In the event no Primary Beneficiary is living at the time of my death, I designate the following the person(s) as my beneficiary(ies):   Name                                                                                      Social Security Number             -            -                  Birth Date                                                                              Relationship                                                                Address                                                                                 City                         State                 Zip                    Name                                                                                      Social Security Number             -            -                  Birth Date                                                                              Relationship                                                                Address                                                                                 City                         State                 Zip                    Name                                                                                      Social Security Number             -            -                  Birth Date                                                                              Relationship                                                                Address                                                                                 City                         State                 Zip                    If more than one Secondary Beneficiary is named, the units will be divided equally among those Secondary beneficiaries who survive the undersigned. This designation revokes and replaces all prior designations of beneficiaries under the Restricted Stock Units Award Agreement.           Date signed:                                                                , 20         Signature         10

  Exhibit 10(h) FISCAL YEAR                      SUPPLEMENTAL PERFORMANCE-BASED BONUS AGREEMENT Adopted Effective                           This Fiscal Year                      Supplemental Performance-Based Bonus Agreement (the “Agreement”) was adopted by the Committee pursuant to the Sysco Corporation 2004 Supplemental Performance-Based Plan (the “Plan”), and agreed to by the Company and CEO effective                     . This Agreement is for the Fiscal Year ending                      (the “Fiscal Year”). Capitalized terms used but not otherwise defined herein shall have the meanings given them in the Plan.      1. Establishment of Performance Goals. CEO and the Company hereby agree to the goals and objectives set forth on Exhibit “A” attached to this Agreement for each of the following performance areas: long-term strategy, growth, financial performance, corporate governance and human capital (the “Performance Goals”). CEO acknowledges and agrees that for purposes of this Agreement, CEO’s performance will be measured using the Performance Goals.      2. Evaluation of Performance. (a) Within 90 days after the end of the Fiscal Year, the Committee, jointly with the Corporate Governance and Nominating Committee of the Board, shall complete an evaluation of CEO’s performance for such Fiscal Year, including an evaluation against the Performance Goals. Based upon this evaluation, CEO’s compensation for the Fiscal Year will be adjusted, in the Committee’s sole discretion, as follows:                (i) Performance Exceeds Expectations. If CEO’s performance for the Fiscal Year “exceeds expectations,” CEO will be entitled to receive a Performance Bonus equal to the Adjustment Factor times the CEO’s MIP Bonus for such Fiscal Year. For purposes of this Section 2(a)(i) and Section 2(a)(iii) below, the “Adjustment Factor” shall be a percentage of up to ___% selected by the Committee representing the Committee’s determination of CEO’s performance in light of the Performance Goals.                (ii) Performance Meets Expectations. If CEO’s performance for the Fiscal Year “meets expectations,” CEO shall not be entitled to receive a Performance Bonus as set forth in Section 2(a)(i) above, nor shall CEO’s MIP Bonus be subject to reduction as set forth in Section 2(a)(iii) below.                (iii) Performance Below Expectations. If CEO’s performance for the Fiscal Year is “below expectations,” CEO’s MIP Bonus for such Fiscal Year shall be reduced by an amount equal to the Adjustment Factor times the CEO’s MIP Bonus for the Fiscal Year (the “Forfeited Amount”). The amount of Additional Shares and Additional Cash Bonus awarded to the CEO under the MIP shall be determined after reducing the MIP Bonus by the Forfeited Amount.           (b) MIP Bonus. Notwithstanding anything herein or otherwise to the contrary, the term “MIP Bonus” means the bonus earned by CEO under the MIP for the Fiscal Year, without regard to any additional amounts the CEO may be entitled to receive under the MIP as a result of elections made by the CEO. By way of example, the MIP Bonus will not include any “Additional Shares” or “Additional Cash Bonus” (as such terms are defined in the MIP) the CEO may be entitled to receive pursuant to Sections 6(A) and 6(B) of the MIP as a result of electing to receive a portion of his MIP Bonus in Company stock. For avoidance of doubt, the MIP Bonus will not include any Company matching contributions resulting from the deferral of all or a portion of the MIP Bonus under the EDCP.   --------------------------------------------------------------------------------             (c) Committee Discretion. All determinations required pursuant to this Section 2 shall be made by the Committee in its sole and absolute discretion.      3. Performance Bonus. If earned in accordance with Section 2(a)(i) above, the Performance Bonus will be paid in cash as soon administratively feasible following the Company’s determination of CEO’s MIP Bonus amount; provided however, that the Performance Bonus must be paid before the later of (i) the date that is 2 1/2 months from the end of CEO’s first taxable year in which the Performance Bonus is no longer subject to a substantial risk of forfeiture or (ii) the date that is 2 1/2 months from the end of Company’s first taxable year in which the amount is no longer subject to a substantial risk of forfeiture, it being the intent of the parties that the compensation paid pursuant to this Agreement not in any way be subject to Section 409A of the Code (and this clause shall be interpreted in a manner that is consistent therewith). Notwithstanding anything herein or otherwise to the contrary, in no event will CEO be permitted to defer any portion of the Performance Bonus under any nonqualified deferred compensation plan or arrangement sponsored by the Company (including, without limitation, the EDCP). In addition, in no event will the Performance Bonus increase the amount of compensation earned by CEO under the MIP (by way of example, the Performance Bonus will not increase either the “Additional Shares” or the “Additional Cash Bonus” (as such terms are defined in the MIP) pursuant to Sections 6(A) and 6(B) of the MIP).      4. Termination of Employment. If CEO’s employment with the Company terminates for any reason prior to the end of the Fiscal Year, including, without limitation, as a result of death, disability or following a change of control of the Company: (a) Section 2(a)(i) will be applied by treating the date CEO’s employment terminates as the end of the Fiscal Year for purposes of such Section if, under the terms of that certain Executive Severance Agreement by and between CEO and Company (the “Severance Agreement”), CEO is entitled to receive an MIP Bonus for the Fiscal Year, (b) Section 2(a)(i) will not apply for the Fiscal Year (i.e., CEO will not be eligible to receive a Performance Bonus under this Agreement) if, under the terms of the Severance Agreement, CEO is not entitled to receive an MIP Bonus for the Fiscal Year, (c) in no event will Section 2(a)(iii) apply to CEO (i.e., CEO’s MIP Bonus will not be subject to reduction regardless of whether his performance immediately prior to the date of his termination was “below expectations”).      5. Waiver of Forfeited Amount. In consideration for the opportunity to earn the Performance Bonus, CEO hereby unconditionally waives his right to receive the Forfeited Amount.      6. Withholding Taxes. The Company may withhold from all payments due to CEO hereunder all taxes that, by applicable federal, state, local or other law, the Company is required to withhold therefrom.      7. Term of Agreement. This Agreement shall be effective only for this Fiscal Year (i.e., the fiscal year ending                     ).      8. Successors; Binding Agreement.           (a) This Agreement shall be binding on the Company, its successors and assigns.           (b) This Agreement shall inure to the benefit of and be enforceable by CEO’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If CEO shall die while any amounts remain to be payable to CEO hereunder had CEO continued to live, all such amounts shall be paid in accordance with the 2 --------------------------------------------------------------------------------   terms of this Agreement to such person or persons appointed in writing by CEO to receive such amounts or, if no person is so appointed, to CEO’s estate.      9. Governing Law. The interpretation, construction and performance of this Agreement shall be governed by and construed and enforced in accordance with the internal laws of the state of Delaware without regard to the principle of conflicts of laws.      10. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed to be an original and all of which together shall constitute one and the same instrument.      11. Severability. Provided the other provisions of this Agreement do not frustrate the purpose and intent of the law, in the event that any portion of this Agreement shall be determined to be invalid or unenforceable to any extent, the same shall to that extent be deemed severable from this Agreement and the invalidity or unenforceability thereof shall not affect the validity and enforceability of the remaining portion of this Agreement.      12. Miscellaneous. No provision of this Agreement may be modified or waived unless such modification or waiver is agreed to in writing and signed by CEO and by a duly authorized officer of the Company. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. Failure by CEO or the Company to insist upon strict compliance with any provision of this Agreement or to assert any right CEO or the Company may have hereunder, shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement. Except as otherwise specifically provided herein, the rights of, and benefits payable to, CEO, CEO’s estate or CEO’s beneficiaries pursuant to this Agreement are in addition to any rights of, or benefits payable to, CEO, CEO’s estate or CEO’s beneficiaries under any other employee benefit plan or compensation Agreement of the Company, except as herein specifically provided.      IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by a duly authorized officer of the Company and CEO has executed this Agreement as of the day and year first above written.                   SYSCO CORPORATION       CEO                       By:   /s/ MICHAEL C. NICHOLS           /s/ RICHARD J. SCHNIEDERS   Richard J. Schnieders     Title:   Vice President & General Counsel             3 --------------------------------------------------------------------------------   Exhibit A Supplemental Performance-Based Bonus Agreement Between Sysco Corporation and                      Fiscal                      Performance Goals Long-Term Strategy   •   Continue National Supply Chain roll-out     •   Design                      generation of SYSCO Brand products     •   Achieve Board Approval of Strategic Process and Priorities Growth   •   Increase customer contact associates by                     % and increase                      sales by                     %     •   Open                      fold-outs Financial Performance   •   Improve under-performing business units +$                    mm EBIT     •   Improve EPS growth equal to or in excess of                     %     •   Maintain ROIC equal to                     % Human Capital   •   Identify new skills required for long-term viability of SYSCO     •   Expand training measurement system – track Best Business Practices utilization     •   Reduce workplace accident frequency by                     /100 associates Corporate Governance   •   Continue to build trust with key constituencies     •   Integrate Risk Management in day-do-day operations and institutionalize key risk management initiatives 4

Exhibit 10.17   1998 IMS HEALTH INCORPORATED NON-EMPLOYEE DIRECTORS’ STOCK INCENTIVE PLAN   (As Amended and Restated as of December 12, 2005)   1.  Purpose of the Plan   The purpose of the Plan is to aid the Company in attracting, retaining and compensating non-employee directors and to enable them to increase their proprietary interest in the Company. The Plan is intended to benefit the Company and its shareholders by enabling non-employee directors of the Board to have a greater personal financial stake in the Company, and reinforcing such directors’ common interest with shareholders in increasing the value of the Shares on a long-term basis. In furtherance of this purpose, the Plan provides for periodic grants of Options, Restricted Stock, and Restricted Stock Units, and the opportunity for non-employee directors to elect deferred and alternative forms of compensation in lieu of cash fees for service as a director, including Options, Shares, and Deferred Share Units.   2.  Definitions   The following capitalized terms used in the Plan have the respective meanings set forth in this Section:   (a)  Act: The Securities Exchange Act of 1934, as amended, or any successor thereto.   (b) Award: An Option, a Share of Restricted Stock, or Restricted Stock Unit granted under the Plan, or an Option, Share, or Deferred Share Unit granted in lieu of cash directors fees under the Plan.   (c)  Beneficial Owner: As such term is defined in Rule 13d-3 under the Act (or any successor rule thereto).   (d)  Board: The Board of Directors of the Company.   (e)  Change in Control: The occurrence of any of the following events:   (i)     any Person (other than the Company, any trustee or other fiduciary holding securities under an employee benefit plan of the Company, or any company owned, directly or indirectly, by the shareholders of the Company in substantially the same proportions as their ownership of stock of the Company), becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing 20% or more of the combined voting power of the Company’s then-outstanding securities;   (ii)    during any period of twenty-four months (not including any period prior to the Effective Date), individuals who at the beginning of such period constitute the Board, and any new director (other than (A) a director nominated by a Person who has entered into an agreement   --------------------------------------------------------------------------------   with the Company to effect a transaction described in Sections 2(e)(i), (iii) or (iv) of the Plan, (B) a director nominated by any Person (including the Company) who publicly announces an intention to take or to consider taking actions (including, but not limited to, an actual or threatened proxy contest) which if consummated would constitute a Change in Control or (C) a director nominated by any Person who is the Beneficial Owner, directly or indirectly, of securities of the Company representing 10% or more of the combined voting power of the Company’s securities) whose election by the Board or nomination for election by the Company’s shareholders was approved in advance by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute at least a majority thereof;   (iii)    the shareholders of the Company approve any transaction or series of transactions under which the Company is merged or consolidated with any other company, other than a merger or consolidation (A) which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 66(2/3)% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation and (B) after which no Person holds 20% or more of the combined voting power of the then-outstanding securities of the Company or such surviving entity; or   (iv)    the shareholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets.   (f)  Committee: The Compensation and Benefits Committee of the Board.   (g)  Company: IMS Health Incorporated, a Delaware corporation.   (h)  Deferred Share Unit: An Award granted under Section 8 upon deferral of cash compensation representing a contractual commitment of the Company to deliver to the Participant, at a specified future date, one Share in settlement of the deferral. Dividend equivalents equal to the value of dividends on outstanding shares shall be paid or credited on Deferred Share Units, if and subject to such terms as may be specified by the Committee, including terms ensuring convenient administration of the Plan.   (i) Disability: Inability to continue to serve as a non-employee director of the Board due to a medically determinable physical or mental impairment which constitutes a permanent and total disability, as determined by the Committee (excluding any member thereof whose own Disability is at issue in a given case) based upon such evidence as it deems necessary and appropriate. A Participant shall not be considered disabled unless he or she furnishes such medical or other evidence of the existence of the Disability as the Committee, in its sole discretion, may require.   --------------------------------------------------------------------------------   (j) Effective Date: June 30, 1998.   (k) Fair Market Value: On a given date, the arithmetic mean of the high and low prices of the Shares as reported for such date, or if no trade was reported for such date then on the latest preceding date for which a trade was reported, by a recognized reporting service designated by the Committee.   (l) Option: A stock option granted under the Plan.   (m) Participant: Any director of the Company who has been granted an Award under the Plan, for so long as the Award is outstanding.   (n) Person: As such term is used for purposes of Section 13(d) or 14(d) of the Act (or any successor section thereto).   (o) Plan: The 1998 IMS Health Incorporated Non-Employee Directors’ Stock Incentive Plan, as amended and restated.   (p) Restricted Stock: An Award of a Share subject to a risk of forfeiture and non-transferability restrictions granted under Section 7 of the Plan.   (q) Restricted Stock Unit or RSU: An Award, granted under Section 7, representing a contractual commitment of the Company to deliver to the Participant, at a specified future date, one Share, if specified vesting conditions are met. Dividend equivalents equal to the value of dividends on outstanding shares shall be paid or credited on RSUs, if and subject to such terms as may be specified by the Committee, including terms that may provide for forfeiture of such dividend equivalents if the corresponding RSU is forfeited and terms ensuring convenient administration of the Plan.   (r) Retirement: Termination of service with the Company after such Participant has attained age 70, regardless of the length of such Participant’s service; or, with the prior written consent of the Committee (excluding any member thereof whose own Retirement is at issue in a given case), termination of service at an earlier age after the Participant has completed six or more years of service with the Company.   (s) Shares: Shares of common stock, par value $0.01 per share, of the Company.   3.  Shares Subject to the Plan   Subject to adjustment as provided in Section 9(a), the total number of Shares reserved and available for delivery under the Plan for Awards outstanding at May 2, 2003 or thereafter granted shall be 909,962. The Shares delivered under the Plan may consist, in whole or in part, of authorized and unissued Shares or treasury Shares. Shares subject to an Award under the Plan that is canceled, expired, forfeited, settled in cash, or otherwise terminated without a delivery of Shares to the Participant, including the number of Shares withheld or surrendered in payment of   --------------------------------------------------------------------------------   any exercise or purchase price of an Award, will become available for Awards under the Plan.   4.  Administration   (a) Administrative Authority. The Plan shall be administered by the Board or Committee, provided that any determination increasing the amount or value of Awards that may granted in any year shall be subject to the approval of the Board. The Committee may delegate its duties and powers in whole or in part to any subcommittee thereof consisting solely of at least two “non-employee directors” within the meaning of Rule 16b-3 under the Act (or any successor rule thereto). In addition, the Committee may delegate administrative responsibilities, including with respect to deferrals implemented under the Plan, to an executive officer or committee of executive officers and employees. The Board and the Committee are authorized to interpret the Plan, to establish, amend and rescind any rules and regulations relating to the Plan, and to make any other determinations that either deems necessary or desirable for the administration of the Plan. The Committee may correct any defect or supply any omission or reconcile any inconsistency in the Plan in the manner and to the extent the Committee deems necessary or desirable. Any decision of the Committee in the interpretation and administration of the Plan, as described herein, shall lie within its sole and absolute discretion and shall be final, conclusive and binding on all parties concerned (including, but not limited to, Participants and their beneficiaries or successors).   (b)  Restriction on Option Repricing. Without the prior approval of the Company’s stockholders, Options granted under the Plan will not be repriced, replaced or regranted through cancellation or by lowering the Option Price of a previously granted Option. For this purpose, “repriced” means: (i) amending the terms of an Option after it is granted to lower its exercise price; (ii) any other action that is treated as a repricing under generally accepted accounting principles; and (iii) canceling an Option at a time when its strike price is equal to or greater than the fair market value of the underlying Stock, in exchange for another Option, Restricted Stock, or other equity, unless the cancellation and exchange occurs in connection with a merger, acquisition, spin-off or other similar corporate transaction. A cancellation and exchange described in clause (iii) of the preceding sentence will be considered a repricing regardless of whether the Option, Restricted Stock or other equity is delivered simultaneously with the cancellation, regardless of whether it is treated as a repricing under generally accepted accounting principles, and regardless of whether it is voluntary on the part of the Participant.   5.  Eligibility   A director who is not an employee of the Company or any subsidiary of the Company as of the date that an Award is granted shall be eligible to participate under this Plan.   --------------------------------------------------------------------------------   6.  Terms and Conditions of Options   Options granted under the Plan shall be non-qualified stock options for federal income tax purposes, as evidenced by the related Option agreements, and shall be subject to the foregoing and the following terms and conditions and to such other terms and conditions, not inconsistent therewith, as the Board or the Committee shall determine:   (a) Grants.  A Participant may receive grants of Options, on such dates and authorizing the purchase of such number of Shares as determined by the Board or Committee in its sole discretion. In addition, the Board or Committee may authorize the grant of Options in lieu of payment of fees to eligible directors, upon the election of the director, in accordance with Section 8. The Board or Committee may set such other terms of Options granted hereunder, subject to the explicit provisions of the Plan.   (b) Option Price.  The exercise price per Share of an Option shall be determined by the Committee, but shall not be less than 100% of the Fair Market Value of the Shares on the date an Option is granted.   (c) Exercisability.  Options granted under the Plan shall be exercisable at such time and upon such terms and conditions as may be determined by the Committee, but in no event shall an Option be exercisable more than ten years after the date it is granted.   (d) Exercise of Options.  Except as otherwise provided in the Plan or in a related Option agreement, an Option may be exercised for all, or from time to time any part, of the Shares for which it is then exercisable. For purposes of Section 6 of the Plan, the exercise date of an Option shall be the later of the date a notice of exercise is received by the Company and, if applicable, (A) the date payment is received by the Company pursuant to clauses (i), (ii) or (iii) in the following sentence or (B) the date of sale by a broker of all or a portion of the Shares being purchased pursuant to clause (iv) in the following sentence. The exercise price for the Shares as to which an Option is exercised shall be paid to the Company in full at the time of exercise at the election of the Participant (i) in cash, (ii) in Shares having a Fair Market Value equal to the aggregate Option exercise price for the Shares being purchased and satisfying such other requirements as may be imposed by the Committee, including, if no additional accounting expense to the Company will result, by directing the withholding of Shares issuable upon exercise of the Option, (iii) partly in cash and partly in such Shares, or (iv) through the delivery of irrevocable instructions to a broker to deliver promptly to the Company an amount equal to the aggregate Option exercise price for the Shares being purchased not later than the time of delivery of the Shares to the broker, subject to limitations under applicable law. No Participant shall have any rights to dividends or other rights of a shareholder with respect to Shares subject to an Option until the Participant has given written notice of exercise of the Option, paid in full for such Shares and, if applicable, has satisfied any other conditions imposed by the Committee pursuant to the Plan. The Committee may impose restrictions on Option shares, subject to applicable law.   (e) Termination Provisions Relating to Certain Options.  An Option granted under this Section 6 not in lieu of fees under Section 8 shall be subject to the   --------------------------------------------------------------------------------   following vesting and exercise terms in the event of termination of a Participant’s service as a director:   (i)     Death.  If a Participant’s service as a director of the Company terminates by reason of death after the date of grant of an Option, the unexercised portion of such Option shall immediately vest in full and the Option may thereafter be exercised only during the shorter of (A) the remaining stated term of the Option or (B) five years after the date of death.   (ii)    Disability or Retirement.  If a Participant’s service as a director of the Company terminates by reason of Disability or Retirement after the date of grant of an Option, the unexercised portion of such Option shall immediately vest in full and such Option may thereafter be exercised only during the shorter of (A) the remaining stated term of the Option or (B) five years after the date of such termination of service; provided, however, that if a Participant dies within a period of five years after such termination of service, the unexercised portion of the Option may thereafter be exercised, during the shorter of (A) the remaining stated term of the Option or (B) the period that is the longer of five years after the date of such termination of service or one year after the date of death.   (iii)   Other Termination of Service.  Unless otherwise specified by the Board not later than the time of grant of an Option, if a Participant’s service as a director of the Company terminates for any reason other than death, Disability or Retirement after the date of grant of an Option as described above, the unexercised portion of an Option may thereafter be exercised only during the period ending 90 days after the date of such termination of service, but only to the extent to which such Option was exercisable at the time of such termination of service.   7.  Terms and Conditions of Restricted Stock and Restricted Stock Units   Restricted Stock or RSUs granted under the Plan shall be subject to the foregoing and the following terms and conditions and to such other terms and conditions, not inconsistent therewith, as the Board or Committee shall determine:   (a)           Grants.  A Participant may receive, on such dates as determined by the Committee in its sole discretion, grants consisting of such amounts of Restricted Stock or RSUs as determined by the Committee in its sole discretion.   (b)           Restrictions.  Restricted Stock and RSUs granted under the Plan shall be subject to such vesting and forfeiture terms as may be specified by the Board or Committee not later than the time of grant of the Award. For so long as such Award is subject to a risk of forfeiture, such Award may not be sold, transferred, pledged, assigned or otherwise disposed of under any circumstances. Restricted Stock Units shall remain subject to restrictions on transferability, in accordance with Section 12, for such periods, after the risk of forfeiture has lapsed, as may be specified by the Committee. Thus, deferral of RSUs at the election of the Participant is specifically authorized,   --------------------------------------------------------------------------------   provided that any election to defer RSUs that vest in 2005 or thereafter may be elected at any time in 2005 (but prior to the vesting date of such RSUs), to the fullest extent permitted under and in reliance upon Proposed Treasury Regulation § 1.409A, Preamble Section XI.C., and IRS Notice 2005-1, Q/A 19(c).   (c)           Acceleration.  Notwithstanding anything in the Plan to the contrary, (i) the restrictions set forth in Section 7(b) of the Plan (including any elected deferral period) shall automatically lapse in the event that a Participant terminates service as a director of the Company as a result of death or Disability, (ii) the risk of forfeiture of RSUs shall automatically lapse upon a Change in Control, and shares shall be distributed in settlement of such RSUs in accordance with Section 9(b), and (iii) the Committee (excluding any member thereof whose own Award is at issue in a given case) may, in its sole discretion, accelerate the lapsing of the restrictions set forth in Section 7(b) of the Plan in the event that a Participant terminates service as a director of the Company for any other reason, except no discretion may be exercised to accelerate or change the time of distribution of RSUs subject to Section 409A of the Internal Revenue Code (the “Code”) except as may be permitted under Section 409A. In the absence of such acceleration, all Shares of Restricted Stock and all RSUs as to which the risk of forfeiture has not previously lapsed pursuant to Section 7(b) of the Plan shall be forfeited upon the termination of a Participant’s service with as a director of the Company for reasons other than death or Disability.   8.  Issuance of Shares, Deferred Share Units, and Options in Lieu of Cash Fees   The Board or Committee may authorize the grant of Shares, Deferred Share Units, or Options in lieu of cash fees otherwise payable to a non-employee director for service to the Company in their capacity as a director, if and to the extent elected by the director. Cash fees for these purposes includes annual retainer, meeting fees, such fees for service as a member of a Board committee, and fees for service in a leadership capacity with respect to the Board or a committee. Awards granted under this Section 8 shall be subject to the foregoing and the following terms and conditions and to such other terms and conditions, not inconsistent therewith, as the Board or Committee shall determine:   (a) Grant of Shares or Deferred Share Units.  The number of Shares or Deferred Share Units granted in lieu of cash fees shall be determined by dividing the amount of cash fees being forgone or deferred by the director by the Fair Market Value of a Share at the date such fees were otherwise payable or another date designated by the Committee, not later than 90 days after the date such fees were otherwise payable.   (b) Grant of Options.  The number of Options granted in lieu of cash fees shall be determined by dividing the amount of cash fees being forgone by the director by the Option value at the date such fees were otherwise payable or another date designated by the Committee. Such designated date may be at any time within a reasonable period, not exceeding approximately one year, over which the director’s fees being forgone otherwise would have been payable. The Committee may specify vesting and forfeiture terms to provide that the Option will not be retained if the service for which the director would   --------------------------------------------------------------------------------   have received the cash fees is not in fact performed. Option value shall be determined from time to time by the Committee, based on a reasonable stock option valuation methodology consistently applied, provided that the Committee may specify a uniform Option value or a formula for determining such value that may remain in effect for a period of approximately one year, for administrative convenience and to provide predictable terms to Participants committing to forgo fees.   (c) Other Terms of Deferred Share Units and Options In Lieu of Fees.  Subject to Section 6 and other provisions of the Plan, the Board or Committee may specify the duration of Deferred Share Units and Options, settlement dates of Deferred Share Units, any post-termination exercise periods of Options, and all other terms of Awards to be granted in lieu of fees, including terms relating to the deferral of such fees.   9.  Adjustments Upon Certain Events   Notwithstanding any other provision in the Plan to the contrary, the following provisions shall apply to all Awards granted under the Plan:   (a) Generally.  In the event of any change in the outstanding Shares after the Effective Date by reason of any Share dividend or split, reorganization, recapitalization, merger, consolidation, spin-off, combination or exchange of Shares of other corporate exchange, or any large, special, and non-recurring distribution to Shareholders, the Committee in its sole discretion and without liability to any person may make such substitution or adjustment, if any, as it deems to be equitable, as to (i) the number or kind of Shares or other securities issued or reserved for issuance pursuant to the Plan or pursuant to outstanding Awards, (ii) the Option exercise price and/or (iii) any other affected terms of such Awards, and the Committee make such adjustments to outstanding Awards as it deems necessary or appropriate to preserve without enlarging the rights of each Participant with respect to his or her Award.   (b) Change in Control.  In the event of a Change in Control, the Committee in its sole discretion and without liability to any person may take such actions, if any, as it deems necessary or desirable with respect to any Award (including, without limitation, (i) the acceleration of an Award, (ii) the payment of a cash amount in exchange for the cancellation of an Award and/or (iii) the requiring of the issuance of substitute Awards that will substantially preserve the value, rights and benefits of any affected Awards previously granted hereunder) as of the date of the consummation of the Change in Control; provided, however, that with respect to RSUs and Deferred Share Units, upon a Change in Control which constitutes (or involves related transactions which constitute) “a change in the ownership or effective control of the corporation, or in the ownership of a substantial portion of the assets of the corporation,” within the meaning of Proposed Treasury Regulation §§ 1.409A-3(a)(5) and (g)(5) (a “409A Change in Control”) and any successor thereto, such Awards shall be distributed in a lump sum not later than five business days after such Change in Control (except  such distribution shall be simultaneous with the 409A Change in Control if necessary to permit Participants to participate in a transaction that is related to the 409A Change in Control, such as a tender offer); and provided further, that the Committee shall not otherwise exercise   --------------------------------------------------------------------------------   discretion hereunder to accelerate any distribution to the extent that such acceleration would result in constructive receipt or tax penalties under Code Section 409A prior to the actual distribution of the shares or cash to the Participant.   10.  Successors and Assigns   The Plan shall be binding on all successors and assigns of the Company and a Participant, including without limitation, the estate of such Participant and the executor, administrator or trustee of such estate, or any receiver or trustee in bankruptcy or representative of the Participant’s creditors, or any designated beneficiary.   11.  Amendments and Termination   The Board may amend, alter, discontinue or terminate the Plan, except that any amendment or alteration shall be subject to the approval of the Company’s shareholders at or before the next annual meeting of shareolders for which the record date is after the date of such Board action if (a) such shareholder approval is required by any federal or state law or regulation or the rules of any stock exchange or automated quotation system on which the Shares may then be listed or quoted, or (b) such amendment or alteration would materially increase the number of shares reserved for the purposes of the Plan, materially broaden the class of persons eligible to participate in the Plan or materially increase benefits accruing to Participants. The Board may, in its discretion, determine to submit other amendments or alterations to the Plan to shareholders for approval. The Committee may act to amend or alter the Plan, but only if the amendment would not require shareholder approval and otherwise does not materially increase the cost of the Plan to the Company. The Board or Committee can act to amend outstanding Awards. The foregoing notwithstanding, no amendment or other change to the Plan or to the terms of an outstanding Award shall be made which would materially and adversely affect the rights of a Participant under any Award theretofore granted without such Participant’s consent.   12.  Nontransferability of Awards   An Award shall not be transferable or assignable by the Participant otherwise than by will or by the laws of descent and distribution. During the lifetime of a Participant, an Award shall be exercisable only by such Participant. An Award exercisable after the death of a Participant may be exercised by the legatees, personal representatives or distributees of the Participant or a beneficiary designated in accordance with procedures specified by the Company. Notwithstanding anything to the contrary herein, the Committee, in its sole discretion, shall have the authority to waive this Section 12 (or any part thereof) to the extent that this Section 12 (or any part thereof) is not required under the rules promulgated under any law, rule or regulation applicable to the Company and is not required in order that the Participant not be subject to constructive receipt of income or tax penalties under Code Section 409A prior to the actual distribution of shares or cash in settlemenet of the Award.   --------------------------------------------------------------------------------   13.  Nonexclusivity of the Plan   Neither the adoption of the Plan by the Board nor any submission of the Plan or amendments thereto to a vote of shareholders of the Company shall be construed as creating any limitations on the power of the Board or Committee to adopt such other compensatory arrangements as it may deem desirable, including, without limitation, the granting of awards otherwise than under the Plan, and such other arrangements may be either applicable generally or only in specific cases.   14.  Choice of Law   The Plan shall be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and to be performed in the State of New York.   15.  Effectiveness of the Plan and Plan Termination   The Plan became effective as of the Effective Date. The Plan will terminate at such time as no Shares remain available for issuance and the Company has no further obligations with respect to outstanding Awards.   --------------------------------------------------------------------------------

    RESTRICTIVE COVENANT AGREEMENT      THIS AGREEMENT (“Agreement”) dated as of November 28, 2006 (the “Effective Date”) is by and between ProQuest Company, a Delaware corporation (“Seller”), and Snap-on Incorporated, a Delaware corporation (“Buyer”). Seller and Buyer may be referred to in this Agreement individually as a “Party” or collectively as “Parties.”      WHEREAS, pursuant to the Stock and Asset Purchase Agreement by and between Buyer and Seller dated October 20 , 2006, as amended November 1, 2006 (the “Stock and Asset Purchase Agreement”), Seller will purchase certain stock and assets of Seller (all capitalized terms not otherwise defined shall have the meanings set forth in the Stock and Asset Purchase Agreement);      WHEREAS, Seller engages in the Business and is selling to Buyer pursuant to the Stock and Asset Purchase Agreement all rights, title and interest in the Acquired Business to Buyer (including all rights to engage in the business in the future); and in connection therewith has agreed to the restrictive covenants set forth herein;      WHEREAS, Seller, pursuant to the transactions contemplated by the Stock and Asset Purchase Agreement, will realize substantial economic benefits, including the receipt of the Purchase Price thereunder;      WHEREAS, the execution of this Agreement between Buyer and Seller is an express condition to closing under the Stock and Asset Purchase Agreement, as set forth in Section 9.3 of the Stock and Asset Purchase Agreement and Buyer would not have consummated the transactions contemplated therein in the absence of this Agreement; and      WHEREAS, to protect the assets and the related business being acquired by Buyer pursuant to the Stock and Asset Purchase Agreement, Buyer and Seller desire to enter into this Agreement. ARTICLE I AGREEMENT NOT TO COMPETE; AGREEMENT NOT TO SOLICIT      SECTION 1.01 Agreement Not to Compete. Seller shall not, for a period of five years after the Effective Date, in any location in the world where the Acquired Business conducts operations other than in the United Kingdom and for a period of two years after the Effective Date in the United Kingdom: (a) directly or indirectly, own, manage, establish, operate, participate in, provide financial assistance to, or control any business, company, partnership, organization, proprietorship, or other entity that is engaged in the business of developing and deploying electronic parts and service information retrieval products and dealer performance applications for the automotive, powersports and outdoor power markets as conducted by the Acquired Entities and by the   --------------------------------------------------------------------------------   Retained Subsidiaries with the Foreign Assets on the Effective Date (except as a holder of no more than five percent (5%) of the stock of a publicly held company, provided the Seller does not participate in the business of such company or render advice or assistance to such company); or (b) entice or attempt to entice any third party with which the Acquired Business transacts business directly or indirectly so as to cause or attempt to cause any such third party not to engage in or reduce its business with Buyer; provided, however, that this agreement not to compete shall not apply to retrieval products and services provided by Seller’s Affiliates to libraries, colleges, schools and universities.      SECTION 1.02 Agreement Not to Solicit Employees. Seller agrees and acknowledges that the value and goodwill related to the Acquired Business purchased by the Buyer depends on continued, amicable relations with its employees, and Seller agrees that for a period of two years after the Effective Date, Seller shall not, directly or indirectly, induce or attempt to induce any Business Employee to terminate his or her employment with Buyer or any of its Affiliates; provided that such restriction shall not prevent Seller or its Subsidiaries from (i) advertising to the general public openings that it may have and hiring individuals in response to those advertisements, or (ii) hiring any Business Employee who has been terminated by Buyer or any of its Affiliates. ARTICLE II NON-DISCLOSURE AGREEMENT      SECTION 2.01 Definition. “Confidential Information” means any data or information of the Acquired Business, including, without limitation, Buyer’s customer lists, business connections, financial information, fees, business and marketing plans, forecasts and techniques, personnel data, employee compensation, the terms of this Agreement, business strategies, and proprietary information, as well as information of any kind provided to Buyer by its customers or their respective representatives, including all written materials, notes, data, reports assessment, analysis, whether transcribed or on computer disk, or databases, prepared by either their employees or other personnel in connection in any way with the work Buyer is doing for its customers; provided that Confidential Information shall not include information which (i) is now or becomes publicly available, other than through disclosure by Seller or one of its Representatives (as hereinafter defined), (ii) is now or becomes available to Seller or its Affiliates on a non-confidential basis from a source other than Buyer or any of its Representatives, provided that such source is not bound by a confidentiality agreement with or other contractual, legal or fiduciary obligation of confidentiality to Buyer or its Affiliates that requires the source of the information to keep such disclosed information confidential, or (iii) that is developed by Seller independently with no use of the Confidential Information.      SECTION 2.02 Recitals. The Parties agree that Confidential Information shall be treated as confidential by the Seller, shall be disclosed only as permitted in this Agreement and is valuable to the Acquired Business and Buyer. The Parties further agree that Buyer would suffer injury if Seller would disclose such information or use it to compete with Buyer (except as permitted pursuant to this Agreement) and Buyer would 2 --------------------------------------------------------------------------------   not have consummated the transactions contemplated herein without this agreement with respect to the Confidential Information.      SECTION 2.03 Use. Seller shall not directly or indirectly use or induce or permit others to use any of the Confidential Information for any purposes, except as may be reasonably necessary for purposes of providing services under the Transition Services Agreement referred to in Section 9.4 of the Stock and Asset Purchase Agreement (the “Transition Services”). Seller shall not directly or indirectly divulge, disclose, or communicate to any person, firm, entity, or other third party in any manner whatsoever any information relating to or constituting a part of the Confidential Information; provided, however, that such disclosures may be made to those of Seller’s directors, officers, employees, attorneys, accountants, and other agents (collectively, “Representatives”) with a specific need to know for purposes of providing or administering Transition Services or for valid legal purposes of Seller (including in connection with disputes pursuant to the Stock and Asset Purchase Agreement); and provided further that Seller may disclose Confidential information to the extent it is requested or required to do so by deposition, interrogatories, requests for information or documents in legal proceedings, subpoenas, civil investigative demand or similar process or by court order, provided that Seller first gives Buyer written notice that Seller has been requested or will be required to make such disclosure so as to allow Buyer to seek a protective order to prevent such disclosure. Seller shall inform all Representatives who are given access to any of the Confidential Information of the nature and existence of this Agreement, and shall advise them that they shall be responsible for the observance of the obligations of Seller under this Agreement.      SECTION 2.04 Term. The provisions of this Article II shall continue in perpetuity with respect to any Confidential Information.      SECTION 2.05 Effect. As to Confidential Information disclosed on or after the date of this Agreement, this Article supersedes any prior confidentiality or non-disclosure agreements between the parties. ARTICLE III AGREEMENT OF SELLER      SECTION 3.01 Enforceability of this Agreement. Seller agrees and acknowledges that the geographic boundaries, scope of prohibited activities and the time duration of the provisions of this Agreement are reasonable and are no broader than are necessary to protect the legitimate business interests of Buyer including, without limitation, the ability of Buyer to realize the benefit of its bargain from the Stock and Asset Purchase Agreement. The Parties agree and stipulate that the agreements and covenants not to compete or solicit contained in this Agreement are fair and reasonable in light of all the facts and circumstances of the relationship between Buyer and Seller; however, Buyer and Seller are aware that in certain circumstances courts have refused to enforce certain agreements not to compete and laws have placed limitations on certain agreements not to compete. Therefore, in furtherance of, and not in derogation of this 3 --------------------------------------------------------------------------------   Agreement, Buyer and Seller agree that in the event a court should decline to enforce some of the provisions of this Agreement or if any law should limit the enforceability of any provisions of this Agreement, that this Agreement shall be deemed to be modified or reformed to restrict Seller’s competition with Buyer and any of its Affiliates or Subsidiaries to the maximum extent, as to time, geography and business scope, which the court shall find enforceable or the applicable law shall permit; provided, however, in no event shall any such modifications or reformations of this Agreement be deemed to be more restrictive to Seller than those contained herein.      SECTION 3.02 Available Remedies. Seller acknowledges that it would be difficult to fully compensate Buyer or any of its Affiliates or Subsidiaries for damages resulting from any breach by Seller of this Agreement and Seller hereby agrees to stipulate in any proceeding that money damages are insufficient. In the event of any actual or threatened breach of this Agreement, Buyer, its Affiliates and its Subsidiaries shall (in addition to any other remedies which it may have) be entitled to temporary and/or permanent injunctive relief in a court of competent jurisdiction to enforce such provisions and to recover reasonable attorneys’ fees and costs for same, and such relief may be granted without the necessity of proving actual damages; provided that to the extent that Buyer, its Affiliates and its Subsidiaries are unable to obtain injunctive relief, Seller shall remain liable for any and all actual damages incurred by Buyer, its Affiliates or its Subsidiaries as a result of a breach of this Agreement by Seller. The preceding remedies are cumulative and nonexclusive and shall be in addition to any other remedy to which Buyer may be entitled. It is understood by and between the parties hereto that the covenants by Seller set forth in Articles I and II are essential elements of this Agreement and that but for the agreement of Seller to comply with such covenants, Buyer would not have entered into the Stock and Asset Purchase Agreement. Seller further acknowledges that this Agreement as a whole constitutes a material condition to Buyer’s consummation of the transactions contemplated by the Stock and Asset Purchase Agreement and the related documents. ARTICLE IV GENERAL PROVISIONS      SECTION 4.01 Assignment. This Agreement is binding on the parties and their successors and permitted assigns.      SECTION 4.02 Notices. All notices and other communications given or made pursuant to this Agreement shall be in writing and shall be deemed to have been duly given or made as of the date delivered, mailed or transmitted, and shall be effective upon receipt, if delivered personally, sent by reputable overnight express courier, charges prepaid, or, if mailed, three days after deposit with the United States Postal Service, to the parties at the following addresses (or at such other address for a party as shall be specified by like changes of address) or sent by electronic transmission to the facsimile number specified below: 4 --------------------------------------------------------------------------------                 If to Buyer:                       Snap-on Incorporated         2801 80th Street         Kenosha, Wisconsin 53143         Attention: Martin M. Ellen, Chief Financial Officer         Fax: 262-656-5221               with copies to:                       Snap-on Incorporated         2801 80th Street         Kenosha, Wisconsin 53143         Attention: Susan F. Marrinan, Chief Legal Officer         Fax: 262-656-4762                   Quarles & Brady LLP         One South Pinckney Street         Suite 600         Madison, Wisconsin 53701-2113         Attention: Mark T. Ehrmann, Esquire         Fax: 608-294-4944               If to Seller:   ProQuest Company         789 Eisenhower Parkway         P.O. Box 1346         Ann Arbor, MI 48106         Attention: General Counsel         Fax: 734-997-4040               With a copy to:   McDermott Will & Emery LLP         227 West Monroe Street         Chicago, Illinois 60606-5096         Attention: Thomas Murphy, Esquire         Fax: 312-984-7700      SECTION 4.03 Governing Law; Jurisdiction; Waiver of Jury Trial. This Agreement shall be governed by, and construed in accordance with, the Laws of the State of Delaware. Each of the Parties agrees that if any dispute is not resolved by the Parties, it shall be resolved only in the Courts of the State of New York sitting in the County of New York or the United States District Court for the Southern District of New York and the appellate courts having jurisdiction of appeals in such courts (collectively, the “Proper Courts”). In that context, and without limiting the generality of the 5 --------------------------------------------------------------------------------   foregoing, each of the Parties irrevocably and unconditionally (a) submits for itself and its property in any action relating to this Agreement or for recognition and enforcement of any judgment in respect thereof, to the exclusive jurisdiction of the Proper, and appellate courts having jurisdiction of appeals from any of the foregoing, and agrees that all claims in respect of any such action shall be heard and determined in such Proper Courts; (b) consents that any such action may and shall be brought in the Proper Courts and waives any objection that it may now or thereafter have to the venue or jurisdiction of any such action in any such court or that such action was brought in an inconvenient court and agrees not to plead or claim the same; (c) waives all right to trial by jury in any action (whether based on contract, tort or otherwise) arising out of or relating to this Agreement or any document delivered pursuant to this Agreement, or its performance under or the enforcement of this Agreement or any document delivered pursuant to this Agreement; (d) agrees that service of process in any such action may be effected by mailing a copy of such process by registered or certified mail (or any substantially similar form of mail), postage prepaid, to such party at its address as provided in Section 4.02 of this Agreement; and (e) agrees that nothing in this Agreement or any document delivered pursuant to this Agreement shall affect the right to effect service of process in any other manner permitted by the Laws of the State of New York.      SECTION 4.04 Amendments and Waivers. This Agreement may not be amended or waived except in writing executed by the Party against which such amendment or waiver is sought to be enforced. The failure of any Party to insist, in any one or more instances, upon the performance of the terms or conditions of this Agreement shall not be construed as a waiver or relinquishment of any right granted hereunder or of the future performance of any such term, covenant or condition. No valid waiver of any provision of this Agreement at any time shall be deemed a waiver of any other provision of this Agreement at such time or will be deemed a valid waiver of such provision at any other time. The Parties agree that nothing in this Agreement shall be construed to limit or negate the common law of torts or trade secrets where it provides Buyer with broader protection than that provided herein.      SECTION 4.05 Other Agreements. This Agreement represents one of a number of agreements among the Parties. Each existing agreement is intended to be separately enforceable. To the extent another agreement, whether executed before or after this Agreement, purports to further restrict Seller’s ability to compete or use or disclose Confidential Information, including trade secrets, such agreement shall also be enforceable. To the extent the provisions of the Stock and Asset Purchase Agreement purport to apply to this Agreement or are incorporated herein by reference, such provisions shall, as applicable, apply or be incorporated.      SECTION 4.06 Advice of Counsel. Buyer and Seller have independently consulted their respective counsel and have been advised in all respects concerning the reasonableness and propriety of such covenants, with specific regard to the nature of the businesses conducted by Buyer. 6 --------------------------------------------------------------------------------        SECTION 4.07 Severability. The provisions of this Agreement (including in particular, but not limited to, the provisions of Article I and Article II hereof) shall be deemed severable, and the invalidity or unenforceability of any one or more of the provisions hereof shall not affect the validity or enforceability of any one or more of the other provisions hereof.      SECTION 4.08 Section Headings. The section headings in this Agreement are included solely for convenient reference, and shall not define, limit, or affect the construction or interpretation of this Agreement.      SECTION 4.09 Counterparts. This Agreement may be executed by facsimile and in one or more counterparts, each of which shall be deemed an original but all of which together, when each party hereto has signed a counterpart, shall constitute one and the same instrument. [Signature Page Follows] 7 --------------------------------------------------------------------------------        IN WITNESS WHEREOF, Seller and Buyer have caused this Agreement to be executed as of the date first written above by its respective officers duly authorized.                       PROQUEST COMPANY                           By:   /s/ Todd W. Buchardt                            Name:   Todd W. Buchardt              Title:   Senior Vice President General Counsel, Secretary                            SNAP-ON INCORPORATED                           By:   /s/ Martin M. Ellen                            Name:   Martin M. Ellen              Title:   Senior Vice President - Finance and Chief Financial Officer                        8

EXHIBIT 10 (k) REVOLVING LOAN AND SECURITY AGREEMENT CONVERTIBLE REVOLVING CREDIT PROMISSORY NOTE DATED OCTOBER 26, 1987 ADDENDUM NO. 17   For consideration given and received, Robert Howard and iCAD, Inc. hereby agree to extend the repayment date in Paragraph D of the above referenced Convertible Revolving Credit Promissory Note, as amended, (the “Note”) from January 4, 2006 to March 31, 2007. Also the Note hereafter will be a maximum principal sum of Five Million Dollars ($5,000,000). Effective the 31st. day of December 2005. Please note that I, Mr. Robert Howard, do not intend to call in the principal balance of the note within 366 days from the date of this amendment. In addition, I agree that I will not, while the revolving line of credit exists, convert any outstanding advances under the agreement into shares of iCAD’ common stock that would exceed the available shares for issuance defined as the authorized shares of the iCAD common stock less issued and outstanding common shares less any reserved shares for outstanding convertible preferred stock, non-employee warrants and non-employee stock options.   ICAD, INC. By: /s/ Annette Heroux                            /s/ Robert Howard                                 Title:Chief Financial Officer Robert Howard   March 30, 2006    --------------------------------------------------------------------------------  

EXHIBIT 10.3 THE PMI GROUP, INC. BONUS INCENTIVE PLAN (September 20, 2006 Amendment and Restatement) SECTION 1 BACKGROUND, PURPOSE AND DURATION 1.1 Effective Date. The Plan originally was effective as of February 18, 1999. This amendment and restatement is effective as of September 20, 2006, subject to ratification by an affirmative vote of the holders of a majority of the Shares that are present in person or by proxy and entitled to vote at the 2007 Annual Meeting of Stockholders of the Company. 1.2 Purpose of the Plan. The Plan is intended to increase shareholder value and the success of the Company by motivating key executives (a) to perform to the best of their abilities, and (b) to achieve the Company’s objectives. The Plan’s goals are to be achieved by providing such executives with incentive awards based on the Company’s net income. The Plan is further 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, subject to the Committee’s authority under Section 3.5 to reduce the award. 2.2 “Affiliate” means any corporation or other entity (including, but not limited to, partnerships and joint ventures) controlled by the Company (within the meaning of section 414(b), (c) or (m) of the Code). 2.3 “Base Salary” means as to any Performance Period, the Participant’s annualized salary rate on the last day of the Performance Period. 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 “Change of Control” means a change in the ownership or effective control of the Company, or in the ownership of a substantial portion of the assets of the Company (as determined in accordance with section 409A(a)(2)(A)(v) of the Code and the applicable regulations issued there under). 2.6 “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. 2.7 “Committee” means the committee appointed by the Board (pursuant to Section 5.1) to administer the Plan. Until otherwise determined by the Board, the Company’s Compensation Committee shall constitute the Committee. 2.8 “Company” means The PMI Group, Inc., a Delaware corporation, or any successor thereto. 2.9 “Disability” or “Disabled” means (a) the inability of a Participant to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, or (b) the Participant is, by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement benefits for a period of not less than three (3) months under an accident and health plan covering employees of the Employer. Notwithstanding the foregoing, a Participant shall be deemed Disabled if he or she is determined to be totally disabled by the Social Security Administration. The Committee shall determine whether or not a Participant is Disabled based on such evidence as the Committee deems necessary or advisable. 2.10 “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. 2.11 “Employee Performance Pool” means the pool of funds available for distribution to Participants. Subject to the terms of the Plan, the Committee establishes the Employee Performance Pool for each Performance Period. 2.12 “Fair Market Value” means the arithmetic mean of the highest and lowest per share selling prices of the Shares, as quoted in the New York Stock Exchange Composite Transactions Index for the date in question. 2.13 “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. 2.14 “Performance Period” means any period of not less than twelve consecutive calendar months, as determined by the Committee in its sole discretion. No more than three Performance Periods may be in effect at any one time.   -2- -------------------------------------------------------------------------------- 2.15 “Plan” means The PMI Group, Inc. Bonus Incentive Plan, as set forth in this instrument and as hereafter amended from time to time. 2.16 “Retirement” means (a) a Termination of Service occurring on or after age sixty-five, (b) a Termination of Service at or after age fifty-five with at least ten years of Benefit Accrual Service (as defined under The PMI Group, Inc. Retirement Plan, as amended), or (c) a Termination of Service approved by the Company as an early retirement; provided that in the case of a person subject to Section 16 of the Exchange Act, such early retirement must be approved by the Committee. 2.17 “Shares” means shares of the Company’s common stock, $0.01 par value. 2.18 “Target Award” means the target award payable under the Plan to a Participant for the Performance Period, expressed as a percentage of his or her Base Salary, as determined by the Committee in accordance with Section 3.2. 2.19 “Termination of Service” means a cessation of the employee-employer relationship between an Employee and the Company or an Affiliate for any reason, (as determined in accordance with section 409A(a)(2)(A) of the Code), including, but not by way of limitation, a termination by resignation, discharge, death, Disability, Retirement, or the disaffiliation of an Affiliate, but excluding any such termination where there is a simultaneous reemployment by the Company or an Affiliate. For this purpose, the employment relationship shall be treated as continuing intact while the Participant is on military leave, sick leave or other bona fide leave of absence (such as temporary employment by the government), except that if the period of such leave exceeds six (6) months and the Participant’s right to reemployment is not provided for by statute or contract, then the employment relationship shall be deemed to have terminated on the first day immediately following such six-month period. 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 any 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. 3.2 Determination of Target Awards. Subject to the limitations of Section 3.4 below, the Committee, in its sole discretion, shall establish a Target Award for each Participant. 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- -------------------------------------------------------------------------------- 3.3 Employee Performance Pool. Each Performance Period, an amount equal to no more than 5% of the Company’s net income shall be allocated to the Employee Performance Pool. The Committee, in its sole discretion, shall determine the size of the Employee Performance Pool, subject to the limitation in the preceding sentence. 3.4 Determination of Awards for Covered Employees. Each year the maximum Actual Award payable under the Plan to a Participant shall be no more than 30% of the amount allocated to the Employee Performance Pool. In addition, the total of all Actual Awards payable for any Performance Period may not exceed the size of the Employee Performance Pool. In the event a partial Performance Period occurs during any calendar year, the percent of pool limitation in this Section 3.4 shall be calculated based on the pro-rata portion of the Performance Pool established for the partial Performance Period (e.g., if a twelve-month Performance Period ends March 31, 2006, one-fourth of the Performance Pool for that Performance Period will be used to calculate the percent of pool limitation in this Section 3.4 for 2006.) 3.5 Discretion to Reduce Awards. Notwithstanding any contrary provision of the Plan, the Committee may, in its sole discretion and at any time, reduce or eliminate (a) a Participant’s Actual Award, and/or (b) the amount allocated to the Employee Performance Pool. The Committee may determine the amount of any reduction on the basis of such factors as it deems relevant, and shall not be require to establish any allocation or weighting with respect to the factors it considers. 3.6 Discretion to Include Additional Criteria. Notwithstanding any contrary provision of the Plan, the Committee may, in its sole discretion, place additional vesting or performance requirements upon any Target Award. The additional requirements may be on the basis of any factors the Committee determines relevant, and may be on an individual, divisional, business unit or Company-wide basis. Failure to meet the additional requirements will result in a failure to earn the Target Award. 3.7 Special Rule for Change of Control. Notwithstanding any contrary provision of the Plan, the then ongoing Performance Period shall be deemed terminated immediately prior to the occurrence of a Change of Control and 100% of Target Awards shall be deemed to be earned and shall be immediately payable to the Participants. SECTION 4 PAYMENT OF AWARDS 4.1 Right to Receive Payment. Each Actual Award shall be paid solely from the general assets of the Company. Nothing in this Plan shall be construed to create a trust or to establish or evidence any Participant’s claim of any right other than an unsecured general creditor with respect to any payment to which he or she may be entitled. 4.2 Timing of Payment. Payment of each Actual Award shall be made as soon as practicable, no more than sixty days from the end of the Performance Period, and in no event will the payment occur later than two and half months from the end of the Participant’s (or the Company’s)   -4- -------------------------------------------------------------------------------- first taxable year after the end of the Performance Period during which the Actual Award was earned. Unless otherwise determined by the Committee, and except as provided in Section 4.4 (relating to death and Disability), a Participant must be employed by the Company or any Affiliate on the date of payment to receive a payment under the Plan. 4.3 Form of Payment. Each Actual Award normally shall be paid in cash (or its equivalent) in a single lump sum. However, the Committee, in its sole discretion, may declare any Actual Award, in whole or in part, payable in restricted stock granted under the Company’s Equity Incentive Plan. The number of Shares of restricted stock granted shall be determined by dividing the cash amount foregone by the Fair Market Value of a Share on the date that the cash payment otherwise would have been made. Any such restricted stock shall be subject to the vesting schedule (not to exceed two calendar years) as may be determined by the Committee, provided that accelerated vesting automatically shall occur upon death, Disability, Retirement or involuntary Termination of Service without cause. 4.4 Payment in the Event of Death or Disability. If a Participant dies or becomes Disabled prior to the payment of an Actual Award earned by him or her prior to death or Disability for a prior Performance Period, the Actual Award shall be paid to his or her estate or to the Participant, as the case may be, subject to the Committee’s discretion to reduce or eliminate any Actual Award otherwise payable. SECTION 5 ADMINISTRATION 5.1 Committee is the Administrator. The Plan shall be administered by the Committee. The Committee shall consist of not less than two members of the Board. The members of the Committee shall be appointed from time to time by, and serve at the pleasure of, the Board. Each member of the Committee shall qualify as an “outside director” under section 162(m) of the Code. If it is later determined that one or more members of the Committee do not so qualify, actions taken by the Committee prior to such determination shall be valid despite such failure to qualify. 5.2 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. 5.3 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.   -5- -------------------------------------------------------------------------------- 5.4 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. SECTION 6 GENERAL PROVISIONS 6.1 Tax Withholding. The Company shall withhold all applicable taxes from any Actual Award, including any federal, state and local taxes (including, but not limited to, the Participant’s FICA and SDI obligations). 6.2 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. 6.3 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. 6.4 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. 6.5 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.   -6- -------------------------------------------------------------------------------- 6.6 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 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. 6.7 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 6.6. All rights with respect to an award granted to a Participant shall be available during his or her lifetime only to the Participant. SECTION 7 AMENDMENT, TERMINATION AND DURATION 7.1 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. No award may be granted during any period of suspension or after termination of the Plan. 7.2 Duration of the Plan. The Plan shall commence on the date specified herein, and subject to Section 7.1 (regarding the Board’s right to amend or terminate the Plan), shall remain in effect thereafter. SECTION 8 LEGAL CONSTRUCTION 8.1 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. 8.2 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. 8.3 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, including if applicable, the provisions of section 409A of the Code. Notwithstanding any contrary Plan provision, the Plan shall be construed, administered and enforced in a manner that is consistent with such intent, and any provision that would cause the Plan to fail to satisfy section 409A of the Code shall have no force and effect until   -7- -------------------------------------------------------------------------------- amended to comply with section 409A of the Code (which amendment may be retroactive to the extent permitted by section 409A of the Code and may be made without the consent of any Participant or beneficiary). 8.4 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. 8.5 Captions. Captions are provided herein for convenience only, and shall not serve as a basis for interpretation or construction of the Plan. EXECUTION IN WITNESS WHEREOF, the Company, by its duly authorized officer, has executed The PMI Group, Inc. Bonus Incentive Plan on the date indicated below.       THE PMI GROUP, INC. Dated:   ___________________     By            Name:            Title:        -8-

Exhibit 10.5 (Multicurrency – Cross Border) LOGO [g61105image1.jpg] International Swap Dealers Association, Inc. MASTER AGREEMENT dated as of June 29, 2006   WACHOVIA BANK, NATIONAL ASSOCIATION   and            NOVASTAR MORTGAGE SUPPLEMENTAL INTEREST TRUST, SERIES 2006-3, a New York common law trust (“Party A”)      (“Party B”) have entered and/or anticipate entering into one of more transactions (each a “Transaction”) that are or will be governed by this Master Agreement, which includes the schedule (the “Schedule”), and the documents and other confirming evidence (each a “Confirmation”) exchanged between the parties confirming those Transactions. Accordingly, the parties agree as follows: —   1. Interpretation (a) Definitions. The terms defined in Section 14 and in the Schedule will have the meanings therein specified for the purpose of this Master Agreement. (b) Inconsistency. In the event of any inconsistency between the provisions of the Schedule and the other provisions of this Master Agreement, the Schedule will prevail. In the event of any inconsistency between the provisions of any Confirmation and this Master Agreement (including the Schedule), such Confirmation will prevail for the purpose of the relevant Transaction. (c) Single Agreement. All Transactions are entered into in reliance on the fact that this Master Agreement and all Confirmations form a single agreement between the parties (collectively referred to as this “Agreement”), and the parties would not otherwise enter into any Transactions.   2. Obligations   (a) General Conditions. (i) Each party will make each payment or delivery specified in each Confirmation to be made by it, subject to the other provisions of this Agreement. (ii) Payments under this Agreement will be made on the due date for value on that date in the place of the account specified in the relevant Confirmation or otherwise pursuant to this Agreement, in freely transferable funds and in the manner customary for payments in the required currency. Where settlement is by delivery (that is, other than by payment), such delivery will be made for receipt on the due date in the manner customary for the relevant obligation unless otherwise specified in the relevant Confirmation or elsewhere in this Agreement. (iii) Each obligation of each party under Section 2(a)(i) is subject to (1) the condition precedent that no Event of Default or Potential Event of Default with respect to the other party has occurred and is continuing, (2) the condition precedent that no Early Termination Date in respect of the relevant Transaction has occurred or been effectively designated and (3) each other applicable condition precedent specified in this Agreement.      Copyright © 1992 by International Swap Dealers Association, Inc.    ISDA® 1992 -------------------------------------------------------------------------------- value of that which was (or would have been) required to be delivered as of the originally scheduled date for delivery, in each case together with (to the extent permitted under applicable law) interest, in the currency of such amounts, from (and including) the date such amounts or obligations were or would have been required to have been paid or performed to (but excluding) such Early Termination Date, at the Applicable Rate. Such amounts of interest will be calculated on the basis of daily compounding and the actual number of days elapsed. The fair market value of any obligation referred to in clause (b) above shall be reasonably determined by the party obliged to make the determination under Section 6(e) or, if each party is so obliged, it shall be the average of the Termination Currency Equivalents of the fair market values reasonably determined by both parties. IN WITNESS WHEREOF the parties have executed this document on the respective dates specified below with effect from the date specified on the first page of this document.   WACHOVIA BANK, NATIONAL ASSOCIATION     NOVASTAR MORTGAGE SUPPLEMENTAL INTEREST TRUST, SERIES 2006-3       By: JPMorgan Chase Bank, National Association, as Trustee under the Pooling and Servicing Agreement, acting not in its individual capacity, but solely in its capacity as Trustee to NovaStar Mortgage Supplemental Interest Trust, Series 2006-3 By:   /s/ Kim Farr     By:   /s/ Matt Kaltenrider Name:   Kim Farr     Name:   Matt Kaltenrieder Title:   Director     Title:   Vice Presiden Date:       Date:   ISDA® 1992

Exhibit 10.20   EMPLOYMENT AGREEMENT   THIS EMPLOYMENT AGREEMENT (“Agreement”) is made as of August 7, 2006 by CoBiz Inc., a Colorado corporation (the “Company”), and Troy R. Dumlao (“Employee”).   1.                                       EMPLOYMENT. THE COMPANY AGREES TO EMPLOY EMPLOYEE, AND EMPLOYEE AGREES TO WORK FOR THE COMPANY, IN THE CAPACITY OR CAPACITIES SPECIFIED ON EXHIBIT A OR IN SUCH OTHER CAPACITIES WITH THE COMPANY AND ITS SUBSIDIARIES AS MAY BE DETERMINED FROM TIME TO TIME BY THE BOARD OF DIRECTORS OF THE COMPANY, ON THE TERMS AND SUBJECT TO THE CONDITIONS ESTABLISHED IN THIS AGREEMENT. EMPLOYEE WILL REPORT TO THE REPORTING PERSON DESIGNATED IN EXHIBIT A, SUBJECT TO CHANGE BY THE COMPANY FROM TIME TO TIME. THIS AGREEMENT AND EMPLOYEE’S EMPLOYMENT BY THE COMPANY SHALL CONTINUE UNTIL TERMINATED BY EITHER PARTY PURSUANT TO SECTION 5 BELOW OR UNTIL EMPLOYEE’S DEATH OR DISABILITY (TERMS CAPITALIZED AND NOT OTHERWISE DEFINED HEREIN ARE USED AS DEFINED IN EXHIBIT B).   2.                                       RESPONSIBILITIES OF EMPLOYMENT. EMPLOYEE SHALL DEVOTE HIS OR HER FULL BUSINESS TIME AND EFFORT TO THE PERFORMANCE OF HIS OR HER RESPONSIBILITIES UNDER THIS AGREEMENT, OTHER THAN PASSIVE INVESTMENTS THAT DO NOT INTERFERE WITH THE PERFORMANCE OF THOSE RESPONSIBILITIES. EMPLOYEE SHALL PERFORM HIS OR HER RESPONSIBILITIES DILIGENTLY, FAITHFULLY AND TO THE BEST OF HIS OR HER ABILITIES. EMPLOYEE SHALL COMPLY WITH AND CARRY OUT THE POLICIES, PROGRAMS AND DIRECTIONS OF THE BOARD OF DIRECTORS OF THE COMPANY, INCLUDING, WITHOUT LIMITATION, THE COMPANY’S CODE OF ETHICS AND INSIDER TRADING POLICIES AS IN EFFECT FROM TIME TO TIME.   3.                                       COMPENSATION. THE COMPANY WILL COMPENSATE EMPLOYEE FOR HIS OR HER SERVICES AS FOLLOWS:   (A)                                  BASE COMPENSATION. THE COMPANY WILL PAY EMPLOYEE MINIMUM MONTHLY BASE COMPENSATION AT THE RATE SPECIFIED ON EXHIBIT A, PAYABLE IN ACCORDANCE WITH THE COMPANY’S NORMAL PAYROLL SCHEDULE. EMPLOYEE’S BASE COMPENSATION WILL BE REVIEWED AND MAY BE INCREASED FROM TIME TO TIME IN THE SOLE DISCRETION OF THE COMPANY’S BOARD OF DIRECTORS.   (B)                                 PLANS. EMPLOYEE WILL BE ELIGIBLE TO PARTICIPATE IN ALL MEDICAL, DENTAL, VISION AND OTHER EMPLOYEE WELFARE PLANS MAINTAINED BY THE COMPANY FROM TIME TO TIME AND AVAILABLE TO SIMILARLY SITUATED EMPLOYEES OF THE COMPANY.   (C)                                  VACATION. EMPLOYEE WILL BE ENTITLED TO PAID VACATION EACH YEAR AS SPECIFIED ON EXHIBIT A, SUBJECT TO THE COMPANY’S GENERAL VACATION POLICY AS IN EFFECT FROM TIME TO TIME.   (D)                                 DISCRETIONARY BONUS PLAN. EMPLOYEE WILL BE ELIGIBLE TO PARTICIPATE IN SUCH DISCRETIONARY BONUS PLANS AS THE COMPANY MAY ESTABLISH FROM TIME TO TIME FOR SIMILARLY SITUATED EMPLOYEES OF THE COMPANY.   (E)                                  EQUITY INCENTIVE PLANS. EMPLOYEE WILL BE ELIGIBLE TO PARTICIPATE IN SUCH STOCK OPTION AND OTHER EQUITY INCENTIVE PLANS AS THE COMPANY MAY ESTABLISH FROM TIME TO TIME FOR SIMILARLY SITUATED EMPLOYEES OF THE COMPANY.   1 --------------------------------------------------------------------------------   The payment of compensation and the provision of benefits will be subject to all applicable federal, state and local tax withholding and reporting requirements.   4.                                       REIMBURSEMENT OF EXPENSES. EMPLOYEE WILL BE ENTITLED TO REIMBURSEMENT OF ORDINARY AND NECESSARY OUT-OF-POCKET EXPENSES REASONABLY INCURRED BY HIM OR HER ON BEHALF OF THE COMPANY IN THE COURSE OF PERFORMING HIS OR HER DUTIES HEREUNDER UNDER THE COMPANY’S EXPENSE REIMBURSEMENT POLICY APPLICABLE TO SIMILARLY SITUATED EMPLOYEES, UPON FURNISHING APPROPRIATE DOCUMENTATION IN ACCORDANCE WITH SUCH POLICY AS IN EFFECT FROM TIME TO TIME.   5.                                       EMPLOYMENT AT WILL; TERMINATION. EMPLOYEE IS AN AT-WILL EMPLOYEE. EITHER PARTY MAY TERMINATE THIS AGREEMENT AND EMPLOYEE’S EMPLOYMENT HEREUNDER AT ANY TIME BY GIVING WRITTEN NOTICE TO THE OTHER PARTY SPECIFYING THE EFFECTIVE DATE OF THE TERMINATION. IN THE CASE OF TERMINATION BY EMPLOYEE, THE EFFECTIVE DATE OF TERMINATION SHALL NOT BE LESS THAN 30 DAYS AFTER THE NOTICE IS GIVEN, BUT THE COMPANY MAY ACCELERATE THE EFFECTIVE DATE OF THE TERMINATION BY WRITTEN NOTICE TO EMPLOYEE, AND SUCH ACCELERATED TERMINATION SHALL STILL BE DEEMED A TERMINATION BY EMPLOYEE.   6.                                       EFFECT OF TERMINATION. UPON TERMINATION OF THIS AGREEMENT BY THE COMPANY OR BY EMPLOYEE, INCLUDING TERMINATION UPON THE DEATH OR DISABILITY OF EMPLOYEE, THE RIGHTS AND OBLIGATIONS OF EMPLOYEE, EMPLOYEE’S ESTATE AND THE COMPANY SHALL BE AS PROVIDED IN THIS SECTION 6.   (A)                                  COMPENSATION THROUGH TERMINATION DATE . IF EMPLOYEE’S EMPLOYMENT WITH THE COMPANY IS TERMINATED, WHETHER BY THE COMPANY OR BY EMPLOYEE, AND INCLUDING ANY TERMINATION RESULTING FROM DEATH OR DISABILITY, THE COMPANY (I) WILL PAY EMPLOYEE HIS OR HER BASE COMPENSATION PURSUANT TO SECTION 3(A) THROUGH THE EFFECTIVE DATE OF TERMINATION, (II) WILL PAY EMPLOYEE FOR VACATION ACCRUED BUT NOT TAKEN UNDER SECTION 3(C) IN ACCORDANCE WITH ITS VACATION POLICY, AND (III) WILL REIMBURSE EMPLOYEE PURSUANT TO SECTION 4 FOR EXPENSES INCURRED PRIOR TO THE EFFECTIVE DATE OF TERMINATION. EXCEPT AS SPECIFICALLY PROVIDED IN THIS SECTION 6, THE COMPANY WILL HAVE NO OBLIGATION TO PAY ANY SEVERANCE, SALARY, BENEFITS OR OTHER COMPENSATION OR DAMAGES AT OR AFTER THE DATE OF TERMINATION.   (B)                                 SEVERANCE UPON TERMINATION WITHOUT CAUSE OR FOR GOOD REASON. IF EMPLOYEE’S EMPLOYMENT IS TERMINATED BY THE COMPANY WITHOUT CAUSE OR BY EMPLOYEE WITH GOOD REASON, THEN, IN ADDITION TO THE AMOUNTS PAYABLE UNDER SECTION 6(A), THE COMPANY WILL PAY EMPLOYEE OR EMPLOYEE’S ESTATE SEVERANCE EQUAL TO TWELVE TIMES HIS OR HER BASE MONTHLY COMPENSATION UNDER SECTION 3(A) AS IN EFFECT ON THE EFFECTIVE DATE OF TERMINATION.   (C)                                  ADDITIONAL SEVERANCE FOR BONUS. IF SEVERANCE IS PAYABLE UNDER SECTION 6(B) AND IF EMPLOYEE RECEIVED A BONUS FROM THE COMPANY IN RESPECT OF THE LAST FULL FISCAL YEAR ENDING PRIOR TO THE EFFECTIVE DATE OF TERMINATION, THE COMPANY SHALL PAY TO EMPLOYEE OR EMPLOYEE’S ESTATE ADDITIONAL SEVERANCE EQUAL TO THE GREATER OF (I) THE BONUS PAID TO EMPLOYEE IN RESPECT OF SUCH LAST FULL FISCAL YEAR AND (II) THE AVERAGE OF THE BONUSES PAID TO EMPLOYEE IN RESPECT OF EACH YEAR IN THE THREE-YEAR PERIOD ENDING WITH SUCH LAST FULL FISCAL YEAR (OR IF EMPLOYEE HAD NOT BEEN EMPLOYED FOR ALL OF THAT THREE-YEAR PERIOD, THE AVERAGE OF THE BONUSES PAID WITH RESPECT TO EACH FULL FISCAL YEAR IN WHICH EMPLOYEE WAS EMPLOYED), IN EACH CASE, PRO RATED TO THE EFFECTIVE DATE OF THE TERMINATION.   2 --------------------------------------------------------------------------------   (D)                                 PAYMENT. ALL SEVERANCE UNDER SECTIONS 6(B) AND (C) WILL BE PAYABLE IN A LUMP SUM WITHIN 30 DAYS AFTER THE EFFECTIVE DATE OF TERMINATION, SUBJECT TO SECTIONS 6(I) AND (J) BELOW.   (E)                                  PAYMENTS IN LIEU OF HEALTH INSURANCE PLANS. IF SEVERANCE IS PAYABLE UNDER SECTION 6(B), IN ADDITION TO THE PAYMENTS REQUIRED BY SECTIONS 6(B) AND (C), IF EMPLOYEE PROPERLY ELECTS PURSUANT TO COBRA TO CONTINUE COVERAGE UNDER THE COMPANY’S HEALTH INSURANCE PLANS IN WHICH HE OR SHE WAS PARTICIPATING AS OF THE EFFECTIVE DATE OF TERMINATION, FOR TWELVE MONTHS FOLLOWING TERMINATION, THE COMPANY WILL REIMBURSE EMPLOYEE (WITHIN 15 DAYS AFTER SUBMISSION TO THE COMPANY OF PROOF OF PAYMENT) AN AMOUNT EQUAL TO (I) THE MONTHLY COBRA PREMIUMS PAID BY EMPLOYEE FOR SUCH COVERAGE, INCLUDING ANY ADMINISTRATIVE CHARGE IMPOSED BY THE COMPANY, MINUS (II) THE MONTHLY AMOUNTS THAT EMPLOYEE WOULD HAVE PAID FOR COVERAGE UNDER THOSE PLANS IF HIS OR HER EMPLOYMENT HAD NOT BEEN TERMINATED. IF EMPLOYEE DOES NOT ELECT TO CONTINUE COVERAGE PURSUANT TO COBRA, THE COMPANY WILL NOT BE OBLIGATED TO PAY TO EMPLOYEE OR FOR EMPLOYEE’S BENEFIT ANY AMOUNT IN RESPECT OF HEALTH INSURANCE AFTER TERMINATION OF EMPLOYMENT. EMPLOYEE ACKNOWLEDGES THAT THE COMPANY IS NOT OBLIGATED TO PROVIDE INSURANCE COVERAGE AFTER TERMINATION OF HIS OR HER EMPLOYMENT AND THAT IT IS SOLELY EMPLOYEE’S RESPONSIBILITY TO ELECT COBRA COVERAGE OR OBTAIN ALTERNATIVE INSURANCE FOLLOWING ANY TERMINATION. THE COMPANY’S OBLIGATION TO MAKE PAYMENTS UNDER THIS SECTION 6(E) SHALL TERMINATE IF EMPLOYEE BECOMES ELIGIBLE TO PARTICIPATE IN ANY HEALTH INSURANCE PLAN OF A SUBSEQUENT EMPLOYER BEFORE THE END OF THE TWELVE-MONTH PERIOD FOLLOWING TERMINATION, WITHOUT REGARD TO THE RELATIVE LEVELS OF BENEFITS PROVIDED BY THE COMPANY’S PLANS AND THE PLANS OF SUCH SUBSEQUENT EMPLOYER.   (F)                                    SEVERANCE UPON DEATH OR DISABILITY. IF EMPLOYEE’S EMPLOYMENT IS TERMINATED AS A RESULT OF EMPLOYEE’S DEATH OR DISABILITY, THE COMPANY SHALL PAY SEVERANCE TO EMPLOYEE OR HIS OR HER ESTATE IN THE AMOUNTS AND AT THE TIMES PROVIDED IN SECTIONS 6(B) THROUGH (E) ABOVE, AND SECTIONS 6(I) AND (J) SHALL NOT APPLY TO SUCH SEVERANCE.   (G)                                 INCREASED SEVERANCE UPON TERMINATION FOLLOWING CHANGE OF CONTROL. IF SEVERANCE IS PAYABLE UNDER SECTION 6(B), AND IF NOTICE OF TERMINATION WAS GIVEN BY THE COMPANY OR EMPLOYEE WITHIN 365 DAYS AFTER A CHANGE OF CONTROL, (I) THE SEVERANCE PAYABLE UNDER SECTION 6(B) SHALL BE 12 TIMES EMPLOYEE’S BASE MONTHLY COMPENSATION UNDER SECTION 3(A) AS IN EFFECT ON THE EFFECTIVE DATE OF TERMINATION, (II) THE SEVERANCE PAYABLE UNDER SECTION 6(C) SHALL BE THE FULL AMOUNT OF THE BONUS OR AVERAGE BONUS DESCRIBED THEREIN AND SHALL NOT BE PRO RATED TO THE DATE OF TERMINATION AND (III) THE REIMBURSEMENT OF COBRA PREMIUMS PURSUANT TO SECTION 6(E) SHALL CONTINUE FOR 12 MONTHS FOLLOWING TERMINATION (SUBJECT TO THE LAST SENTENCE OF SECTION 6(E)). INCREASED SEVERANCE UNDER CLAUSES (I) AND (II) OF THIS SECTION 6(G) SHALL BE PAYABLE AS PROVIDED IN SECTION 6(D).   (H)                                 SEVERANCE CONDITIONED ON RELEASE. THE RIGHT OF EMPLOYEE OR EMPLOYEE’S ESTATE TO RECEIVE SEVERANCE AND OTHER PAYMENTS AS PROVIDED IN SECTIONS 6(B) THROUGH 6(G): (I) WILL BE CONTINGENT UPON EMPLOYEE’S OR EMPLOYEE’S ESTATE’S EXECUTION OF A RELEASE OF ALL CLAIMS AGAINST THE COMPANY AND ITS AFFILIATES (OTHER THAN THE RIGHT TO RECEIVE PAYMENTS UNDER THIS SECTION 6) IN FORM AND SUBSTANCE AND UNDER PROCEDURES REASONABLY BELIEVED BY THE COMPANY TO BE ADEQUATE TO EFFECTIVELY WAIVE ALL SUCH CLAIMS UNDER APPLICABLE LAWS AND (II) WILL AUTOMATICALLY TERMINATE UPON ANY BREACH BY EMPLOYEE OF SECTION 7 OR 8 OF THIS AGREEMENT. THE COMPANY WILL   3 --------------------------------------------------------------------------------   PROVIDE THE FORM OF SUCH RELEASE TO EMPLOYEE OR EMPLOYEE’S ESTATE WITHIN A REASONABLE TIME AFTER ANY TERMINATION AS A RESULT OF WHICH SEVERANCE IS PAYABLE. IF THE RELEASE DOES NOT BECOME FULLY AND FINALLY EFFECTIVE UNTIL LEGALLY PRESCRIBED PERIODS HAVE ELAPSED, NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT, NO SEVERANCE SHALL BE PAYABLE UNTIL ALL SUCH PERIODS HAVE ELAPSED AND THE RELEASE HAS BECOME FULLY AND FINALLY EFFECTIVE.   (I)                                     DEFERRAL BASED ON CAPITAL REQUIREMENTS. THE COMPANY MAY ELECT TO DEFER ANY PAYMENT OF SEVERANCE AND OTHER PAYMENTS UNDER SECTIONS 6(B), (C) AND (G) THAT MAY BECOME DUE TO EMPLOYEE OR EMPLOYEE’S ESTATE IF, AT THE TIME THE PAYMENT BECOMES DUE, THE COMPANY OR ANY BANK OWNED BY THE COMPANY IS NOT IN COMPLIANCE WITH ANY REGULATORY-MANDATED MINIMUM CAPITAL REQUIREMENTS OR IF MAKING THE PAYMENTS WOULD CAUSE THE COMPANY’S OR ANY SUCH BANK’S CAPITAL TO FALL BELOW SUCH MINIMUM CAPITAL REQUIREMENTS. IN THIS EVENT, THE COMPANY WILL RESUME MAKING THE PAYMENTS AS SOON AS IT CAN DO SO WITHOUT VIOLATING SUCH MINIMUM CAPITAL REQUIREMENTS. NO INTEREST SHALL BE PAYABLE ON ANY PAYMENTS DEFERRED UNDER THIS SECTION 6(I). THIS SECTION 6(I) SHALL NOT APPLY TO THE EXTENT THAT ANY SUCH DEFERRAL WOULD RESULT IN THE IMPOSITION OF A TAX UNDER SECTION 409A OF THE INTERNAL REVENUE CODE.   (J)                                     DELAY BASED ON 409A. IF EMPLOYEE IS A “KEY EMPLOYEE” (AS DEFINED IN SECTION 409A OF THE INTERNAL REVENUE CODE) AT THE TIME OF TERMINATION, THE PAYMENT OF ALL AMOUNTS DUE UNDER SECTIONS 6(B), (C) AND (G) WILL BE DELAYED FOR SIX MONTHS AS AND TO THE EXTENT REQUIRED BY SECTION 409A. THE AMOUNTS THAT WOULD HAVE BEEN PAYABLE DURING THAT SIX-MONTH PERIOD SHALL BE PAYABLE IN A LUMP SUM WITHIN 10 DAYS AFTER THE END OF THAT SIX-MONTH PERIOD AND ANY PAYMENTS DUE AFTER THAT SIX-MONTH PERIOD SHALL BE MADE AS PROVIDED IN THIS AGREEMENT. NO INTEREST SHALL BE PAYABLE ON ANY PAYMENTS DELAYED UNDER THIS SECTION 6(J).   7.                                       PROTECTIVE COVENANTS.   (A)                                  NON-SOLICITATION. EMPLOYEE AGREES THAT, WITHOUT THE COMPANY’S PRIOR WRITTEN CONSENT, DURING THE PERIOD COMMENCING ON THE DATE HEREOF AND ENDING ON THE FIRST ANNIVERSARY OF THE EFFECTIVE DATE OF TERMINATION OF EMPLOYEE’S EMPLOYMENT WITH THE COMPANY, NEITHER EMPLOYEE NOR ANY AFFILIATE OF EMPLOYEE WILL:   (I)                                     SOLICIT OR INDUCE ANY PERSON WHO IS OR WAS DURING THE SIX-MONTH PERIOD PRECEDING SUCH SOLICITATION OR INDUCEMENT AN EMPLOYEE OR AGENT OF THE COMPANY OR OF ANY AFFILIATE OF THE COMPANY TO TERMINATE SUCH PERSON’S RELATIONSHIP WITH THE COMPANY OR SUCH AFFILIATE OR TO ENTER INTO AN EMPLOYMENT OR AGENCY RELATIONSHIP WITH ANY PERSON OTHER THAN THE COMPANY OR AN AFFILIATE OF THE COMPANY;   (II)                                  SOLICIT OR INDUCE ANY CUSTOMER OF THE COMPANY OR OF ANY AFFILIATE OF THE COMPANY TO TERMINATE OR REDUCE THE EXTENT OF SUCH CUSTOMER’S BUSINESS WITH THE COMPANY OR SUCH AFFILIATE OR TO BECOME A CUSTOMER OF ANY OTHER PERSON IN RESPECT OF PRODUCTS OR SERVICES OFFERED BY THE COMPANY OR ANY OF ITS AFFILIATES; OR   (III)                               MAKE ANY STATEMENTS OR TAKE ANY ACTION THAT COULD REASONABLY BE EXPECTED TO DAMAGE THE REPUTATION, STANDING OR BUSINESS OF THE COMPANY OR OF ANY AFFILIATE OF THE COMPANY.   4 --------------------------------------------------------------------------------   (B)                                 JUDICIAL MODIFICATION. EMPLOYEE ACKNOWLEDGES AND AGREES THAT THE RESTRICTIONS SET FORTH IN THIS SECTION 7 ARE REASONABLE AND NECESSARY IN DURATION AND SCOPE TO PROTECT THE LEGITIMATE INTERESTS AND EXPECTATIONS OF THE COMPANY. IF, CONTRARY TO THE AGREEMENT AND INTENT OF THE PARTIES, A COURT OF COMPETENT JURISDICTION SHOULD FIND THAT ANY SUCH RESTRICTION IS UNENFORCEABLE AS WRITTEN, THE PARTIES INTEND AND AGREE THAT SUCH RESTRICTION WILL BE DEEMED MODIFIED TO THE MINIMUM EXTENT NECESSARY TO RENDER IT ENFORCEABLE AND WILL BE ENFORCED AS SO MODIFIED.   8.                                       CONFIDENTIALITY. EXCEPT AS MAY BE REQUIRED IN CONNECTION WITH HIS OR HER EMPLOYMENT UNDER THIS AGREEMENT, EMPLOYEE WILL NOT, DIRECTLY OR INDIRECTLY, USE OR DISCLOSE TO ANY OTHER PERSON ANY INFORMATION OF A CONFIDENTIAL OR PROPRIETARY NATURE BELONGING OR RELATING TO THE COMPANY OR ANY OF ITS AFFILIATES, OR ANY INFORMATION THE DISCLOSURE OF WHICH COULD REASONABLY BE EXPECTED TO HAVE AN ADVERSE EFFECT ON THE COMPANY, ITS BUSINESSES, PROPERTY OR FINANCIAL CONDITION, INCLUDING BUT NOT LIMITED TO INFORMATION CONCERNING THE COMPANY’S METHODS OF OPERATION, TECHNIQUES, KNOW-HOW, PLANS, POLICIES, CUSTOMERS, SUPPLIERS, REPRESENTATIVES OR OTHER MATTERS OF ANY KIND OR DESCRIPTION RELATING TO THE PRODUCTS, SERVICES, OR BUSINESSES OF THE COMPANY OR ANY OF ITS AFFILIATES. ALL RECORDS, FILES, DOCUMENTS, EQUIPMENT AND THE LIKE RELATING TO THE COMPANY’S BUSINESSES WHICH EMPLOYEE MAY PREPARE, USE, POSSESS OR OBSERVE SHALL BE AND REMAIN THE SOLE PROPERTY OF THE COMPANY, AND UPON TERMINATION OF HIS OR HER EMPLOYMENT HEREUNDER FOR ANY REASON, EMPLOYEE SHALL RETURN TO THE COMPANY ANY ITEMS OF THAT NATURE AND ANY COPIES THEREOF WHICH HE OR SHE MAY HAVE IN HIS OR HER POSSESSION OR CONTROL.   9.                                       INDEMNITY.   (A)                                  INDEMNIFICATION. COMPANY WILL INDEMNIFY EMPLOYEE (AND, UPON HIS DEATH, HIS HEIRS, EXECUTORS AND ADMINISTRATORS) TO THE FULLEST EXTENT PERMITTED BY LAW AGAINST ALL LOSSES, LIABILITIES, COSTS AND EXPENSES, INCLUDING REASONABLE ATTORNEYS’ FEES, COURT AND INVESTIGATIVE COSTS, JUDGMENTS, FINES AND AMOUNTS PAID IN SETTLEMENT (COLLECTIVELY, “LOSSES”) REASONABLY INCURRED BY HIM IN CONNECTION WITH OR ARISING OUT OF ANY PENDING, THREATENED OR COMPLETED ACTION, SUIT OR PROCEEDING IN WHICH HE MAY BECOME INVOLVED BY REASON OF HIS HAVING BEEN AN OFFICER OR DIRECTOR OF THE COMPANY OR ANY AFFILIATE OF THE COMPANY. THE INDEMNIFICATION RIGHTS PROVIDED FOR HEREIN ARE NOT EXCLUSIVE AND WILL SUPPLEMENT ANY RIGHTS TO INDEMNIFICATION THAT EMPLOYEE MAY HAVE UNDER ANY APPLICABLE BYLAW OR CHARTER PROVISION OF COMPANY OR ANY AFFILIATE OF THE COMPANY OR ANY APPLICABLE STATUTE.   (B)                                 ADVANCEMENT OF EXPENSES. IN THE EVENT THAT EMPLOYEE BECOMES A PARTY, OR IS THREATENED TO BE MADE A PARTY, TO ANY PENDING, THREATENED OR COMPLETED ACTION, SUIT OR PROCEEDING FOR WHICH THE COMPANY IS REQUIRED TO INDEMNIFY HIM OR HER, THE COMPANY WILL, TO THE FULLEST EXTENT PERMITTED BY LAW, ADVANCE ALL EXPENSES INCURRED BY EMPLOYEE IN CONNECTION WITH THE INVESTIGATION, DEFENSE, SETTLEMENT OR APPEAL OF ANY THREATENED, PENDING OR COMPLETED ACTION, SUIT OR PROCEEDING, SUBJECT TO RECEIPT BY THE COMPANY OF A WRITTEN UNDERTAKING FROM EMPLOYEE TO REIMBURSE THE COMPANY FOR ALL AMOUNTS ACTUALLY PAID BY THE COMPANY TO OR ON BEHALF OF EMPLOYEE IN THE EVENT IT SHALL BE ULTIMATELY DETERMINED THAT THE COMPANY IS NOT OBLIGATED TO INDEMNIFY EMPLOYEE FOR SUCH AMOUNTS, AND TO ASSIGN TO THE COMPANY ALL RIGHTS OF EMPLOYEE TO INDEMNIFICATION UNDER ANY POLICY OF DIRECTORS AND OFFICERS LIABILITY INSURANCE TO THE EXTENT OF THE AMOUNTS ACTUALLY PAID BY COMPANY TO OR ON BEHALF OF EMPLOYEE.   5 --------------------------------------------------------------------------------   (C)                                  LITIGATION. UNLESS PRECLUDED BY AN ACTUAL OR POTENTIAL CONFLICT OF INTEREST, COMPANY WILL HAVE THE RIGHT TO RECOMMEND COUNSEL TO EMPLOYEE TO REPRESENT HIM IN CONNECTION WITH ANY CLAIM COVERED BY THIS SECTION 9. FURTHER, EMPLOYEE’S CHOICE OF COUNSEL, HIS DECISION TO CONTEST OR SETTLE ANY SUCH CLAIM, AND THE TERMS AND AMOUNT OF THE SETTLEMENT OF ANY SUCH CLAIM WILL BE SUBJECT TO COMPANY’S PRIOR REASONABLE APPROVAL IN WRITING.   10.                                 INJUNCTIVE RELIEF. EMPLOYEE ACKNOWLEDGES THAT IRREPARABLE INJURY WILL RESULT TO THE COMPANY AND ITS BUSINESS IN THE EVENT OF A BREACH OF SECTION 7 OR 8, THAT DAMAGES CAUSED BY SUCH BREACH WOULD BE DIFFICULT IF NOT IMPOSSIBLE TO ASCERTAIN AND THAT ANY REMEDY AT LAW FOR SUCH BREACH WILL BE INADEQUATE. EMPLOYEE AGREES THAT THE COMPANY WILL BE ENTITLED TO INJUNCTIVE RELIEF TO PREVENT OR STOP ANY SUCH BREACH, WITHOUT THE NECESSITY OF PROVING ACTUAL DAMAGE TO THE COMPANY OR OF POSTING ANY BOND OR OTHER SECURITY.   11.                                 ARBITRATION. ANY DISPUTE ARISING OUT OF THIS AGREEMENT OR CONNECTED WITH EMPLOYEE’S EMPLOYMENT WILL BE SUBMITTED TO BINDING ARBITRATION IN DENVER, COLORADO. THE ARBITRATION WILL BE CONDUCTED BY THE JUDICIAL ARBITER GROUP OR, IF THE JUDICIAL ARBITER GROUP IS NOT AVAILABLE, BY THE AMERICAN ARBITRATION ASSOCIATION OR ANOTHER ARBITRAL BODY SELECTED BY THE PARTIES. THE DECISION OF THE ARBITRATOR MAY BE ENTERED AS A JUDGMENT IN ANY COURT OF COMPETENT JURISDICTION. NOTWITHSTANDING THIS ARBITRATION PROVISION, THE COMPANY WILL BE ENTITLED TO APPLY TO ANY COURT OF COMPETENT JURISDICTION FOR INJUNCTIVE RELIEF UNDER SECTION 10.   12.                                 GOVERNING LAW; INTERPRETATION. THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF COLORADO. THE TITLES OF THE SECTIONS HAVE BEEN INSERTED FOR CONVENIENT REFERENCE ONLY AND WILL NOT AFFECT THE CONSTRUCTION OF THIS AGREEMENT.   13.                                 SEVERABILITY. THE INVALIDITY OR UNENFORCEABILITY OF ANY PROVISION OF THIS AGREEMENT WILL NOT AFFECT THE VALIDITY OR UNENFORCEABILITY OF ANY OTHER PROVISION. IF ANY PROVISION IS FOUND TO BE INVALID OR UNENFORCEABLE AS WRITTEN, IT WILL BE DEEMED MODIFIED TO THE MINIMUM EXTENT NECESSARY TO RENDER IT VALID AND ENFORCEABLE.   14.                                 BENEFIT. THIS AGREEMENT MAY NOT BE ASSIGNED BY EITHER PARTY WITHOUT THE WRITTEN CONSENT OF THE OTHER, AND ANY ASSIGNMENT WITHOUT SUCH CONSENT WILL BE NULL AND VOID; PROVIDED THAT THE COMPANY MAY ASSIGN THIS AGREEMENT, WITHOUT EMPLOYEE’S CONSENT, TO ANY SUCCESSOR TO ALL OR SUBSTANTIALLY ALL OF THE COMPANY’S BUSINESS AND ASSETS OR TO ANY SUCCESSOR TO ALL OR SUBSTANTIALLY ALL OF THE BUSINESS AND ASSETS OF THE AFFILIATE OF THE COMPANY FOR WHICH EMPLOYEE PRIMARILY WORKED. SUBJECT TO THAT LIMITATION, THIS AGREEMENT WILL BE BINDING UPON AND INURE TO THE BENEFIT OF THE PARTIES AND THEIR HEIRS, PERSONAL REPRESENTATIVES, SUCCESSORS AND ASSIGNS.   15.                                 NOTICES. ALL NOTICES GIVEN UNDER THIS AGREEMENT WILL BE IN WRITING. ANY NOTICE MAY BE TRANSMITTED BY ANY MEANS SELECTED BY THE SENDER. A NOTICE THAT IS MAILED TO A PARTY AT ITS ADDRESS GIVEN BELOW, REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, WITH ALL POSTAGE PREPAID, WILL BE DEEMED TO HAVE BEEN GIVEN AND RECEIVED ON THE EARLIER OF THE DATE REFLECTED ON THE RETURN RECEIPT OR THE THIRD BUSINESS DAY AFTER IT IS POSTED. A NOTICE SENT BY FACSIMILE TRANSMISSION TO A PARTY AT ITS FACSIMILE NUMBER GIVEN BELOW WILL BE DEEMED TO HAVE BEEN GIVEN AND RECEIVED UPON CONFIRMATION OF TRANSMISSION BY THE SENDER’S FACSIMILE MACHINE. A NOTICE TRANSMITTED BY RECOGNIZED OVERNIGHT COURIER SERVICE TO A PARTY AT ITS ADDRESS GIVEN BELOW WILL BE   6 --------------------------------------------------------------------------------   DEEMED GIVEN AND RECEIVED ON THE FIRST BUSINESS DAY AFTER IT IS DELIVERED TO THE COURIER. A NOTICE GIVEN BY ANY OTHER MEANS WILL BE DEEMED GIVEN AND RECEIVED ONLY UPON ACTUAL RECEIPT. THE ADDRESSES AND FACSIMILE NUMBERS OF THE PARTIES FOR NOTICE PURPOSES ARE AS FOLLOWS:   IF TO THE COMPANY:   COBIZ INC. 821 – 17TH STREET DENVER, COLORADO 80202 ATTN: LYNE ANDRICH FACSIMILE NO.: (720) 264-1958   IF TO THE EMPLOYEE:   TO THE ADDRESS OR FACSIMILE NUMBER SET FORTH ON EXHIBIT A.   EITHER PARTY MAY CHANGE HIS, HER OR ITS ADDRESS OR FACSIMILE NUMBER FOR NOTICE PURPOSES BY WRITTEN NOTICE TO THE OTHER PARTY.   16.                                 MODIFICATION. NO FAILURE BY EITHER PARTY TO INSIST UPON THE STRICT PERFORMANCE OF THIS AGREEMENT ON ONE OR MORE OCCASIONS WILL CONSTITUTE A WAIVER OF ANY RIGHT OR REMEDY HEREUNDER. THIS AGREEMENT MAY BE AMENDED, AND ANY RIGHT OR REMEDY HEREUNDER MAY BE WAIVED, ONLY IN A WRITING SIGNED BY THE PARTY AGAINST WHOM THE AMENDMENT OR WAIVER IS ASSERTED.   17.                                 WAIVER OF OTHER BENEFITS. EMPLOYEE IRREVOCABLY WAIVES ANY RIGHT HE MIGHT OTHERWISE HAVE TO RECEIVE ANY SEVERANCE, DAMAGES OR OTHER POST-TERMINATION PAYMENTS OR BENEFITS FROM THE COMPANY, EXCEPT FOR THOSE PROVIDED IN THIS AGREEMENT. THIS WAIVER EXPRESSLY INCLUDES, WITHOUT LIMITATION, ANY AMOUNTS PAYABLE UNDER ANY SEVERANCE PLAN OR POLICY ADOPTED BY THE COMPANY.   18.                                 SURVIVAL. THE PROVISIONS OF SECTIONS 6 (INSOFAR AS THEY REQUIRE PAYMENTS AFTER TERMINATION) AND 7 THROUGH 19 SHALL SURVIVE THE TERMINATION OF THIS AGREEMENT.   19.                                 ENTIRE AGREEMENT. THIS AGREEMENT SETS FORTH THE ENTIRE AGREEMENT AND UNDERSTANDING OF THE PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF AND SUPERSEDES ANY AND ALL PRIOR AND CONTEMPORANEOUS NEGOTIATIONS, UNDERSTANDINGS AND AGREEMENTS WITH REGARD TO THE SUBJECT MATTER HEREOF, WHETHER ORAL OR WRITTEN. IN ENTERING INTO THIS AGREEMENT, NEITHER PARTY HAS MADE OR RELIED UPON ANY REPRESENTATION OR PROMISE NOT SET FORTH HEREIN.   7 --------------------------------------------------------------------------------   IN WITNESS WHEREOF, THE PARTIES HAVE EXECUTED THIS EMPLOYMENT AGREEMENT AS OF THE DAY AND YEAR FIRST ABOVE WRITTEN.       COMPANY:       COBIZ INC.       BY: /S/ STEVEN BANGERT     NAME: STEVEN BANGERT   TITLE:    CEO           EMPLOYEE:         /S/ TROY R. DUMLAO       TROY R. DUMLAO   8 --------------------------------------------------------------------------------   EXHIBIT A   TERMS OF EMPLOYMENT     NAME OF EMPLOYEE: TROY R. DUMLAO         CAPACITY(IES): 1ST VICE PRESIDENT & CONTROLLER         REPORTING PERSON: LYNE ANDRICH       MINIMUM BASE COMPENSATION: $8,750.00 PER MONTH       VACATION:    4 WEEKS PER YEAR       ADDRESS AND FACSIMILE   NUMBER OF EMPLOYEE: TROY R. DUMLAO     821 17TH STREET     DENVER, CO 80202     (720) 264-1956     A-1 --------------------------------------------------------------------------------   EXHIBIT B   DEFINITIONS   “Affiliate” means, with respect to a specified Person, (i) any other Person directly or indirectly controlling, controlled by or under common control with the specified Person, (ii) any trust in which the specified Person holds 10% or more of the beneficial interest, as beneficiary, settler or otherwise, (iii) any member of the immediate family of the specified Person, (iv) any director, executive officer, manager, member, partner or trustee of the specified Person, or (v) any other Person in which the specified person or any Affiliate of the specified Person owns a beneficial interest of 10% or more.   “Cause” for the termination by the Company of Employee’s employment means (i) a breach by Employee of Section 7 or 8 of the Agreement, (ii) a breach of any other provision of this Agreement by Employee which, if curable, has not been cured within 15 days after notice from the Company, (iii) theft or embezzlement from or other dishonesty involving the Company by Employee, (iv) the commission by Employee of a crime involving moral turpitude or constituting a felony, (v) gross negligence or willful misconduct with respect to Employee’s duties and responsibilities to the Company, (vi) the willful failure or refusal of Employee to perform his duties under this Agreement or to carry out the lawful instructions of the Reporting Person or Board of Directors, (vii) a material violation of the standards of conduct or code of ethics established by the Company or (viii) Employee engages in self-dealing or attempts to obtain any improper personal benefit or profit from the Company or any transaction in which the Company or any Affiliate of the Company has an interest.   “Change of Control” of the Company shall be deemed to have occurred if: (i) any person (as such term is defined in Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended (the “1934 Act”)), other than a person who is a shareholder of the Company as of the date of this Agreement, acquires beneficial ownership (within the meaning of Rule 13d-3 promulgated under the 1934 Act) of more than 50% of the combined voting power of the then outstanding voting securities of the Company; or (ii) the Company merges or consolidates with or into another entity if the shareholders of the Company immediately before such merger or consolidation do not, immediately after such merger or consolidation, own, directly or indirectly, more than 50% of the combined voting power of the then outstanding voting securities of the entity resulting from such merger or consolidation in substantially the same proportion as their ownership of the combined voting power of the outstanding securities of the Company immediately before such merger or consolidation; or (iii) the sale or other disposition of all or substantially all of the assets of the Company or CoBiz Bank, N.A. Notwithstanding the foregoing, a Change of Control will not be deemed to have occurred: (x) solely because more than 50% of the combined voting power of the then outstanding voting securities of the Company are acquired by a trustee or other fiduciary holding securities under one or more employee benefit plans maintained for employees of the Company or its subsidiaries; or (y) if Employee agrees in writing to waive a particular Change of Control for the purposes of this Agreement.   “Disability” has the meaning given to that term (or the most closely analogous term) in the Company’s long-term disability insurance policy as in effect at the relevant time. If no such   B-1 --------------------------------------------------------------------------------   policy is in effect, “Disability” means a mental or physical condition that prevents Employee from performing the essential functions of his or her position hereunder, with or without reasonable accommodations by the Company, as determined by the Company in its discretion.   “Good Reason” for the termination by Employee of his or her employment means (i) Employee is removed from all of the capacities described in Exhibit A, other than for Cause, and is not offered another position with the Company or an Affiliate of the Company that is commensurate with Employee’s education, experience and abilities; (ii) the Company decreases Employee’s base compensation or arbitrarily and capriciously decreases Employee’s bonus; or (iii) the Company transfers Employee to a location outside the metropolitan area in which Employee’s employment was based on the date of this Agreement; provided that (x) no such action or event shall constitute Good Reason if Employee consents to the action or event, whether before, at or after the time that it is taken, (y) no such action or event shall constitute Good Reason unless Employee gives written notice to the Company within 30 days after the action or event, which notice shall specify the action or event and indicate that Employee believes it constitutes Good Reason as defined herein, and the Company fails to cure the action or event within 30 days after such notice and (z) a termination by Employee of his or her employment shall not be a termination for Good Reason unless notice of the termination is given by Employee within 90 days after the end of the 30-day period established in clause (y) above.   “Person” means any individual and any corporation, partnership, trust, unincorporated organization, association, limited liability company or other entity.   B-2 --------------------------------------------------------------------------------  

Exhibit 10.4 Description of salaries of certain executive officers On February 15, 2006, the Compensation Committee of the Board of Directors of National Fuel Gas Company (the “Company”) approved increases in the base salaries of David F. Smith and Ronald J. Tanski. Mr. Smith was elected President and Chief Operating Officer of the Company effective February 1, 2006. He also serves as President of National Fuel Gas Supply Corporation and President of Empire State Pipeline. His base salary increased from $450,000 to $525,000. Mr. Tanski was elected President of National Fuel Gas Distribution Corporation effective February 1, 2006. In addition, he serves as Treasurer and Principal Financial Officer of the Company. His base salary increased from $350,000 to $400,000. The base salary of the Company’s Chairman of the Board and Chief Executive Officer, Philip C. Ackerman, is $825,000, and the base salary of James A. Beck, President of Seneca Resources Corporation, is $450,000. None of these executive officers and none of the other executive or non-executive officers of the Company or its subsidiaries are employed pursuant to employment agreements; instead, they are “at will” employees. The Compensation Committee may, among other things, adjust the base salaries of executive officers at its discretion.        

  EXHIBIT 10.28 AMENDED AND RESTATED EMPLOYMENT AGREEMENT between THE CONNECTICUT WATER COMPANY CONNECTICUT WATER SERVICE, INC. and Daniel J. Meaney   --------------------------------------------------------------------------------     EXHIBIT 10.28 AMENDED AND RESTATED EMPLOYMENT AGREEMENT      THIS AGREEMENT, dated as of January 12, 2006, is made by and between The Connecticut Water Company, a Connecticut corporation having its principal place of business in Clinton, Connecticut, (“Company”), Connecticut Water Service, Inc., a Connecticut corporation and holder of all of the outstanding capital stock of Company (“Parent”) and DANIEL J. MEANEY (“Executive”), a resident of Ellington, Connecticut. W I T N E S S E T H :      WHEREAS, Executive has been and continues to be employed by Company and Parent in an executive capacity and has entered into an Employment Agreement between Executive and Company and Parent dated as of January 12, 2006 which becomes effective upon a “Change-in-Control,” as defined herein, of Company or Parent; and      WHEREAS, should Company or Parent receive a proposal from or engage in discussions with a third person concerning a possible combination with Company or Parent or the acquisition of a substantial portion of voting securities of Company or Parent, the Boards of Directors of Company and Parent have deemed it imperative that they and Company and Parent be able to rely on Executive to continue to serve in Executive’s position and that the Boards of Directors and Company and Parent be able to rely upon Executive’s advice as being in the best interests of Company and Parent and their shareholders without concern that Executive might be distracted by the personal uncertainties and risks that such a proposal or discussions might otherwise create; and      WHEREAS, Company and Parent desire to reward Executive for Executive’s valuable, dedicated service to Company and Parent should Executive’s service be terminated under circumstances hereinafter described: and      WHEREAS, Executive, Company and Parent are willing to enter into this Amended and Restated Employment Agreement (“Agreement”) on the terms herein set forth;      NOW, THEREFORE, to assure Company and Parent of Executive’s continued dedication and the availability of Executive’s advice and counsel in the event of any such proposal, to induce Executive to remain in the employ of Company and Parent and to reward Executive for Executive’s valuable dedicated service to Company and Parent should Executive’s service be terminated under circumstances hereinafter described, and for other good and valuable consideration, the receipt and adequacy of which each party acknowledges, Company, Parent and Executive agree as follows: --------------------------------------------------------------------------------   -2-      1. Definitions. For purposes of this Agreement, the following terms shall have the following meanings:           (a) “Cause” shall mean Executive’s serious, willful misconduct in respect of Executive’s duties under this Agreement, including conviction for a felony or perpetration by Executive of a common law fraud upon Company or Parent which has resulted or is likely to result in material economic damage to Company or Parent, as determined by a vote of at least seventy-five percent (75%) of all of the Directors (excluding Executive) of each of Company’s and Parent’s Board of Directors;           (b) “Change-in-Control” shall be deemed to have occurred if after the date hereof (i) a public announcement shall be made or a report on Schedule 13D shall be filed with the Securities and Exchange Commission pursuant to Section 13(d) of the Securities Exchange Act of 1934 (the “Act”) disclosing that any Person (as defined below), other than Company or Parent or any employee benefit plan sponsored by Company or Parent, is the beneficial owner (as the term is defined in Rule 13d-3 under the Act) directly or indirectly, of twenty percent (20%) or more of the total voting power represented by Company’s or Parent’s then outstanding voting common stock (calculated as provided in paragraph (d) of Rule 13d-3 under the Act in the case of rights to acquire voting common stock); or (ii) any Person, other than Company or Parent or any employee benefit plan sponsored by Company or Parent, shall purchase shares pursuant to a tender offer or exchange offer to acquire any voting common stock of Company or Parent (or securities convertible into such voting common stock) for cash, securities or any other consideration, provided that after consummation of the offer, the Person in question is the beneficial owner directly or indirectly, of twenty percent (20%) or more of the total voting power represented by Company’s or Parent’s then outstanding voting common stock (all as calculated under clause (i)); or (iii) the stockholders of Company or Parent shall approve (A) any consolidation or merger of Company or Parent in which Company or Parent is not the continuing or surviving corporation (other than a merger of Company or Parent in which holders of the outstanding capital stock of Company or Parent immediately prior to the merger have the same proportionate ownership of the outstanding capital stock of the surviving corporation immediately after the merger as immediately before), or pursuant to which the outstanding capital stock of Company or Parent would be converted into cash, securities or other property, or (B) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all the assets of Company or Parent; or (iv) there shall have been a change in the composition of the Board of Directors of Company or Parent at any time during any consecutive twenty-four (24) month period such that “continuing directors” cease for any reason to constitute at least a majority of the Board unless the election, or the nomination for election of each new Director was approved by a vote of at least two-thirds (2/3) of the Directors then still in office who were Directors at the beginning of such period; or (v) the Board of Directors of Company or Parent, by a vote of a majority of all the Directors (excluding Executive) adopts a resolution to the effect that a “Change-in-Control” has occurred for purposes of this Agreement. --------------------------------------------------------------------------------   -3-           (c) “Disability” shall mean the incapacity of Executive by illness or any other cause as determined under the long-term disability insurance plan of Company in effect at the time in question, or if no such plan is in effect, then such incapacity of Executive as prevents Executive from performing the essential functions of Executive’s position with or without reasonable accommodation for a period in excess of two hundred forty (240) days (whether or not consecutive), or one hundred eighty (180) days consecutively, as the case may be, during any twelve (12) month period.           (d) “Effective Date” shall be the date on which a Change-in-Control occurs. Anything in this Agreement to the contrary notwithstanding, if Executive’s employment is terminated prior to the date on which a Change-in-Control occurs, and it is reasonably demonstrated that such termination (i) was at the request of a third party who has taken steps reasonably calculated to effect a Change-in-Control or (ii) otherwise arose in connection with or anticipation of a Change-in-Control, then for all purposes of this Agreement the “Effective Date” shall mean the date immediately prior to the date of such termination.           (e) “Good Reason” shall mean the occurrence of any action which (i) removes or changes Executive’s title or reduces Executive’s job responsibilities or base salary; (ii) results in a significant worsening of Executive’s work conditions; or (iii) moves Executive’s place of employment to a location that increases Executive’s commute by more than thirty (30) miles over the length of Executive’s commute from Executive’s place of principal residence at the time the move is requested. For purposes of this subparagraph (e), any good faith determination by Executive that any such action has occurred shall be conclusive. Notwithstanding the foregoing, at any time during the period commencing on the Effective Date and ending on the 30th day after the first anniversary of the Effective Date, except for purposes of Paragraph 5(g), “Good Reason” shall mean any reason or no reason.           (f) “Person” shall mean any individual, corporation, partnership, company or other entity, and shall include a “group” as defined in Section 13(d)(3) of the Securities Exchange Act of 1934.      2. Employment.           (a) As of the Effective Date, Company hereby agrees to continue to employ Executive and Executive agrees to remain in the employ of Company for the Term of this Agreement upon the terms and conditions hereinafter set forth. Subject to the provisions of subparagraph (b) of this Paragraph 2, and to the provisions of Paragraph 6 below, “Term” shall mean a continuously renewing period of three (3) years commencing on the Effective Date.           (b) At any time during the Term, the Board of Directors of Company and Parent may, by written notice to Executive, advise Executive of their desire to modify or amend any of the terms or provisions of this Agreement or to delete or add any terms or provisions. Any such notice (“Notice”) shall describe the proposed modifications in reasonable detail. In the event a Notice shall be given to Executive, then Company, Parent and Executive agree to discuss --------------------------------------------------------------------------------   -4- the proposed modification(s) and to attempt in good faith to reach agreement with respect thereto and to reduce such agreement to writing in an amendment to be executed by all the parties (“Amendment”). If a Notice is given hereunder and an Amendment shall not have been executed on or before the sixtieth (60th) day following the date on which Notice is given, then the Term shall thereupon be automatically converted to a fixed period ending three (3) years after the expiration of such sixty (60) days.      3. Duties of Employment.           (a) During the Term, Executive’s position (including status, offices, titles and reporting requirements), authority, duties and responsibilities shall be at least commensurate in all material respects with the most significant of those held, exercised and assigned at any time during the ninety (90)-day period immediately preceding the Effective Date and Executive’s services shall be performed at such location as Executive shall determine.           (b) During the Term, Executive will serve Company faithfully, diligently and competently and will devote full-time to Executive’s employment and will hold, in addition to the offices held on the Effective Date, such other executive offices of Company or Parent, or their respective subsidiaries and affiliates, to which Executive may be elected, appointed or assigned by the Boards of Directors of Company or Parent from time to time and will discharge such executive duties in connection therewith. Nothing in this Agreement shall preclude Executive, with the prior approval of the Board of Directors of Company, from devoting reasonable periods of time required for (i) serving as a director or member of a committee of any organization involving no conflict of interest with Company or Parent, or (ii) engaging in charitable, religious and community activities, provided, that such directorships, memberships or activities do not materially interfere with the performance of Executive’s duties hereunder.      4. Compensation. During the Term, Company shall pay to Executive as compensation for the services to be rendered by Executive hereunder the following:           (a) A base salary at a rate equal to the highest base salary paid or payable to Executive by Company during the twelve (12)-month period immediately preceding the month in which the Effective Date occurs, or such larger sum as the Board of Directors of Company may from time to time determine in connection with regular periodic performance reviews pursuant to Company’s policies and practices. Such compensation shall be payable in accordance with the normal payroll practices of Company. Executive shall receive an annual increase in base salary at each normal pay adjustment date during the Term, but no later than one (1) year after the date of Executive’s last increase and annually thereafter during the Term, of not less than the percentage increase in the cost-of-living since Executive’s last pay adjustment, as measured by the Consumer Price Index-All Urban Consumers of the U.S. Bureau of Labor Statistics.           (b) In addition, Company shall pay to Executive an annual bonus, payable in cash or other form of compensation, in accordance with the Company’s practice or plan for annual bonuses for peer executives which is at least equal to the target percentage of the --------------------------------------------------------------------------------   -5- midpoint of Executive’s salary grade under the Company’s Officers Incentive Program for the year preceding the fiscal year in which the Effective Date occurs.      5. Benefits. During the Term, Executive shall be entitled to the following benefits:           (a) Incentive, Savings and Retirement Plans. In addition to base salary and bonus payable as hereinabove provided, Executive shall be entitled to participate during the Term in all incentive, savings and retirement plans, practices, policies and programs applicable to executive employees of Company as may be in effect from time to time. Such plans, practices, policies and programs, in the aggregate, shall provide Executive with compensation, benefits and reward opportunities at least as favorable as the most favorable of such compensation, benefits and reward opportunities provided by Company for Executive under such plans, practices, policies and programs as in effect at any time during the ninety (90)-day period immediately preceding the Effective Date or, if more favorable to Executive, as provided at any time thereafter with respect to other key employees of Company or Parent.           (b) Welfare Benefit Plans. During the Term, Executive and/or Executive’s family, as the case may be, shall be eligible for participation in and shall receive all benefits under welfare benefit plans, practices, policies and programs applicable to executive employees of Company (including, without limitation, medical, prescription, dental, disability, salary continuance, employee life, group life, accidental death and travel accident insurance plans and programs) at least as favorable as the most favorable of such plans, practices, policies and programs in effect at any time during the ninety (90)-day period immediately preceding the Effective Date or, if more favorable to Executive and/or Executive’s family, as in effect at any time thereafter with respect to other key employees of Company or Parent.           (c) Expenses. During the Term, Executive shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by Executive in accordance with the most favorable policies, practices and procedures of Company in effect at any time during the ninety (90)-day period immediately preceding the Effective Date or, if more favorable to Executive, as in effect at any time thereafter with respect to other key employees of Company or Parent.           (d) Fringe Benefits. During the Term, Executive shall be entitled to fringe benefits, including use of an automobile and payment of related expenses or payment of an allowance for automobile related expenses, in accordance with the most favorable plans, practices, programs and policies of Company in effect at any time during the ninety (90)-day period immediately preceding the Effective Date or, if more favorable to Executive, as in effect at any time thereafter with respect to other key employees of Company or Parent.           (e) Office and Support Staff. During the Term, Executive shall be entitled to an office or offices of a size and with furnishings and other appointments, and to secretarial and other assistance, at least equal to the most favorable of the foregoing provided to Executive by Company at any time during the ninety (90)-day period immediately preceding the Effective Date or, if more favorable to Executive, as provided at any time thereafter with respect to other key employees of Company or Parent. --------------------------------------------------------------------------------   -6-           (f) Vacation. During the Term, Executive shall be entitled to paid vacation in accordance with the most favorable plans, policies, programs and practices of Company as in effect at any time during the ninety (90)-day period immediately preceding the Effective Date or, if more favorable to Executive, as in effect at any time thereafter with respect to other key employees of Company or Parent.      6. End of Term and Notice of Termination.           (a) End of Term. The Term shall end upon the occurrence of any of the following events:                (i) Termination of Executive’s employment by Company for Cause.                (ii) The voluntary termination of Executive’s employment by Executive other than for Good Reason.                (iii) The death of Executive.                (iv) Executive’s attainment of age sixty-five (65).                (v) Full compliance by Company with the provisions of Paragraph 7(e) below, if Executive’s employment shall have been terminated by Company during the Term for any reason other than Cause, or if Executive’s employment shall have been terminated by reason of Executive’s Disability, or if Executive shall have voluntarily terminated Executive’s employment during the Term for Good Reason.           (b) Notice of Termination. Any termination by Company for Cause or by Executive for Good Reason or on account of Executive’s Disability shall be communicated by notice to the other party hereto given in accordance with Section 16 of this Agreement. For purposes of this Agreement, a “notice” means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive’s employment under the provision so indicated and (iii) if the date of termination (as defined below) is other than the date of receipt of such notice, specifies the termination date (which date shall be not more than fifteen (15) days after the giving of such notice).           (c) Date of Termination. The date of termination means the date of receipt of the notice of termination or any later date specified therein, as the case may be; provided, however, that (i) if Executive’s employment is terminated by Company other than for Cause or on account of Executive’s Disability, the date of termination shall be the date on which Company notifies Executive of such termination and (ii) if Executive’s employment is terminated by reason of death, the date of termination shall be the date of death of Executive.      7. Payment Upon Termination. --------------------------------------------------------------------------------   -7-           (a) If Executive’s employment is terminated by Company for Cause, as defined in Paragraph 1(a), the obligations of Company under this Agreement shall cease and Executive shall forfeit all right to receive any compensation or other benefits under this Agreement except only compensation or benefits accrued or earned and vested (if applicable) by Executive as of the date of termination, including base salary through the date of termination, benefits payable under the terms of any qualified or nonqualified retirement plans or deferred compensation plans maintained by Company, any accrued vacation pay as of the date of termination not yet paid by Company and any benefits required to be paid by law such as continued health care coverage pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”) (collectively, the “Accrued Obligations”).           (b) If Executive shall voluntarily terminate Executive’s employment during the Term, other than for Good Reason, as defined in Paragraph 1(e), the obligations of Company under this Agreement shall cease and Executive shall forfeit all right to receive any compensation or other benefits under this Agreement except only the Accrued Obligations.           (c) In the event of the death of Executive during the Term, then, in addition to the Accrued Obligations and any other benefits which may be payable by Company in respect of the death of Executive, the base salary then payable hereunder shall continue to be paid at the then current rate for a period of six (6) months after such death to such beneficiary as shall have been designated in writing by Executive, or if no effective designation exists, then to the estate of Executive.           (d) If Executive’s employment is terminated by reason of Executive’s attainment of age sixty-five (65), the obligations of Company under this Agreement shall cease and Executive shall forfeit all right to receive any compensation or other benefits under this Agreement except only the Accrued Obligations.           (e) If Executive’s employment is terminated by Company during the Term for any reason other than for Cause, or Executive’s death, or Executive’s attainment of age sixty-five (65), or if Executive’s employment is terminated during the Term by reason of Executive’s Disability, or if Executive shall voluntarily terminate Executive’s employment during the Term for Good Reason, Executive shall be entitled to receive, and Company shall be obligated to pay and provide Executive, the following amounts:                (i) An amount in consideration of the covenants by Executive set forth in Paragraphs 8 and 9 below to be determined by a nationally recognized independent certified public accounting firm selected and retained by Company to be the reasonable value of said covenants as of the date of termination of Executive’s employment, but in no event shall such amount be greater than the aggregate value of the benefits provided in subparagraphs (e)(ii), (iii), (iv), (v), (vii), (viii), (ix) and (xi) hereinbelow. The benefits otherwise payable to Executive pursuant to said subparagraphs shall be offset by the amount, if any, payable to Executive in respect of the covenants by Executive set forth in Paragraphs 8 and 9 below. Notwithstanding the foregoing, if any benefit otherwise payable to Executive pursuant to said subparagraphs --------------------------------------------------------------------------------   -8- would be offset by the amount payable to Executive in respect of the covenants set forth in Paragraphs 8 and 9 below, Executive may elect to receive such benefit, but the amount payable to Executive in respect of the covenants by Executive set forth in Paragraphs 8 and 9 below shall be reduced by the value of such benefit. Said amount paid in consideration of the covenants by Executive set forth in Paragraphs 8 and 9 below shall be paid in cash in a lump sum in the month next following Executive’s date of termination of employment and shall be treated as a supplemental wage payment under applicable Treasury Regulations subject to federal tax withholding at the flat percentage rate applicable thereto.                (ii) An amount equal to three (3) times the base salary of Executive, at the rate in effect immediately prior to the date of termination, plus an amount equal to three (3) times the target percentage of the midpoint of Executive’s salary grade under the Company’s Officers Incentive Program for the year in which termination occurs. There shall be subtracted from the aggregate amount determined in accordance with the immediately preceding sentence the amount, if any, payable to Executive under any then effective severance pay plan of Company. Such resulting amount shall be payable in equal installments over the three (3)-year period commencing on the date of termination of employment in accordance with the normal payroll practices of Company or, at Company’s option, the entire amount (determined without any discount) shall be paid in cash in a lump sum in the month next following Executive’s date of termination of employment and shall be treated as a supplemental wage payment under applicable Treasury Regulations subject to federal tax withholding at the flat percentage rate applicable thereto.                (iii) An amount equal to the aggregate amounts that Company would have contributed on behalf of Executive under Company’s qualified defined contribution retirement plan(s), if any such plan(s) shall be in effect (other than amounts attributable to Executive’s before-tax contributions to such plan(s)) plus estimated earnings thereon had Executive continued in the employ of Company for the three (3)-year period commencing on the date of termination and made contributions under said plan(s) at a rate, as a percentage of salary, equal to the rate at which Executive had made contributions to said plan(s) in the plan year immediately preceding Executive’s termination, to be payable in a lump sum to Executive within thirty (30) days after the expiration of the non-competition period specified in Paragraph 9(a) of this Agreement, provided that Executive shall not have breached said non-competition provisions.                (iv) An amount equal to the difference between: (A) benefits which would have been payable to Executive under any deferred compensation agreement between Company and Executive, if any such agreement shall be in effect, had Executive continued in the employ of Company for the three (3)-year period commencing on the date of termination, received compensation at least equal to that specified in Paragraph 4 of this Agreement during such time, and deferred pursuant to said deferred compensation agreement the amount of compensation specified therein; and (B) the benefits actually payable to Executive under such deferred compensation agreement; such amount to be payable in a lump sum to Executive within thirty (30) days after the expiration of the non-competition period specified in Paragraph 9(a) of --------------------------------------------------------------------------------   -9- this Agreement, provided that Executive shall not have breached said non-competition provisions.                (v) Additional retirement benefits equal to the difference between: (A) the annual pension benefits that would have been payable to Executive under Company’s qualified defined benefit retirement plan (the “Plan”) and under any nonqualified supplemental executive retirement plan covering Executive (the “Supplemental Plan”), if any such Plan or Supplemental Plan shall be in effect, if Executive had been continued in the employ of Company for the three (3)-year period commencing on the date of termination and had received compensation at least equal to that specified in Paragraph 4(a) of this Agreement during such time and had been fully vested in the benefits payable under any such Plan and Supplemental Plan; and (B) the annual benefits actually payable to Executive under any such Plan and Supplemental Plan. The discounted present value of such additional benefits, shall be payable to Executive in a lump sum, as calculated by the independent actuary for the Plan using the assumptions specified in the Plan, within thirty (30) days after the expiration of the non-competition period specified in Paragraph 9(a) of this Agreement, provided that Executive shall not have breached said non-competition provisions.                (vi) At the date of termination of Executive’s employment, Executive shall be fully vested in any form of compensation previously granted to Executive (other than benefits payable under a qualified retirement plan), such as, by way of example only, restricted stock, stock options, and performance share awards.                (vii) If Executive’s employment is terminated by reason of Executive’s Disability, Executive shall be entitled to receive, in addition to the other benefits provided under this Paragraph 7(e), disability benefits at least equal to the most favorable of those provided by Company or Parent to disabled employees in accordance with the most favorable plans, programs, practices and policies of Company or Parent in effect at any time during the ninety (90)-day period immediately preceding the Effective Date or, if more favorable to Executive, as in effect on the date of Executive’s Disability with respect to other key employees of Company or Parent.                (viii) During the three (3)-year period commencing on the date of termination, or such longer period as any plan, program, practice or policy may provide, Executive shall continue to participate in all life, health, disability and similar welfare benefit plans and programs of Company to the extent that such continued participation is possible under the general terms and provisions of such plans and programs, and Executive shall be credited with additional service attributable to the three (3)-year period commencing on the date of termination for purposes of determining eligibility to participate in any such plans or programs maintained by Company for retirees, with Company and Executive paying the same portion of the cost of each such plan or program as existed at the time of Executive’s termination. In the event that Executive’s continued participation (or commencement of participation for plans or programs for retirees) is not permitted, then in lieu thereof, Company shall acquire, with the same cost sharing, individual insurance policies providing comparable coverage for Executive; provided, however, that Company shall not be obligated to pay more than three (3) times --------------------------------------------------------------------------------   -10- Company’s current cost for comparable group coverage. If any such individual coverage is unavailable, then Company shall pay to Executive annually for the three (3)-year period commencing on the date of termination an amount equal to the sum of the average annual contributions, payments, credits, or allocations made by Company for such coverage on Executive’s behalf (or the average such contributions, payments, credits, or allocations for retirees, in the case of retiree coverage) over the three (3) calendar years preceding the date of termination of Executive’s employment.                (ix) During the three (3)-year period commencing on the date of termination, Executive shall continue to receive such perquisites, other than those specified in the preceding subparagraphs above, as Executive was receiving at the date of termination of employment with, to the extent applicable, the same cost sharing with Company as was in effect immediately prior to Executive’s termination of employment.                (x) Company shall reimburse Executive for the amount of any reasonable legal or accounting fees and expenses incurred by Executive to obtain or enforce any right or benefit provided to Executive by Company hereunder or as confirmed or acknowledged hereunder.      8. Confidential Information. Executive understands that in the course of Executive’s employment by Company, Executive will receive or have access to confidential information concerning the business or purposes of Company and Parent, and which Company and Parent desire to protect. Such confidential information shall be deemed to include, but not be limited to, Company’s customer lists and information, and employee lists, including, if known, personnel information and data. Executive agrees that Executive will not, at any time during the period ending two (2) years after the date of termination of Executive’s employment, reveal to anyone outside Company or Parent or use for Executive’s own benefit any such information without specific written authorization by Company or Parent. Executive further agrees not to use any such confidential information or trade secrets in competing with Company or Parent at any time during or in the two (2) year period immediately following the date of termination of Executive’s employment with Company. 9. Covenants by Executive Not to Compete With Company or Parent.           (a) Upon the date of termination of Executive’s employment with Company for any reason, Executive covenants and agrees that Executive will not at any time during the period of two (2) years from and after such date of termination directly or indirectly in any manner or under any circumstances or conditions whatsoever be or become interested, as an individual, partner, principal, agent, clerk, employee, stockholder, officer, director, trustee, or in any other capacity whatsoever, except as a nominal owner of stock of a public corporation, in any other business which, at the date of Executive’s termination, is a Competitor (as defined herein), either directly or indirectly, with Company or Parent, or engage or participate in, directly or indirectly (whether as an officer, director, employee, partner, consultant, holder of an equity or debt investment, lender or in any other manner or capacity), or lend Executive’s name (or any --------------------------------------------------------------------------------   -11- part or variant thereof) to, any business which, at the date of Executive’s termination, is a Competitor, either directly or indirectly, with Company or Parent, or as a result of Executive’s engagement or participation would become, a Competitor, either directly or indirectly, with any aspect of the business of Company or Parent as it exists at the time of Executive’s termination, or solicit any officer, director, employee or agent of Company or Parent or any subsidiary or affiliate of Company or Parent to become an officer, director, employee or agent of Executive, Executive’s respective affiliates or anyone else. Ownership, in the aggregate, of less than one percent (1 %) of the outstanding shares of capital stock of any corporation with one or more classes of its capital stock listed on a national securities exchange or publicly traded in the over-the-counter market shall not constitute a violation of the foregoing provision. For the purposes of this Agreement, a Competitor is any business which is similar to the business of Company or Parent or in any way in competition with the business of Company or Parent within any of the then-existing water utility service areas of Company.           (b) Executive hereby acknowledges that Executive’s services are unique and extraordinary, and are not readily replaceable, and hereby expressly agrees that Company and Parent, in enforcing the covenants contained in Paragraphs 8 and 9 herein, in addition to any other remedies provided for herein or otherwise available at law, shall be entitled in any court of equity having jurisdiction to an injunction restraining Executive in the event of a breach, actual or threatened, of the agreements and covenants contained in these Paragraphs.           (c) The parties hereto believe that the restrictive covenants of these Paragraphs are reasonable. However, if at any time it shall be determined by any court of competent jurisdiction that these Paragraphs or any portion of them as written, are unenforceable because the restrictions are unreasonable, the parties hereto agree that such portions as shall have been determined to be unreasonably restrictive shall thereupon be deemed so amended as to make such restrictions reasonable in the determination of such court, and the said covenants, as so modified, shall be enforceable between the parties to the same extent as if such amendments had been made prior to the date of any alleged breach of said covenants.           (d) The provisions of this Paragraph 9 shall not apply if Company and Parent shall be prohibited under Paragraph 15 below from making any payments to Executive pursuant to Paragraph 7 above.      10. No Obligation to Mitigate. So long as Executive shall not be in breach of any provision of Paragraph 8 or 9, Executive shall have no duty to mitigate damages in the event of a termination and if Executive voluntarily obtains other employment (including self-employment), any compensation or profits received or accrued, directly or indirectly, from such other employment shall not reduce or otherwise affect the obligations of Company and Parent to make payments hereunder.      11. Resignation. In the event that Executive’s services hereunder are terminated under any of the provisions of this Agreement (except by death), Executive agrees that Executive will deliver Executive’s written resignation as an officer of Company or Parent, or their --------------------------------------------------------------------------------   -12- subsidiaries and affiliates, to the Board of Directors, such resignation to become effective immediately, or, at the option of the Board of Directors, on a later date as specified by the Board.      12. Insurance. Company shall have the right at its own cost and expense to apply for and to secure in its own name, or otherwise, life, health or accident insurance or any or all of them covering Executive, and Executive agrees to submit to the usual and customary medical examination and otherwise to cooperate with Company in connection with the procurement of any such insurance, and any claims thereunder.      13. Release. As a condition of receiving payments or benefits provided for in this Agreement, at the request of Company or Parent, Executive shall execute and deliver for the benefit of Company and Parent, and any subsidiary or affiliate of Company or Parent, a general release in the form set forth in Attachment A, and such release shall become effective in accordance with its terms. The failure or refusal of Executive to sign such a release or the revocation of such a release shall cause the termination of any and all obligations of Company and Parent to make payments or provide benefits hereunder, and the forfeiture of the right of Executive to receive any such payments and benefits. Executive acknowledges that Company and Parent have advised Executive to consult with an attorney prior to signing this Agreement and that Executive has had an opportunity to do so.      14. Regulatory Limitation. Notwithstanding any other provision of this Agreement, Company shall not be obligated to make, and Executive shall have no right to receive, any payment, benefit or amount under this Agreement which would violate any law, regulation or regulatory order applicable to Company or Parent at the time such payment, benefit or amount is due (“Prohibited Payment”). If and to the extent Company shall at a later date be relieved of the restriction on its ability to make any Prohibited Payment, then at such time Company or Parent shall promptly make payment of any such amounts to Executive.      15. Notices. All notices under this Agreement shall be in writing and shall be deemed effective when delivered in person to Executive or to the Secretary of Company and Parent, or if mailed, postage prepaid, registered or certified mail, addressed, in the case of Executive, to Executive’s last known address as carried on the personnel records of Company, and, in the case of Company and Parent, to the corporate headquarters, attention of the Secretary, or to such other address as the party to be notified may specify by notice to the other party.      16. Successors and Binding Agreement.           (a) Company and Parent will require any successor, whether direct or indirect, by purchase, merger, consolidation or otherwise to all or substantially all of the business and/or assets of Company and/or Parent, as the case may be, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that Company and Parent are required to perform it. Failure of Company and Parent to obtain such assumption and agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle Executive to compensation and benefits from Company and Parent in the same amount and on the same terms as Executive would be entitled hereunder if Executive had terminated --------------------------------------------------------------------------------   -13- employment for Good Reason, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the date on which Executive’s employment with Company was terminated. As used in this Agreement, “Company” and “Parent” shall include any successor to Company’s and/or Parent’s, as the case may be, business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise.           (b) This Agreement shall inure to the benefit of, and be enforceable by, Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If Executive dies while any amount is still payable hereunder, all such amounts shall be paid in accordance with the terms of this Agreement to Executive’s devisee, legatee or other designee or, if there is no such designee, to Executive’s estate.      17. Arbitration. Any dispute which may arise between the parties hereto may, if both parties agree, be submitted to binding arbitration in the State of Connecticut in accordance with the Rules of the American Arbitration Association; provided that any such dispute shall first be submitted to Company’s Board of Directors in an effort to resolve such dispute without resort to arbitration.      18. Severability. If any of the terms or conditions of this Agreement shall be declared void or unenforceable by any court or administrative body of competent jurisdiction, such term or condition shall be deemed severable from the remainder of this Agreement, and the other terms and conditions of this Agreement shall continue to be valid and enforceable.      19. Amendment. This Agreement may be modified or amended only by an instrument in writing executed by the parties hereto; provided, however, that the Board of Directors of Company and Parent may amend this Agreement without the consent of Executive upon receipt of a written opinion of Company’s accounting firm that a provision or provisions of this Agreement would prevent “pooling” accounting treatment in connection with any Change-in-Control and such “pooling” accounting treatment would otherwise be available in connection with such Change-in-Control, to the extent necessary to permit “pooling” accounting treatment in connection with such a Change-in-Control, provided that such amendment may not adversely affect any benefit to which Executive was entitled under the terms of this Agreement as in effect on November 17 1999, and must preserve the benefits to Executive under this Agreement to the maximum extent possible consistent with obtaining such accounting treatment.      20. Construction. This Agreement shall supersede and replace all prior agreements and understandings between the parties hereto on the subject matter covered hereby. This Agreement shall be governed and construed under the laws of the State of Connecticut. Words of the masculine gender mean and include correlative words of the feminine gender. Paragraph headings are for convenience only and shall not be considered a part of the terms and provisions of the Agreement. --------------------------------------------------------------------------------   -14-      IN WITNESS WHEREOF, Company and Parent have caused this Agreement to be executed by a duly authorized officer, and Executive has hereunto set Executive’s hand, this 12th day of January 2006.                   The Connecticut Water Company                       By          Michele G. DiAcri                  Corporate Secretary                       Connecticut Water Service, Inc.                       By                                 DANIEL J. MEANEY               (Executive)     --------------------------------------------------------------------------------   -15- ATTACHMENT A RELEASE      We advise you to consult an attorney before you sign this Release. You have until the date which is seven (7) days after the Release is signed and returned to ___ (“Company”) to change your mind and revoke your Release. Your Release shall not become effective or enforceable until after that date.      In consideration for the benefits provided under your Employment Agreement dated ___with Company and ___(“Parent”), and more specifically enumerated in Exhibit 1 hereto, by your signature below you agree to accept such benefits and not to make any claims of any kind against Company, its past and present and future parent corporations, subsidiaries, divisions, subdivisions, affiliates and related companies or their successors and assigns, including without limitation Parent, or any and all past, present and future Directors, officers, fiduciaries or employees of any of the foregoing (all parties referred to in the foregoing are hereinafter referred to as the “Releasees”) before any agency, court or other forum, and you agree to release the Releasees from all claims, known or unknown, arising in any way from any actions taken by the Releasees up to the date of this Release, including, without limiting the foregoing, any claim for wrongful discharge or breach of contract or any claims arising under the Age Discrimination in Employment Act of 1967, Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act of 1990, the Employee Retirement Income Security Act of 1974, Connecticut’s Fair Employment Practices Act or any other federal, state or local statute or regulation and any claim for attorneys’ fees, expenses or costs of litigation.      THE PRECEDING PARAGRAPH MEANS THAT BY SIGNING THIS RELEASE YOU WILL HAVE WAIVED ANY RIGHT YOU MAY HAVE TO BRING A LAWSUIT OR MAKE ANY LEGAL CLAIM AGAINST THE RELEASEES BASED ON ANY ACTIONS TAKEN BY THE RELEASEES UP TO THE DATE OF THIS RELEASE.      By signing this Release, you further agree as follows:      1. You have read this Release carefully and fully understand its terms;      2. You have had at least twenty-one (21) days to consider the terms of the Release;      3. You have seven (7) days from the date you sign this Release to revoke it by written notification to Company. After this seven (7) day period, this Release is final and binding and may not be revoked;      4. You have been advised to seek legal counsel and have had an opportunity to do so; --------------------------------------------------------------------------------   -16-      5. You would not otherwise be entitled to the benefits provided under your Employment Agreement with Company and Parent had you not agreed to waive any right you have to bring a lawsuit or legal claim against the Releasees; and      6. Your agreement to the terms set forth above is voluntary.                       Name:                                                                 Signature:           Date:                                                     Received by:           Date:                               --------------------------------------------------------------------------------     EXHIBIT 1 1. 2. 3. 4. 5. etc. NOTE: THIS EXHIBIT IS TO BE COMPLETED AT THE TIME OF TERMINATION TO REFLECT ALL BENEFITS AND PAYMENTS MADE UNDER THE EMPLOYMENT AGREEMENT. Acknowledged and Agreed:                   THE CONNECTICUT WATER COMPANY       EXECUTIVE                       By                            Its                       CONNECTICUT WATER SERVICE, INC.               By                    Its      

Amendment No. 9 To Fifth Amended And Restated Revolving Loan And Letter Of Credit Agreement This Amendment No. 9 (this “Amendment”) is entered into as of December 15, 2006, among: the two entities included among the Borrower as listed on Exhibit A attached hereto (individually, and collectively, jointly and severally, the “Borrower”); the several entities included among the Guarantors as listed on Exhibit A attached hereto (each, individually, a “Guarantor,” and collectively, jointly and severally, the “Guarantors”); the several entities included among the Banks as listed on Exhibit A attached hereto (each, individually, a “Bank” and collectively, but not jointly, the “Banks”); and Bank of America, N.A. (“Bank of America”), as agent for the Banks (in such capacity, the “Agent”). RECITALS Reference is made to the following facts that constitute the background of this Amendment:   A.   The parties hereto have entered into that certain Fifth Amended and Restated Revolving Loan and Letter of Credit Agreement dated as of November 4, 2005 (as amended and/or restated from time to time, the “Loan Agreement”). Capitalized terms used herein and not otherwise defined herein shall have the same meanings herein as ascribed to them in the Loan Agreement;   B.   The Borrower and the Guarantors have requested that, for a period of ninety (90) days from the date hereof through 5:00 p.m. EST on March 14, 2007 (the “Increase Period”), the Maximum Amount be increased by $25,000,000.00 (the “Increase Amount”) to $165,000,000.00.   C.   The Agent and the Banks are willing to amend the Agreement to accommodate such request solely upon the terms and conditions set forth in this Amendment. NOW, THEREFORE, in consideration of the foregoing recitals and of the representations, warranties, covenants and conditions set forth herein and in the Loan Agreement, and for other valuable consideration the receipt and adequacy of which is hereby acknowledged, the parties agree as follows: Section 1. Increase in Maximum Amount. Solely during the Increase Period, the definition of “Maximum Amount” in Section 1.1 of the Loan Agreement is hereby amended to mean One Hundred Sixty-Five Million and 00/100 Dollars ($165,000,000.00). During the Increase Period, all references to the term “Maximum Amount” in the Credit Documents shall mean such term as amended hereby, including, without limitation, as referenced in the sublimits set forth in Section 2.11 of the Loan Agreement. The parties hereto acknowledge and agree that the Commitments of Bank of America, Citicorp and Comerica (the “Participating Banks”) shall increase during the Increase Period and the Commitments of the other Banks shall not change. Accordingly, Section IV of Schedule A to the Loan Agreement, which sets forth the Commitment and Commitment Percentage of each Bank, is hereby amended by deleting it in its entirety and substituting Section IV of Schedule A attached to this Amendment in its stead. Upon expiration of the Increase Period, Section IV of Schedule A to the Loan Agreement as it existed immediately prior to the date of this Amendment shall be in full force and effect. Section 2. Representations and Warranties. The Borrower and Guarantors, jointly and severally, represent and warrant to the Banks as of the effective date of this Amendment that, assuming the due execution and delivery of this Amendment: (a) no Default or Event of Default is in existence, from and after, or will result from, the execution and delivery of this Amendment or the consummation of any transactions contemplated hereby; (b) each of the representations and warranties of the Borrower and the Guarantors in the Loan Agreement and the other Credit Documents is true and correct in all material respects on the effective date of this Amendment (except for representations and warranties limited as to time or with respect to a specific event, which representations and warranties shall continue to be limited to such time or event) and (c) this Amendment and the Loan Agreement (as amended by this Amendment) are legal, valid and binding agreements of the Borrower and the Guarantors and are enforceable against them in accordance with their terms. Section 3. Ratification. Except as hereby amended, the Loan Agreement, all other Credit Documents and each provision thereof are hereby ratified and confirmed in every respect and shall continue in full force and effect, and this Amendment shall not be, and shall not be deemed to be, a waiver of any Default or Event of Default or of any covenant, term or provision of the Loan Agreement or the other Credit Documents. In furtherance of the foregoing ratification, by executing this Amendment in the spaces provided below, each of the Guarantors, on a joint and several basis, hereby absolutely and unconditionally (a) reaffirms its obligations under the Guaranty, and (b) absolutely and unconditionally consents to (i) the execution and delivery by the Borrower of this Amendment, (ii) the continued implementation and consummation of arrangements and transactions contemplated by the Loan Agreement (including, without limitation, as amended hereby) and the other Credit Documents, and (iii) the performance and observance by the Borrower and each Guarantor of all of its respective agreements, covenants, duties and obligations under the Loan Agreement (including, without limitation, as amended hereby) and the other Credit Documents. Section 4. Conditions Precedent. The agreements set forth in this Amendment are conditional and this Amendment shall not be effective until (i) receipt by the Agent of a fully-executed counterpart original of this Amendment and (ii) receipt by the Participating Banks of fully-executed original allonges to the Credit Notes in their favor in the form attached hereto as Exhibit B. Section 5. Counterparts. This Amendment may be executed and delivered in any number of counterparts with the same effect as if the signatures on each counterpart were upon the same instrument. Section 6. Amendment as Credit Document. Each party hereto agrees and acknowledges that this Amendment constitutes a “Credit Document” under and as defined in the Loan Agreement. SECTION 7. GOVERNING LAW. THIS AMENDMENT SHALL BE DEEMED TO CONSTITUTE A CONTRACT MADE UNDER THE LAWS OF THE STATE OF NEW YORK, INCLUDING ARTICLE 5 OF THE UCC, AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING SECTIONS 5-1401 AND 5-1402 OF THE GENERAL OBLIGATIONS LAW, BUT OTHERWISE WITHOUT REGARD TO ITS CONFLICTS OF LAW RULES). Section 8. Successors and Assigns. This Amendment shall be binding upon each of the Borrower, the Guarantors, the Banks, the Agent and their respective successors and assigns, and shall inure to the benefit of each of the Borrower, the Guarantors, the Banks and the Agent. Section 9. Headings. Section headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose. Section 10. Expenses. Each Borrower jointly and severally agrees to promptly reimburse the Agent and the Banks for all expenses, including, without limitation, reasonable fees and expenses of outside legal counsel, it has heretofore or hereafter incurred or incurs in connection with the preparation, negotiation and execution of this Amendment and all other instruments, documents and agreements executed and delivered in connection with this Amendment. Section 11. Integration. This Amendment contains the entire understanding of the parties hereto with regard to the subject matter contained herein. This Amendment supersedes all prior or contemporaneous negotiations, promises, covenants, agreements and representations of every nature whatsoever with respect to the matters referred to in this Amendment, all of which have become merged and finally integrated into this Amendment. Each of the parties hereto understands that in the event of any subsequent litigation, controversy or dispute concerning any of the terms, conditions or provisions of this Amendment, no party shall be entitled to offer or introduce into evidence any oral promises or oral agreements between the parties relating to the subject matter of this Amendment not included or referred to herein and not reflected by a writing included or referred to herein. Section 12. No Course of Dealing. The Agent and the Banks have entered into this Amendment on the express understanding with each Borrower and Guarantor that in entering into this Amendment the Agent and the Banks are not establishing any course of dealing with the Borrower or the Guarantors. The Agent’s and the Banks’ rights to require strict performance with all of the terms and conditions of the Loan Agreement and the other Credit Documents shall not in any way be impaired by the execution of this Amendment. None of the Agent and the Banks shall be obligated in any manner to execute any further amendments or waivers and if such waivers or amendments are requested in the future, assuming the terms and conditions thereof are satisfactory to them, the Agent and the Banks may require the payment of fees in connection therewith. Each of the Borrower and the Guarantors agrees that none of the ratifications and reaffirmations set forth herein, nor the Agent’s nor any Bank’s solicitation of such ratifications and reaffirmations, constitutes a course of dealing giving rise to any obligation or condition requiring a similar or any other ratification or reaffirmation from the Borrower or the Guarantors with respect to any subsequent modification, consent or waiver with respect to the Loan Agreement or any other Credit Document. Section 13. Jury Trial Waiver. BORROWER, GUARANTORS, AGENT AND BANKS BY ACCEPTANCE OF THIS AMENDMENT MUTUALLY HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AMENDMENT, THE LOAN AGREEMENT, OR ANY OTHER CREDIT DOCUMENT CONTEMPLATED TO BE EXECUTED IN CONNECTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY, INCLUDING, WITHOUT LIMITATION, ANY COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS OR ACTIONS OF AGENT OR ANY BANK RELATING TO THE ADMINISTRATION OF THE LOAN OR ENFORCEMENT OF THE CREDIT DOCUMENTS, AND AGREE THAT NO PARTY WILL SEEK TO CONSOLIDATE ANY SUCH ACTION WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. [Remainder of page intentionally left blank; signature pages follow] 1 IN WITNESS WHEREOF, the parties have caused this Amendment No. 9 to be duly executed by their duly authorized officers or representatives, all as of the date first above written. BORROWER: MMA FINANCIAL WAREHOUSING, LLC By: MMA Equity Corporation, its sole member By: /s/ Anthony Mifsud Name: Anthony Mifsud Title: Senior Vice President and Treasurer MMA FINANCIAL BOND WAREHOUSING, LLC By: MMA Equity Corporation, its managing member By: /s/ Anthony Mifsud Name: Anthony Mifsud Title: Senior Vice President and Treasurer GUARANTORS: MUNICIPAL MORTGAGE & EQUITY, LLC By: /s/ Anthony Mifsud Name: Anthony Mifsud Title: Senior Vice President and Treasurer MMA FINANCIAL HOLDINGS, INC. By: /s/ Anthony Mifsud Name: Anthony Mifsud Title: Senior Vice President and Treasurer (Signatures continued on next page) 2 GUARANTORS (CONT.): MMA EQUITY CORPORATION By: /s/ Anthony Mifsud Name: Anthony Mifsud Title: Senior Vice President and Treasurer MMA FINANCIAL TC CORP. By: /s/ Anthony Mifsud Name: Anthony Mifsud Title: Senior Vice President and Treasurer MMA FINANCIAL BFGLP, LLC By: MMA Financial TC Corp., its sole member By: /s/ Anthony Mifsud Name: Anthony Mifsud Title: Senior Vice President and Treasurer MMA FINANCIAL BFRP, INC. By: /s/ Anthony Mifsud Name: Anthony Mifsud Title: Senior Vice President and Treasurer MMA SPECIAL LIMITED PARTNER, INC. By: /s/ Anthony Mifsud Name: Anthony Mifsud Title: Senior Vice President and Treasurer (Signatures continued on next page) 3 GUARANTORS (CONT.): MMA FINANCIAL BFG INVESTMENTS, LLC By: MMA Financial TC Corp., its managing member By: /s/ Anthony Mifsud Name: Anthony Mifsud Title: Senior Vice President and Treasurer AGENT: BANK OF AMERICA, N.A., as Agent By: /s/ Ugo Arinzeh Ugo Arinzeh, Senior Vice President BANKS: BANK OF AMERICA, N.A., as one of the Banks By: /s/ Ugo Arinzeh Ugo Arinzeh, Senior Vice President CITICORP USA, INC., as one of the Banks By: /s/ Maria McKeon Maria McKeon, Vice President COMERICA BANK, A MICHIGAN BANKING CORPORATION, as one of the Banks By: /s/ Lisa Kotula Lisa Kotula, Vice President (Signatures continued on next page) 4 BANKS (CONT.): MERRILL LYNCH COMMUNITY DEVELOPMENT COMPANY, LLC, as one of the Banks By: /s/ Michael Solomon Michael Solomon, Director SOVEREIGN BANK, as one of the Banks By: /s/ Robert Nickey Robert Nickey, Senior Vice President 5 Exhibit A: Parties I. Borrower: MMA Financial Warehousing, LLC, a Maryland limited liability company (“SPE I”), MMA Financial Bond Warehousing, LLC, a Maryland limited liability company (“SPE II”), and (SPE I and SPE II are individually, and collectively, jointly and severally referred to as the “Borrower”). II. Guarantors: Municipal Mortgage & Equity, LLC, a Delaware limited liability company (“MuniMae”), MMA Financial Holdings Inc., a Florida corporation (“MFH”), MMA Equity Corporation, a Florida corporation (“MEC”), MMA Financial TC Corp., a Delaware corporation (“TC Corp.”), MMA Financial BFGLP, LLC, a Maryland limited liability Company (“BFGLP”), MMA Financial BFRP Inc., a Delaware corporation (“BFRP”), MMA Financial BFG Investments LLC, a Delaware limited liability company (“BFG Investments”), and MMA Special Limited Partner, Inc., a Florida corporation (“MSLP”). (MuniMae, MFH, MEC, TC Corp., BFGLP, BFRP, BFG Investments, and MSLP are each referred to as a “Guarantor” and are collectively, jointly and severally referred to as the “Guarantors”). II. Banks: Bank of America, N.A. Citicorp USA, Inc. Comerica Bank Merrill Lynch Community Development Company, LLC 6 Sovereign BankExhibit B: Form of Allonge to Credit Note Allonge to Fourth Amended and Restated Revolving Credit Note dated as of December 23, 2004 in the principal amount of $40,000,000 made payable by MMA Financial Warehousing, LLC and MMA Financial Bond Warehousing, LLC, on a joint and several basis, to the order of Bank of America, N.A. (as amended from time to time, the “Credit Note”) This Allonge is made to the Credit Note this 15th day of December, 2006. Terms not defined herein have the same meanings as in the Credit Note. From and after the date hereof, and continuing through March 14, 2007, the principal amount of the Credit Note shall be increased from $52,500,000.00 to $63,500,000.00, and this Allonge shall become part of the Credit Note and shall be subject to all of the terms and conditions thereof. At 5:00 p.m. EST on March 14, 2007, this Allonge shall be of no further force or effect. Although it is in the interest of the parties that this Allonge be affixed to the Note, this Allonge shall continue in full force and effect even if it has not been so affixed. IN WITNESS WHEREOF, Borrower has caused this Allonge to be duly executed as of the date set forth above. BORROWER: MMA FINANCIAL WAREHOUSING, LLC By: MMA Equity Corporation, its sole member By:      Name:      Title:       MMA FINANCIAL BOND WAREHOUSING, LLC By: MMA Equity Corporation, its managing member By:      Name:      Title:       7 SCHEDULE A IV. Commitment Percentages:                   Bank   Commitment Percentage   Commitment                   Bank of America     38.484848484849 %   $ 63,500,000.00                     Citicorp     30.909090909091 %   $ 51,000,000.00                     Merrill Lynch     15.151515151515 %   $ 25,000,000.00                     Comerica     09.393939393939 %   $ 15,500,000.00                     Sovereign     06.060606060606 %   $ 10,000,000.00                     TOTAL:     100 %   $ 165,000,000.00                     1587740.3 8

Exhibit 10.7a   IPSCO Inc. 2005 Form 10-K   CHANGE OF CONTROL AGREEMENTS FOR EXECUTIVES   In accordance with the Instructions of Item 601 of Regulation S-K, the registrant has omitted filing Change of Control Agreements by and between IPSCO Inc. and the following employees as exhibits to this Form 10-K because, except as noted, they are identical to the form of Change of Control Agreement filed as Exhibit 10.7 with this Form 10-K.   1. John Tulloch 2. Joseph Russo   --------------------------------------------------------------------------------

Exhibit 10.3 INCENTIVE STOCK OPTION AGREEMENT FIBERNET TELECOM GROUP, INC. This Incentive Stock Option Agreement (the “Agreement”) is entered into as of August 17, 2006 (the “Grant Date”) by and between FiberNet Telecom Group, Inc., a Delaware corporation (the “Company”), and the individual set forth on the signature page hereto (the “Optionee”). W I T N E S S E T H: WHEREAS, the Company has granted to the Optionee, effective as of the date of this Agreement, an option to purchase common stock of the Company, par value of $0.001 per share (the “Shares”), under the Company’s 2003 Equity Incentive Plan (as amended, the “Plan”). NOW, THEREFORE, in consideration of the promises and the mutual covenants contained herein, the Company and the Optionee hereby agree as follows: 1. Plan. The Options are subject to all the terms and conditions set forth in the Plan, which is hereby incorporated by reference. The Optionee acknowledges he or she has read and understands the Plan and he or she agrees to be bound by the terms of the Plan. Capitalized terms used and not otherwise defined herein shall have the meanings ascribed to such terms in the Plan. In the event of an express conflict between any term or provision of this Agreement and those of the Plan, the terms and provisions of the Plan shall control. Any term or condition that the Agreement is silent shall be governed and administered in accordance with the terms of the Plan. A copy of the Plan is attached hereto as Exhibit A. 2. Grant of Options. Subject to the terms and conditions of the Agreement and the Plan, the Company hereby grants to the Optionee an incentive stock option (individually, “ISO” and collectively, the “Options”) to purchase all or part of a designated number of Shares at an Option Price, effective as of the Grant Date. The number of Shares and the Option Price are set forth on Schedule 1 attached hereto, subject to adjustment, as provided in the Plan, in the event of a stock split, reverse stock split or other events affecting the holders of Shares. 3. Date Options Become Exercisable. (a) Subject to the terms and conditions of this Agreement and the Plan, the Options become exercisable by the Optionee in accordance with the cumulative vesting schedule set forth on Schedule 1 attached hereto; provided, that the Options may not be exercised for fractional Shares. (b) Notwithstanding the terms of paragraph 3(a), the following provisions shall govern: (i) Death, Disability and Retirement. In the event that the Optionee’s employment with the Company and/or any Affiliate or Subsidiary terminates by reason of death, Disability or Retirement, the exercisability of the Options shall accelerate and become fully exercisable as of the date of such death, Disability or Retirement. (ii) Change of Control. If a Change of Control occurs, the exercisability of the Options shall accelerate and become fully exercisable as of the effective date of such Change of Control; provided, that the Optionee expressly acknowledges that, pursuant to the terms of Section 14 of the Plan, the Board of Directors of the Company may determine whether a Change of Control will have occurred.   - 1 - -------------------------------------------------------------------------------- (iii) Discretion of Administrator. At the sole discretion of the Administrator, the exercisability of the Options shall accelerate and become fully exercisable. 4. Option Term. (a) Subject to earlier termination as provided below in this paragraph 4, the term of the Options shall be for a ten-year period, beginning on the Grant Date and ending on the tenth anniversary of the Grant Date or, if the Optionee owns as of the date hereof more than 10% of the total combined voting power of all classes of capital stock of the Company or an Affiliate, five years from the date of this Agreement, but shall be subject to earlier termination as provided herein or in the Plan (the “Expiration Date”). (b) Termination for Cause. In the event that the Optionee’s employment with the Company and/or any Affiliate or Subsidiary terminates for Cause, the Options shall expire immediately upon notification of such termination for Cause and all rights to purchase Shares hereunder shall cease. (c) Death, Disability and Retirement. In the event that the Optionee’s employment with the Company and/or any Affiliate or Subsidiary terminates by reason of death, Disability or Retirement the Options shall remain exercisable until the earlier of the Expiration Date or 12 months after the date of such termination; provided, however, in the case of Retirement, 90 days after the date of such termination. In the case of the Optionee’s death, the Optionee’s beneficiary or estate may exercise the Options. (d) Other Termination. In the event that the Optionee’s employment with the Company and/or any Affiliate or Subsidiary terminates for any reason other than death, Disability, Retirement or for Cause, to the extent that the Options have vested and are then exercisable (determined in accordance with paragraph 3 above), the Options shall remain exercisable until the earlier of the Expiration Date or 90 days from the date of such termination. (e) Notwithstanding the foregoing provisions of this paragraph 4, in no event may the Option be exercised later than the Expiration Date. 5. Adjustments. (a) The Plan contains provisions covering the treatment of Options in a number of contingencies such as stock splits and mergers. Provisions in the Plan for adjustment with respect to Shares subject to Options, the Option Price and the related provisions with respect to successors to the business of the Company are hereby made applicable hereunder and are incorporated herein by reference. (b) Adjustments under this paragraph 5 shall be made by the Administrator, whose determination as to what adjustments shall be made, and the extent thereof, shall be final, binding and conclusive. In computing any adjustment under this paragraph 5, any fractional Share that might otherwise become subject to an Option shall be eliminated. 6. Non-transferability of Options. The Options shall not be assigned, transferred or otherwise alienated or hypothecated other than by will or by the laws of descent and distribution. During the lifetime of the Optionee, the Options may be exercised only by the Optionee (or, in the event of legal incapacity or incompetency, by the   - 2 - -------------------------------------------------------------------------------- Employee’s guardian or representative). Transfer of the Options by will or by the laws of descent and distribution shall not be effective to bind the Company unless the Company shall have been furnished with written notice thereof and an authenticated copy of the will or such other evidence as the Administrator may deem necessary to establish the validity of the transfer and the acceptance by the transferees of the terms and conditions of such Options. Any attempted assignment, transfer, pledge, hypothecation or other disposition of the Options contrary to the provisions hereof, or the levy of any execution, attachment or similar process upon the Options shall be null and void and without effect. 7. Method of Exercise. (a) The Options shall be exercised by a written notice delivered to the Company in substantially the form of Exhibit B attached hereto at the address provided below in paragraph 13, or such other address designated by the Company, specifying the number of Shares to be purchased and tendering payment in full for such Shares. Payment may be tendered by any one of the following methods, or combination thereof: (i) in cash or by certified check, cashier’s check or teller’s check, (ii) at the discretion of the Administrator, by tendering previously acquired Shares having an aggregate Fair Market Value at the time of exercise equal to the total purchase price, (iii) at the discretion of the Administrator, by withholding Shares that otherwise would be acquired on exercise having an aggregate Fair Market Value at the time of exercise equal to the total purchase price, (iv) at the discretion of the Administrator, by tendering other Awards payable under the Plan, (v) at the discretion of the Administrator, by cashless exercise through delivery of irrevocable instructions to a broker to promptly deliver to the Company the amount of proceeds from a sale of shares having a Fair Market Value equal to the purchase price, or (vi) at the discretion of the Administrator, by a combination of (i), (ii), (iii) and/or (iv). (b) In the event all or part of the purchase price is paid in Shares, any excess of the value of such Shares over the purchase price will be returned to the Optionee as follows: (i) any whole Share remaining in excess of the purchase price will be returned in kind, and may be represented by one or more Share certificates, and (ii) any fractional Share remaining in excess of the Option Price will be returned in cash. 8. Taxes. (a) The Optionee acknowledges that any income or other taxes due from him or her with respect to the Options or the Shares issuable pursuant to the Options shall be the Optionee’s responsibility. (b) In the event of a Disqualifying Disposition (as defined in paragraph 14 below) or if any portion of the Options are converted into a Nonqualified Stock Option and such Nonqualified Stock Option is exercised, the Optionee agrees that the Company may withhold from the Optionee’s remuneration, if any, the minimum statutory amount of federal, state and local withholding taxes attributable to such amount that is considered compensation includable in such person’s gross income.   - 3 - -------------------------------------------------------------------------------- Payment of such withholding requirements may be made, (i) in cash, (ii) by delivery of Shares registered in the name of the Optionee, (iii) by the Company withholding Shares subject to the exercised Option that have a Fair Market Value at the date the tax is to be determined equal to the minimum statutory total tax which would be required to be withheld or (iv) any combination of (i), (ii) and (iii) above. The Optionee further agrees that, if the Company does not withhold an amount from the Optionee’s remuneration sufficient to satisfy the Company’s income tax withholding obligation, the Optionee will reimburse the Company on demand, in cash, for the amount under-withheld. 9. Issuance of Optioned Stock. (a) Issuance of Shares. The Company shall not be required to issue or deliver any Shares purchased upon exercise of the Options, or any portion thereof, prior to fulfillment of each of the following applicable conditions: (i) the obtaining of any approval or other clearance from any federal or state governmental agency that the Administrator shall, in its sole discretion, determine to be necessary or advisable; and (ii) the lapse of such reasonable period of time following the exercise of the Options as the Administrator from time to time may establish for reasons of reasonable administrative convenience. (b) Compliance with Securities and Other Laws. In no event shall the Company be required to sell, issue or deliver Shares pursuant to this Agreement if, in the opinion of the Administrator, the issuance thereof would constitute a violation by either the Optionee or the Company of any provision of any law or regulation of any governmental authority or any securities exchange. As a condition of any sale or issuance of Shares pursuant to the Options, the Company may place legends on the Shares, issue stop-transfer orders and require such agreements or undertakings from the Optionee as the Company may deem necessary or advisable to assure compliance with any such law or regulation, including, if the Company or its counsel deems it appropriate, representations from the Optionee that the Optionee is acquiring the Shares solely for investment and not with a view to distribution and that no distribution of the Shares acquired by the Optionee will be made unless registered pursuant to applicable federal and state securities laws or unless, in the opinion of counsel to the Company, such registration is unnecessary. 10. Conditions of Forfeiture. (a) The Option shall be subject to the following forfeiture conditions, to which the Optionee, by accepting the Options granted hereunder, agrees. If a Forfeiture Event (as defined below) occurs, then: (i) The unexercised portion of any Option, whether or not vested, will be immediately forfeited and canceled; and (ii) The Optionee will be obligated to repay to the Company, in cash, within five business days after demand by the Company, the total amount of Award Gain (as defined below) realized by the Optionee upon each exercise of an Option that occurred on or after (A) the date that is six months prior to the occurrence of the Forfeiture Event, if the Forfeiture Event occurred while the Optionee was employed by the Company or an Affiliate or Subsidiary, or (B) the date that is six months prior to the date the Optionee’s employment with the Company or an Affiliate or Subsidiary terminated, if the Forfeiture Event occurred after the Optionee ceased to be so employed. The term “Award Gain” shall mean the product of (X) the Fair Market Value per Share on the date of exercise (without regard to any subsequent change in the market price of shares) minus the Option Price times (Y) the number of Shares as to which the Option was exercised at that date.   - 4 - -------------------------------------------------------------------------------- (b) The forfeitures specified above will be triggered upon the occurrence of any one of the following “Forfeiture Events” at any time during the Optionee’s employment with the Company or an Affiliate or Subsidiary and during the one-year period following termination of such employment: (i) Non-Solicitation. The Optionee, for his or her own benefit or for the benefit of any other person, company or entity, directly or indirectly, (A) induces or attempts to induce or hires or otherwise counsels, induces or attempts to induce or hire or otherwise counsel, advise, encourage or solicit any person to leave the employment of or the service for the Company or any Affiliate or Subsidiary, (B) hires or in any manner employs or retains the services of any individual employed by or providing services to the Company or any Affiliate or Subsidiary as of the date of his or her termination of employment, or employed by or providing services to the Company or any Affiliate or Subsidiary subsequent to such termination, (C) solicits, pursues, calls upon or takes away, any of the customers of the Company or any Affiliate or Subsidiary, (D) solicits, pursues, calls upon or takes away, any potential customer of the Company or any Affiliate or Subsidiary that has been the subject of a bid, offer or proposal by the Company or any Affiliate or Subsidiary, or of substantial preparation with a view to making such a bid, proposal or offer, within six (6) months prior to such Optionee’s termination of employment with the Company or any Affiliate or Subsidiary, or (E) otherwise interferes with the business or accounts of the Company or any Affiliate or Subsidiary. (ii) Non-Competition. The Optionee engages in Competition (as defined below) with the Company or any Affiliate or Subsidiary in any locality or region of the United States in which the Company or any Affiliate or Subsidiary had operations at the time of, or within six (6) months prior to, the termination of the Optionee’s employment with the Company or any Affiliate or Subsidiary, or in which, during the six (6) month period prior to the termination of the Optionee’s employment with the Company or any Affiliate or Subsidiary, the Company or any Affiliate or Subsidiary had made substantial plans with the intention of establishing operations in such locality or region; provided that, it shall not be a violation of this provision for the Optionee to become the registered or beneficial owner of up to five percent (5%) of any class of the capital stock of a competing corporation registered under the Exchange Act, provided that the Optionee does not actively participate in the business of such corporation until the one-year period following the Optionee’s termination ends. For purposes of this Agreement, “Competition” means the Optionee engages in, or otherwise directly or indirectly is employed by or acts as a consultant or lender to, or is a director, officer, employee, principal, agent, stockholder, member, owner or partner of, or permits the Optionee’s name to be used in connection with, the activities of any other business or organization anywhere in the United States that directly or indirectly designs, develops, operates, builds or manufactures in-building communications transmission networks, or any other business of the Company or any Affiliate or Subsidiary at any time during or following the Optionee’s employment with the Company or any Affiliate or Subsidiary. (iii) Confidential Information. The Optionee discloses to any person or entity or makes use of any Confidential Information (as defined below) for his or her own purpose or for the benefit of any person or entity, except as may be necessary in the ordinary course of employment with or other service to the Company or any Affiliate or Subsidiary. Such “Confidential Information” of the Company or any Affiliate or Subsidiary, includes, but is not limited to, the design, development, operation, building or manufacturing of in-building communications transmission networks, the identity of the Company’s or any Affiliate’s or Subsidiary’s customers, the identity of representatives of customers with whom the Company or any Affiliate or Subsidiary has dealt, the kinds of services provided by the Company or any Affiliate or Subsidiary to customers and offered to be performed for potential customers, the manner in which such services are performed or offered to be performed, the service needs of actual   - 5 - -------------------------------------------------------------------------------- or prospective customers, pricing information, information concerning the creation, acquisition or disposition of products and services, customer maintenance listings, computer software and hardware applications and other programs, personnel information, information identifying, relating to or concerning investors in the Company or any Affiliate or Subsidiary, joint venture partners of the Company or any Affiliate or Subsidiary, business partners of the Company or any Affiliate or Subsidiary or other entities providing financing to the Company or any Affiliate or Subsidiary, real estate and leasing opportunities, communications and telecommunications operations and processes, zoning and licensing matters, relationships with, or matters involving, landlords and/or property owners, and other trade secrets. (c) The Administrator may, in its discretion, waive in whole or in part the Company’s right to forfeiture under this paragraph 10, but no such waiver shall be effective unless evidenced by a writing signed by a duly authorized officer of the Company. 11. Lock-Up Agreement. The Optionee agrees, if requested by the Company and an underwriter of Shares (or other securities) of the Company, not to sell or otherwise transfer or dispose of any Shares (or other securities) of the Company held by the Optionee during the one hundred eighty (180) day period following the effective date of a registration statement filed under the Exchange Act, without the prior consent of the Company or such underwriter, as the case may be. 12. Right of Setoff. The Company or any Affiliate or Subsidiary may, to the extent permitted by applicable law, deduct from and set off against any amounts the Company or an Affiliate or Subsidiary may owe to the Optionee from time to time, including amounts (a) payable in connection with any Award granted under the Plan, or (b) owed as wages, fringe benefits, or other compensation owed to the Optionee, such amounts as may be owed by the Optionee to the Company or an Affiliate or Subsidiary, although the Optionee shall remain liable for any part of the Optionee’s payment obligation not satisfied through such deduction and setoff. 13. Option Is Intended To Be An ISO. The parties each intend that the Options be an ISO so that the Optionee may qualify for the favorable tax treatment provided to holders of Options that meet the standards of Section 422 of the Code. Any provision of this Agreement or the Plan which conflicts with the Code so that these Options would not be deemed an ISO is null and void and any ambiguities shall be resolved so that the Options qualify as an ISO. Nonetheless, if the Options are determined not to be an ISO, the Optionee understands that neither the Company nor any Affiliate is responsible to compensate him or her or otherwise make up for the treatment of the Options as a Nonqualified Stock Option and not as an ISO. The Optionee should consult with the Optionee’s own tax advisors regarding the tax effects of the Options and the requirements necessary to obtain favorable tax treatment under Section 422 of the Code, including, but not limited to, holding period requirements. 14. Notice To Company Of Disqualifying Disposition. The Optionee agrees to notify the Company in writing within 10 days after the Optionee makes a Disqualifying Disposition of any of the Shares acquired pursuant to the exercise of the Options. A Disqualifying Disposition is defined in Section 424(c) of the Code and includes any disposition (including any sale or gift) of such Shares before the later of (a) two years after the date the Optionee was granted the Options or (b) one year after the date the Optionee acquired Shares by exercising the Option,   - 6 - -------------------------------------------------------------------------------- except as otherwise provided in Section 424(c) of the Code. If the Optionee has died before the Shares are sold, these holding period requirements do not apply and no Disqualifying Disposition can occur thereafter. 15. Notices. All notices, claims, certificates, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given and delivered if personally delivered or if sent by nationally-recognized overnight courier, or by registered or certified mail, return receipt requested and postage prepaid, addressed as follows: If to the Company, to: FiberNet Telecom Group, Inc. 570 Lexington Avenue New York, New York 10022 Attention: General Counsel If to the Optionee, to the last address on record at the Company; or to such other address as the party to whom notice is to be given may have furnished to the other party in writing in accordance herewith. Any such notice or communication shall be deemed to have been received (i) in the case of personal delivery, on the date of such delivery (or if such date is not a business day, on the next business day after the date sent), (ii) in the case of internationally-recognized overnight courier, on the next business day after the date sent, and (iii) in the case of telecopy transmission, when received (or if not sent on a business day, on the next business day after the date sent). 16. General Provisions. (a) No Obligation to Maintain Relationship. The Company is not by the Plan or this Agreement obligated to continue the Optionee as an employee, director or consultant of the Company or an Affiliate or Subsidiary. The Optionee acknowledges: (i) that the Plan is discretionary in nature and may be suspended or terminated by the Company at any time; (ii) that the grant of the Options is a one-time benefit which does not create any contractual or other right to receive future grants of Options, or benefits in lieu of Options; (iii) that all determinations with respect to any such future grants, including, but not limited to, the times when options shall be granted, the number of Shares subject to Options to be issued, the Option Price, and the time or times when each share shall vest, will be at the sole discretion of the Company; (iv) that the Optionee’s participation in the Plan is voluntary; (v) that the value of the Options is an extraordinary item of compensation which is outside the scope of the Optionee’s employment contract, if any; and (vi) that the Options are not part of normal or expected compensation for purposes of calculating any severance, resignation, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments. (b) Undertaking by Optionee. The Optionee hereby agrees to take whatever additional actions and execute whatever additional documents the Company may, in its discretion, deem necessary or advisable in order to carry out or effect one or more of the obligations or restrictions imposed on the Optionee pursuant to the express provisions of this Agreement and the Plan. (c) Binding Effect. This Agreement shall be binding upon, and inure to the benefit of, the successors and assigns of the Company and upon persons who acquire the right to exercise the Option granted hereunder by will or through the laws of descent and distribution, or as otherwise permitted under this Agreement.   - 7 - -------------------------------------------------------------------------------- (d) Singular, Plural, Gender. Whenever used herein, except where the context clearly indicates to the contrary, nouns in the singular shall include the plural, and the masculine pronoun shall include the feminine gender. (e) Headings. Headings of the paragraphs contained in this Agreement are inserted for convenience and reference and shall not be used in interpreting or construing the terms and provisions of the Agreement. (f) Rights as Stockholder. An Optionee shall have no rights as a stockholder with respect to any Shares subject to the Options until registration of the Shares in the Company’s share register in the name of the Optionee. Except as is expressly provided in the Plan with respect to certain changes in the capitalization of the Company, no adjustment shall be made for dividends or similar rights for which the record date is prior to the date of such registration. (g) Disclosure of Information. The Optionee acknowledges and agrees that neither the Company, its shareholders nor its directors and officers, has any duty or obligation to disclose to the Optionee any material information regarding the business of the Company or affecting the value of the Shares before, at the time of, or following a termination of the employment of the Optionee by the Company, including, without limitation, any information concerning plans for the Company to make a public offering of its securities or to be acquired by or merged with or into another firm or entity. (h) Entire Agreement. This Agreement and the Plan constitute the entire agreement between the parties with respect to the subject matter hereof and supersede all prior or written or oral negotiations, commitments, representations and agreements with respect thereto. (i) Modifications and Amendments; Waivers and Consents. The terms and provisions of this Agreement may be modified or amended as provided in the Plan. Except as provided in the Plan, the terms and provisions of this Agreement may be waived, or consent for the departure therefrom granted, only by written document executed by the party entitled to the benefits of such terms or provisions. No such waiver or consent shall be deemed to be or shall constitute a waiver or consent with respect to any other terms or provisions of this Agreement, whether or not similar. Each such waiver or consent shall be effective only in the specific instance and for the purpose for which it was given, and shall not constitute a continuing waiver or consent. (j) Severability. In the event any one or more of the provisions of this Agreement shall be held invalid, illegal or unenforceable in any respect in any jurisdiction, such provision or provisions shall be automatically deemed amended, but only to the extent necessary to render such provision or provisions valid, legal and enforceable in such jurisdiction, and the validity, legality and enforceability of the remaining provisions of this Agreement shall not in any way be affected or impaired thereby. (k) Applicable Law. This Agreement shall be construed and enforced in accordance with the laws of the State of Delaware, without giving effect to the conflict of law principles thereof. For the purpose of litigating any dispute that arises under this Agreement, whether at law or in equity, the parties hereby consent to exclusive jurisdiction in the State of New York and agree that such litigation shall be conducted in the courts of New York, New York or the federal courts of the United States for the District of New York.   - 8 - -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the Company and the Optionee, as indicated below, have executed this Agreement as of the Grant Date.   FIBERNET TELECOM GROUP, INC. By:     Name:   Title:   OPTIONEE By:     Name:     - 9 - -------------------------------------------------------------------------------- Schedule 1 OPTIONS Total number of Options:                      Option price: $             Vesting schedule:   Number of Shares    Exercise Date    On or after 1st anniversary of Grant Date    On or after 2nd anniversary of Grant Date    On or after 3rd anniversary of Grant Date   - 10 - -------------------------------------------------------------------------------- Exhibit A 2003 EQUITY INCENTIVE PLAN Please see attached.   - 11 - -------------------------------------------------------------------------------- Exhibit B NOTICE OF EXERCISE OF INCENTIVE STOCK OPTION   TO: FiberNet Telecom Group, Inc. I hereby exercise my Incentive Stock Option to purchase                      shares (the “Shares”) of the common stock, $0.001 par value, of FiberNet Telecom Group, Inc. (the “Company”), at the Option Price of $             per share, pursuant to and subject to the terms of that certain Incentive Stock Option Agreement between the undersigned and the Company dated August 17, 2006. I understand the nature of the investment I am making and the financial risks thereof. I am aware that it is my responsibility to have consulted with competent tax and legal advisors about the relevant national, state and local income tax and securities laws affecting the exercise of the Option and the purchase and subsequent sale of the Shares. I am paying the Option Price for the Shares as follows:       Please issue the Shares (check one):     ¨ to me; or     ¨ to me and                                                      , as joint tenants with right of survivorship, at the following address:               My mailing address for shareholder communications, if different from the address listed above, is:               Very truly yours,   Optionee (signature)   Print Name   Date   Social Security Number   - 12 -

FIRST ADDENDUM to Administrative Services Agreement 2005 ("Agreement") dated 29 November 2004 between A. L. Industrier ASA, Harbitzalleen, 3, 0275 Oslo, Norway ("A. L. Industrier") and ALPHARMA AS, Harbitzalleen 3, 0275 Oslo, Norway ("Alpharma") WHEREAS the terms used in the First Addendum shall have the same meaning as in the Agreement unless otherwise indicated herein; WHERAS the Agreement expires on 31 December 2005 but the parties have decided that Alpharma will continue to provide the services according to the Agreement for an additional period of 6 months (1 January 2006 to 30 June 2006) and, thus, to extend the term of the Agreement accordingly; NOW, THEREFORE, in consideration of the mutual covenants and agreement contained herein and intending to be legally bound, the Parties hereto agree as follows: 1) Clause 4.1 of the Agreement is amended as follows: The Agreement shall continue in force for additional 6 months, i.e. until 30 June 2006, after which it will automatically expire. 2) Clause 3.1 of the Agreement is amended as follows: A.L. Industrier shall pay to Alpharma an additional fixed fee of NOK 200,000, exclusive of VAT, for the Services rendered in the extended period 1 January 2006 - 30 June 2006 according to the Agreement. The fee will be paid in 6 equal monthly installments. IN WITNESS WHEREOF, the duly authorized representatives of each Party have executed this Agreement as of the date above written. Signed for and on behalf of Signed for and on behalf of A. L. INDUSTRIER ASA: Alpharma AS: /s/ Stein Aukner /s/ Carl Aake Carlsson By:   Stein Aukner By:    Carl-Aake Carlsson Title:   Managing Director Title:   Managing Director Date:   April 21, 2006 Date:   April 21, 2006            

Exhibit 10.72 Meade Instruments Corporation 6001 OAK CANYON, IRVINE, CALIFORNIA 92618-5200 U.S.A. (949) 451-1450 n FAX: (949) 451-1460 n www.meade.com April 28, 2006 Dear Mr. Muellner: This letter contains Meade Instruments Corporation’s (the “Company”) offer of employment for the position of Chief Executive Officer and President. You will report directly to the Company’s Board of Directors, with a starting date of May 8, 2006 (the “Start Date”). The terms of this offer are as follows:   •   In this position, your annualized base salary will be $350,000, which equates to approximately $6,730.77 per week. You will also be eligible to participate in the company’s Fiscal Year 2007 bonus pool, the total amount of which will be up to 50% of your base salary. The terms and conditions of this bonus will be subject to a written agreement to be executed by you and the Company.   •   This offer will also include appointment as a member of the Company’s Board of Directors.   •   Subject to the terms of the Meade Instruments Corp.1997 Stock Incentive Plan (the “Plan”), and an applicable stock option agreement, you will receive options to purchase 500,000 shares of Meade common stock pursuant to the Plan with an exercise price equal to the then current market price on the Start Date. Contingent upon approval by the Company’s shareholders and subject to an applicable stock option agreement, you will receive options to purchase 200,000 shares of Meade common stock outside of the Plan with an exercise price equal to the then current market price on the Start Date. All such options will become exercisable in 25% increments beginning on the first anniversary of the option date and on each such anniversary until the options are exercisable in full.   •   You will be eligible to participate in the Meade Instruments Corp. Employee Stock Ownership Plan, subject to the terms of such Plan.   •   You and your eligible dependents will be eligible to join Meade’s group medical plan, provided an enrollment application is completed and returned to Human Resources within 31 days of eligibility. All company benefits will be explained in detail in your New Hire Orientation package.   •   You will be entitled to three weeks paid vacation each twelve-month period, which shall accrue on a pro rata basis from the date employment commences. The total maximum accrued vacation cannot exceed six weeks.   •   You will be employed “at will” and your employment relationship can be terminated by either you or by Meade Instruments at will at any time, with or without notice, and with or without cause. In the event your employment is terminated without cause, you will be entitled to receive a lump-sum payment equal to 50% of your annualized base salary. After one-year of service, you will be entitled to receive a lump-sum payment equal to100% of your annualized base salary. The “at will” nature of your employment cannot be changed or modified absent an express written agreement signed by both you and the Board of Directors of the Company. In the event of a change in the control of the Company and your employment is subsequently terminated, you will be eligible to receive a lump-sum payment equal to that set forth above, pursuant to such terms.   •   You will be required to provide necessary proof of your eligibility and legal authorization to work in the United States as provided under the Immigration Reform and Control Act of 1986.   •   You are required to complete and pass a Pre-Employment Drug Screen and Background Screen which is provided and paid for by Meade Instruments Corporation. Your appointment slip for your drug screening is enclosed. Please signify your acceptance of the terms of this employment offer by signing the enclosed copy of this offer letter and returning it to me via confidential fax to (XXX) XXX-XXXX; retain the original copy for your records. Should you have any questions regarding the details of this offer, please don’t hesitate to call me at (XXX) XXX-XXXX, or on my cell phone at (XXX) XXX-XXXX. Sincerely, /s/ Harry Casari Chairman of the Board of Directors Meade Instruments Corporation My signature below indicates acceptance of the offer of employment as outlined in this letter.       /s/ Steve Muellner   April 28, 2006       Signature   Date      

Exhibit 10.1 COMMON STOCK PURCHASE AGREEMENT      This Common Stock Purchase Agreement (this “Agreement”) is dated as of March 30, 2006 by and among Intelligroup, Inc., a New Jersey corporation (the “Company”), and each purchaser identified on the signature page hereto (each a “Purchaser” and collectively, the “Purchasers”).      WHEREAS, subject to the terms and conditions set forth in this Agreement and pursuant to Section 4(2) of the Securities Act of 1933, as amended, the Company desires to issue and sell to each Purchaser, and each Purchaser desires to purchase from the Company, common stock of the Company as more fully described in this Agreement; and      WHEREAS, the Company has established a special committee of the disinterested members of the Board of Directors (the “Special Committee”) to evaluate and approve this Agreement and the transactions contemplated hereby, and the Special Committee has approved this Agreement and the transactions contemplated hereby,      NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for other good and valuable consideration the receipt and adequacy of which are hereby acknowledged, the Company and each Purchaser agrees as follows: ARTICLE I DEFINITIONS      1.1      Definitions. In addition to the terms defined elsewhere in this Agreement, the following terms have the meanings indicated:            “Act” means the New Jersey Shareholders Protection Act.            “Affiliate” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 144.            “Board” means the Board of Directors of the Company.            “Business Day” means any day other than Saturday, Sunday or a federal holiday on which the offices of the Commission are not open.            “Closing” means the closing of the sale and purchase of the Shares pursuant to Section 2.1.            “Closing Date” means the date of the Closing.            “Commission” and “SEC” each mean the Securities and Exchange Commission.            “Common Stock” means the common stock of the Company.     --------------------------------------------------------------------------------        “Common Stock Equivalents” means, collectively, Options and Convertible Securities.            “Convertible Securities” means any stock or securities (other than Options) convertible into or exercisable or exchangeable for Common Stock.            “Eligible Market” means any of the New York Stock Exchange, the American Stock Exchange, the Nasdaq National Market, the Nasdaq Capital Market or the OTC Bulletin Board.            “Exchange Act” means the Securities Exchange Act of 1934, as amended.            “Excluded Stock” means the issuance of Common Stock (A) upon exercise or conversion of any options or other securities described in Schedule 3.1(e) (provided that such exercise or conversion occurs in accordance with the terms thereof, without amendment or modification, and that the applicable exercise or conversion price or ratio is described in such schedule), (B) in connection with any grant of options to employees, officers, directors or consultants of the Company approved by the Board or compensation committee thereof, pursuant to a stock option plan duly adopted by the Board or in respect of the issuance of Common Stock upon exercise of any such options, (C) in connection with a bona fide transaction under Rule 144A placed on a firmly underwritten basis, (D) in connection with acquisitions, strategic alliances or other similar business combinations approved by the Board including at least one Investor Director, or (E) in connection with any debt financing from a bank or similar financial institution that is approved by the Board including at least one Investor Director.            “Lien” means any lien, charge, claim, security interest, encumbrance, right of first refusal or other restriction.            “Options” means any rights, warrants or options to subscribe for or purchase Common Stock or Convertible Securities.             “Person” means any individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or any court or other federal, state, local or other governmental authority or other entity of any kind.             “Rule 144,” “Rule 144A,” “Rule 415,” and “Rule 424” means Rule 144, Rule 144A, Rule 415 and Rule 424, respectively, promulgated by the Commission pursuant to the Securities Act, as such Rules may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule.            “SAIF” means SB Asia Infrastructure Fund, L.P.            “Securities Act” means the Securities Act of 1933, as amended.     2 --------------------------------------------------------------------------------        “Shares” means an aggregate of 6,666,667 shares of Common Stock to be issued and sold to the Purchasers at the Closing.            “Subsidiary” means any Person in which the Company, directly or indirectly, owns capital stock or holds an equity or similar interest that are required to be listed in Schedule 3.1(a).            “Trading Day” means any day on which the Common Stock is listed or quoted and traded on any Eligible Market or (b) if the Common Stock is not then listed or quoted and traded on any Eligible Market, then any Business Day.            “Trading Market” means any Eligible Market on which the Common Stock is then listed or quoted.            “Transaction Documents” means this Agreement, the Transfer Agent Instructions and any other documents or agreements executed in connection with the transactions contemplated hereunder.            “Transfer Agent” means the Company’s transfer agent.            “Transfer Agent Instructions” means the Irrevocable Transfer Agent Instructions, in the form of Exhibit A, executed by the Company and delivered to and acknowledged in writing by the Transfer Agent. ARTICLE II PURCHASE AND SALE      2.1      Closing. Subject to the terms and conditions set forth in this Agreement, at the Closing the Company shall issue and sell to each Purchaser, and each Purchaser shall purchase from the Company, the number of Shares at the aggregate purchase price as indicated below such Purchaser’s name on the signature page of this Agreement. The Closing shall take place upon satisfaction or waiver of all applicable conditions in Section 5 below, or at such other time as the parties may mutually agree. The Closing shall occur at the offices of Intelligroup, Inc. or at such other location as the parties may mutually agree. The purchase price of the Shares shall be $10,000,000.00 ($1.50) per Share.        2.2      Closing Deliveries.                 (a)      At the Closing, the Company shall deliver or cause to be delivered to each Purchaser the following:                     (i)      one or more stock certificates, or such other evidence of stock ownership as such Purchaser may reasonably request, free and clear of all restrictive and other legends (except as expressly provided in Section 4.1(b) hereof), evidencing the number of Shares indicated below such Purchaser’s name on the signature page of this Agreement, registered in the name of such Purchaser; and 3 --------------------------------------------------------------------------------               (ii)      duly executed Transfer Agent Instructions acknowledged by the Transfer Agent.                 (b)      At the Closing, each Purchaser shall deliver or cause to be delivered to the Company the purchase price for the Shares being purchased by such Purchaser, in United States dollars and in immediately available funds, by wire transfer to an account designated in writing by the Company for such purpose. ARTICLE III REPRESENTATIONS AND WARRANTIES      3.1      Representations and Warranties of the Company. The Company hereby represents and warrants to each of the Purchasers as follows:                 (a)      Subsidiaries. The Company has no direct or indirect Subsidiaries other than those listed in Schedule 3.1(a). Except as disclosed in Schedule 3.1(a), the Company owns, directly or indirectly, all of the capital stock or comparable equity interests of each Subsidiary free and clear of any Lien, and all the issued and outstanding shares of capital stock or comparable equity interests of each Subsidiary are validly issued and are fully paid, non-assessable and free of preemptive and similar rights.                 (b)      Organization and Qualification. Each of the Company and the Subsidiaries is an entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization (as applicable), with the requisite power and authority to own and use its properties and assets and to carry on its business as currently conducted. Neither the Company nor any Subsidiary is in violation of any of the provisions of its respective certificate or articles of incorporation, bylaws or other organizational or charter documents. Each of the Company and the Subsidiaries is duly qualified to do business and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, would not or could not reasonably be expected to, individually or in the aggregate, (i) materially adversely affect the legality, validity or enforceability of any Transaction Document, (ii) have or result in a material adverse effect on the results of operations, assets, properties, liabilities (absolute, accrued, contingent or otherwise), business or financial condition of the Company and the Subsidiaries, taken as a whole, or (iii) adversely impair the Company's ability to perform fully on a timely basis its obligations under any of the Transaction Documents (any of (i), (ii) or (iii), a "Material Adverse Effect").                 (c)      Authorization; Enforcement. The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by each of the Transaction Documents and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of each of the Transaction Documents by the Company and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary action on the part of the Company and no further consent or action is required by the Company, its Board of Directors or its stockholders. Each of the Transaction Documents has been (or upon delivery will be) duly executed by the Company and is, or when delivered in accordance with the terms hereof, will constitute, the valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as such may be limited by applicable bankruptcy, insolvency, reorganization or other laws affecting creditors' rights generally and by general equitable principles. 4 --------------------------------------------------------------------------------             (d)      Issuance of the Shares. The Shares are duly authorized and, when issued and paid for in accordance with the Transaction Documents, will be duly and validly issued, fully paid and nonassessable, free and clear of all Liens and shall not be subject to preemptive rights or similar rights of stockholders.                 (e)      Capitalization. The number of shares and type of all authorized, issued and outstanding capital stock, options and other securities of the Company (whether or not presently convertible into or exercisable or exchangeable for shares of capital stock of the Company) is set forth in Schedule 3.1(e). All outstanding shares of capital stock are duly authorized, validly issued, fully paid and nonassessable and have been issued in compliance with all applicable securities laws. Except pursuant to the Common Stock Purchase Agreement dated September 29, 2004 by and among the Purchasers, and except as disclosed in Schedule 3.1(e), there are no outstanding options, warrants, script rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities, rights or obligations convertible into or exercisable or exchangeable for, or giving any Person any right to subscribe for or acquire, any shares of Common Stock, or contracts, commitments, understandings or arrangements by which the Company or any Subsidiary is or may become bound to issue additional shares of Common Stock, or securities or rights convertible or exchangeable into shares of Common Stock. There are no anti-dilution or price adjustment provisions contained in any security issued by the Company (or in any agreement providing rights to security holders) and the issue and sale of the Shares will not obligate the Company to issue shares of Common Stock or other securities to any Person (other than the Purchaser) and will not result in a right of any holder of Company securities to adjust the exercise, conversion, exchange or reset price under such securities.                 (f)      Contracts.                     (i)      Each of the Material Contracts has been filed as an exhibit to the SEC Reports and other than the Material Contracts, neither the Company nor any Subsidiary has any agreements, contracts and commitments that are material to the Company and not made in the ordinary course of business.                     (ii)      Except as described in Schedule 3.1(f), the Company and each Subsidiary is not materially restricted by agreement from carrying on its business anywhere in the world.                 (g)      Compliance. Except as set forth in Schedule 3.1(g), neither the Company nor any Subsidiary (i) is in default under or in violation of (and no event has occurred that has not been waived that, with notice or lapse of time or both, would result in a default by the Company or any Subsidiary under), nor has the Company or any Subsidiary received written notice of a claim that it is in default under or that it is in violation of, any indenture, loan or credit agreement or any other agreement or instrument to which it is a party or by which it or any of its properties is bound (whether or not such default or violation has been waived), (ii) is in violation of any order of any court, arbitrator or governmental body, or (iii) is or has been in violation of any statute, rule or regulation of any governmental authority, including without limitation all foreign, federal, state and local laws relating to taxes, environmental protection, occupational health and safety, product quality and safety and employment and labor matters, except in each case as would not, individually or in the aggregate, have or result in a Material Adverse Effect. 5 --------------------------------------------------------------------------------             (h)      Title to Assets. The Company and the Subsidiaries have good and marketable title in fee simple to all real property owned by them that is material to the business of the Company and the Subsidiaries and good and marketable title in all personal property owned by them that is material to the business of the Company and the Subsidiaries, in each case free and clear of all Liens, except for Liens that do not materially affect the value of such property and do not materially interfere with the use made, and proposed to be made, of such property by the Company and the Subsidiaries. Any real property and facilities held under lease by the Company and the Subsidiaries are held by them under valid, subsisting and enforceable leases, free and clear of all Liens, of which the Company and the Subsidiaries are in compliance.                 (i)      Certain Fees. Except for the fees due to the financial advisor engaged by the Special Committee, no brokerage or finder's fees or commissions are or will be payable by the Company to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions contemplated by this Agreement, and the Company has not taken any action that would cause any Purchaser to be liable for any such fees or commissions.                 (j)      Private Placement. Neither the Company nor any Person acting on the Company's behalf has sold or offered to sell or solicited any offer to buy the Shares by means of any form of general solicitation or advertising. Neither the Company nor any of its Affiliates nor any Person acting on the Company's behalf has, directly or indirectly, at any time within the past six months, made any offer or sale of any security or solicitation of any offer to buy any security under circumstances that would (i) eliminate the availability of the exemption from registration under Regulation D under the Securities Act in connection with the offer and sale of the Shares as contemplated hereby or (ii) cause the offering of the Shares pursuant to the Transaction Documents to be integrated with prior offerings by the Company for purposes of any applicable law, regulation or stockholder approval provisions, including, without limitation, under the rules and regulations of any Trading Market. The issuance and sale of the Shares hereunder does not conflict with or violate any rules or regulations of any Trading Market. The Company is not, and is not an Affiliate of, an "investment company" within the meaning of the Investment Company Act of 1940, as amended. The Company is not a United States real property holding corporation within the meaning of the Foreign Investment in Real Property Tax Act of 1980.                 (k)      Registration Rights. Except as set forth in the Common Stock Purchase Agreement dated September 29, 2004 by and among Company and the Purchasers, as amended, the Company has not granted or agreed to grant to any Person any rights (including "piggy-back" registration rights) to have any securities of the Company registered with the Commission or any other governmental authority that have not been satisfied or waived. 6 --------------------------------------------------------------------------------             (l)      Application of Takeover Protections. Except for the Act, there is no control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or other similar anti-takeover provision under the Company's charter documents or the laws of its state of incorporation that is or could become applicable to any of the Purchasers as a result of Purchasers and the Company fulfilling their obligations or exercising their rights under the Transaction Documents, including, without limitation, as a result of the Company's issuance of the Shares and the Purchasers' ownership of the Shares.                 (m)       Disclosure. The Company understands and confirms that each of the Purchasers will rely on the foregoing representations in effecting transactions in securities of the Company. All disclosures provided to the Purchasers regarding the Company, its business and the transactions contemplated hereby, including the Schedules to this Agreement, furnished by or on behalf of the Company are true and correct and do not contain any untrue statement of a material fact or, to the best of the Company's knowledge, omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. No event or circumstance has occurred or information exists with respect to the Company or any of its Subsidiaries or its or their business, properties, prospects, operations or financial conditions, which, under applicable law, rule or regulation, requires public disclosure or announcement by the Company but which has not been so publicly announced or disclosed. The Company acknowledges and agrees that no Purchaser makes or has made any representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth in Section 3.2.                 (n)      Acknowledgment Regarding Purchasers' Purchase of Shares. The Company acknowledges and agrees that each of the Purchasers is acting solely in the capacity of an arm's length purchaser with respect to this Agreement and the transactions contemplated hereby. The Company further acknowledges that no Purchaser is acting as a financial advisor or fiduciary of the Company or any other Purchaser (or in any similar capacity) with respect to this Agreement and the transactions contemplated hereby and any advice given by any Purchaser or any of their respective representatives or agents in connection with this Agreement and the transactions contemplated hereby is merely incidental to such Purchaser's purchase of the Shares. The Company further represents to each Purchaser that the Company's decision to enter into this Agreement has been based solely on the independent evaluation of the transactions contemplated hereby by the Company and its representatives.                 (o)      Patents and Trademarks. The Company and the Subsidiaries have, or have rights to use, all patents, patent applications, trademarks, trademark applications, service marks, trade names, copyrights, licenses and other similar rights that are necessary or material for use in connection with their respective businesses and which the failure to so have would, or could reasonably be expected to, have a Material Adverse Effect (collectively, the "Intellectual Property Rights"). Neither the Company nor any Subsidiary has received written notice that, or has knowledge that, the Intellectual Property Rights used by the Company or any Subsidiary conflicts with, or violates or infringes upon, the rights of any Person. To the knowledge of the Company, all such Intellectual Property Rights are enforceable and there is no existing infringement by another Person of any of the Intellectual Property Rights. The Company is not aware of any claim or potential claim against the Company or any Subsidiary regarding any of the Intellectual Property Rights. The Company or any Subsidiary does not, in the conduct of its business, infringe or conflict with any right or patent of any third party, or any discovery, invention, product or process that is the subject of a patent application filed by any third party, known to the Company. The Company and each Subsidiary has taken reasonable steps to protect the material intellectual property of the Company. The execution, delivery and performance by the Company of this Agreement, and the consummation of the transactions contemplated hereby, will not result in the loss or impairment of, or give rise to any right of any third party to terminate or materially alter, any of the Company's or any Subsidiary's material rights to own any of its intellectual property or its material rights under any agreements relating to such intellectual property, nor require the consent of any governmental authority or third party in respect of any such intellectual property. 7 --------------------------------------------------------------------------------             (p)      Employee Benefit Plans; Employee Matters. The Company and each Subsidiary is in compliance in all material respects with all currently applicable laws and regulations respecting employment, discrimination in employment, terms and conditions of employment, wages, hours and occupational safety and health and employment practices, and is not engaged in any unfair labor practice. To the Company's knowledge, no employees of the Company or any Subsidiary are in violation of any term of any material employment contract, patent disclosure agreement, noncompetition agreement or any restrictive covenant to a former employer relating to the right of any such employee to be employed by the Company or any Subsidiary because of the nature of the business conducted or presently proposed to be conducted by the Company or any Subsidiary or to the use of trade secrets or proprietary information of others. No key employee of the Company or any Subsidiary has given written notice of resignation to the Company or any Subsidiary and, to the Company's knowledge, no key employee intends to terminate his or her employment with the Company or any Subsidiary.                 (q)      Insurance. The Company and the Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as are prudent and customary in the businesses in which the Company and the Subsidiaries are engaged. Neither the Company nor any Subsidiary has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business without a significant increase in cost.                 (r)      Regulatory Permits. The Company and the Subsidiaries possess all certificates, authorizations and permits issued by the appropriate federal, state, local or foreign regulatory authorities necessary to conduct their respective businesses as described in the SEC Reports, except where the failure to possess such permits would not, individually or in the aggregate, have or result in a Material Adverse Effect ("Material Permits"), and neither the Company nor any Subsidiary has received any notice of proceedings relating to the revocation or modification of any Material Permit. 8 --------------------------------------------------------------------------------             (s)      Environmental Laws. Except as would not have a Material Adverse Effect, the Company and each of the Subsidiaries is not in violation of any applicable statute, law or regulation relating to the environment or occupational health and safety, and no material expenditures are or will be required in order to comply with any such existing statute, law or regulation.        3.2      Representations and Warranties of the Purchaser. Each Purchaser hereby, as to itself only and for no other Purchaser, represents and warrants to the Company as follows:                 (a)      Organization; Authority. Such Purchaser is an entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization with the requisite corporate or partnership power and authority to enter into and to consummate the transactions contemplated by the Transaction Documents and otherwise to carry out its obligations hereunder and thereunder. The purchase by such Purchaser of the Shares hereunder has been duly authorized by all necessary action on the part of such Purchaser. This Agreement has been duly executed and delivered by such Purchaser and constitutes the valid and binding obligation of such Purchaser, enforceable against such Purchaser in accordance with its terms.                 (b)      Investment Intent. Such Purchaser is acquiring the Shares as principal for its own account for investment purposes only and not with a view to or for distributing or reselling such Shares or any part thereof, without prejudice, however, to such Purchaser’s right, subject to the provisions of this Agreement, at all times to sell or otherwise dispose of all or any part of such Shares pursuant to an effective registration statement under the Securities Act or under an exemption from such registration and in compliance with applicable federal and state securities laws. Nothing contained herein shall be deemed a representation or warranty by such Purchaser to hold the Shares for any period of time.                 (c)      Purchaser Status. At the time such Purchaser was offered the Shares it was, and at the date hereof it is, an “accredited investor” as defined in Rule 501(a) under the Securities Act.                 (d)      Experience of such Purchaser. Such Purchaser, either alone or together with its representatives, has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the Shares, and has so evaluated the merits and risks of such investment. Such Purchaser is able to bear the economic risk of an investment in the Shares and, at the present time, is able to afford a complete loss of such investment. ARTICLE IV OTHER AGREEMENTS OF THE PARTIES      4.1      Transfer Restrictions.                 (a)      The Shares may only be disposed of pursuant to an effective registration statement under the Securities Act or pursuant to an available exemption from the registration requirements of the Securities Act, and in compliance with any applicable state securities laws. In connection with any transfer of Shares other than (i) pursuant to an effective registration statement, (ii) to the Company or (iii) pursuant to Rule 144(k), except as otherwise set forth herein, the Company may require the transferor to provide to the Company an opinion of counsel selected by the transferor (reasonably acceptable to the Company) to the effect that such transfer does not require registration under the Securities Act. Notwithstanding the foregoing, the Company hereby consents to and agrees to register on the books of the Company and with its Transfer Agent, without any such legal opinion, any transfer of Shares by a Purchaser to an Affiliate of such Purchaser, provided that no registration of such transfer is required under the Securities Act. In addition, a Purchaser shall not knowingly transfer any Shares to a competitor of the Company. 9 --------------------------------------------------------------------------------             (b)      The Purchasers agree to the imprinting, so long as is required by this Section 4.1, of the following legend on any certificate evidencing Shares:       THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. NOTWITHSTANDING THE FOREGOING, THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY SUCH SECURITIES. Certificates evidencing Shares shall not be required to contain such legend or any other legend (i) while a Registration Statement covering the resale of such Shares is effective under the Securities Act, or (ii) following any sale of such Shares pursuant to Rule 144, or (iii) if such Shares are eligible for sale under Rule 144(k), or (iv) if such legend is not required under applicable requirements of the Securities Act (including judicial interpretations and pronouncements issued by the Staff of the Commission). At such time as a legend is no longer required for certain Shares, the Company will no later than three Trading Days following the delivery by a Purchaser to the Company or the Transfer Agent of a legended certificate representing such Shares, deliver or cause to be delivered to such Purchaser a certificate representing such Shares that is free from the restrictive legends set forth above. The Company may not make any notation on its records or give instructions to any transfer agent of the Company that enlarge the restrictions on transfer set forth in this Section. For so long as any Purchaser owns Shares, the Company will not effect or publicly announce its intention to effect any exchange, recapitalization or other transaction that effectively requires or rewards physical delivery of certificates evidencing the Common Stock. 10 --------------------------------------------------------------------------------           (c)      The Company acknowledges and agrees that a Purchaser may from time to time pledge or grant a security interest in some or all of the Shares in connection with a bona fide margin agreement or other loan or financing arrangement secured by the Shares and, if required under the terms of such agreement, loan or arrangement, such Purchaser may transfer pledged or secured Shares to the pledgees or secured parties. Such a pledge or transfer would not be subject to approval of the Company and no legal opinion of the pledgee, secured party or pledgor shall be required in connection therewith. Further, no notice shall be required of such pledge. At the appropriate Purchaser’s expense, the Company will execute and deliver such required documentation as a pledgee or secured party of Shares may reasonably request in connection with a pledge or transfer of the Shares, including the preparation and filing of any required prospectus supplement under Rule 424(b)(3) of the Securities Act or other applicable provision of the Securities Act to appropriately amend the list of selling stockholders thereunder.        4.2      Integration. The Company shall not, and shall use its commercially reasonable best efforts to ensure that no Affiliate of the Company shall, sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined in Section 2 of the Securities Act) that would be integrated with the offer or sale of the Shares in a manner that would require the registration under the Securities Act of the sale of the Shares to the Purchaser, or that would be integrated with the offer or sale of the Shares for purposes of the rules and regulations of any Trading Market.        4.3      Reservation of Shares. The Company shall maintain a reserve from its duly authorized shares of Common Stock for issuance pursuant to the Transaction Documents in such amount as may be required to fulfill its obligations in full under the Transaction Documents. In the event that at any time the then authorized shares of Common Stock are insufficient for the Company to satisfy its obligations in full under the Transaction Documents, the Company shall promptly take such actions as may be required to increase the number of authorized shares.        4.4      Subsequent Placements.                 (a)      Except for entering into a new credit agreement approved by the Company’s Board of Directors, for so long as Purchasers and/or their Affiliates hold at least 10% of the outstanding Common Stock (the “Subsequent Placement Period”), the Company will not, directly or indirectly, offer, sell, grant any option to purchase, or otherwise dispose of (or announce any offer, sale, grant or any option to purchase or other disposition of) any of its or the Subsidiaries’ equity or equity equivalent securities, including without limitation any debt, preferred stock or other instrument or security that is, at any time during its life and under any circumstances, convertible into or exchangeable or exercisable for Common Stock or Common Stock Equivalents (any such offer, sale, grant, disposition or announcement being referred to as a “Subsequent Placement”) unless the Company shall have first complied with this Section 4.4(a).                     (i)      The Company shall deliver to each Purchaser a written notice (the “Offer”) of any proposed or intended issuance or sale or exchange of the securities being offered in a Subsequent Placement (the “Offered Securities”), which Offer shall (w) identify and describe the Offered Securities, (x) describe the price and other terms upon which they are to be issued, sold or exchanged, and the number or amount of the Offered Securities to be issued, sold or exchanged, (y) identify the Persons or entities (if known) to which or with which the Offered Securities are to be offered, issued, sold or exchanged and (z) offer to issue and sell to or exchange with Purchaser on the same terms as those set forth in the Subsequent Placement a portion of the Offered Securities based on such Purchaser’s pro rata percentage holdings of the outstanding Common Stock at the time of the Offer (the “Basic Amount”), and with respect to each Purchaser that elects to purchase its Basic Amount, any additional portion of the Offered Securities attributable to the Basic Amounts of other Purchasers as such Purchaser shall indicate it will purchase or acquire should the other Purchasers subscribe for less than their Basic Amounts (the “Undersubscription Amount”). 11 --------------------------------------------------------------------------------               (ii)      To accept an Offer, in whole or in part, a Purchaser must deliver a written notice to the Company within ten (10) Trading Day(s) after receipt of the Offer, setting forth the portion of the Purchaser’s Basic Amount that such Purchaser elects to purchase and, if such Purchaser shall elect to purchase all of its Basic Amount, the Undersubscription Amount, if any, that such Purchaser elects to purchase (in either case, the “Notice of Acceptance”). If the Basic Amounts subscribed for by all Purchasers are less than the total of all of the Basic Amounts, then the Purchaser who has set forth an Undersubscription Amount in its Notice of Acceptance shall be entitled to purchase, in addition to the Basic Amounts subscribed for, the Undersubscription Amount it has subscribed for; provided, however, that if the Undersubscription Amounts subscribed for exceed the difference between the total of all the Basic Amounts and the Basic Amounts subscribed for (the “Available Undersubscription Amount”), the Purchaser who has subscribed for any Undersubscription Amount shall be entitled to purchase on that portion of the Available Undersubscription Amount as the Basic Amount of such Purchaser bears to the total Basic Amounts of all Purchasers that have subscribed for Undersubscription Amounts, subject to rounding by the Board to the extent its deems reasonably necessary.                     (iii)      The Company shall have sixty (60) Trading Days from the expiration of the period set forth in Section 4.4(a)(ii) above to issue, sell or exchange all or any part of such Offered Securities as to which a Notice of Acceptance has not been given by the Purchasers (the “Refused Securities”), but only upon terms and conditions (including, without limitation, unit prices and interest rates) that are not materially more favorable to the acquiring Person or Persons or materially less favorable to the Company than those set forth in the Offer.                     (iv)      In the event the Company shall propose to sell less than all the Refused Securities (any such sale to be in the manner and on the terms specified in Section 4.4(a)(iii) above), then each Purchaser may, at its sole option and in its sole discretion, reduce the number or amount of the Offered Securities specified in its Notice of Acceptance to an amount that shall be not less than the number or amount of the Offered Securities that the Purchaser elected to purchase pursuant to Section 4.4(a)(ii) above multiplied by a fraction, (i) the numerator of which shall be the number or amount of Offered Securities the Company actually proposes to issue, sell or exchange (including Offered Securities to be issued or sold to such Purchaser pursuant to Section 4.4(a)(ii) above prior to such reduction) and (ii) the denominator of which shall be the original amount of the Offered Securities. In the event that any Purchaser so elects to reduce the number or amount of Offered Securities specified in its Notice of Acceptance, the Company may not issue, sell or exchange more than the reduced number or amount of the Offered Securities unless and until such securities have again been offered to such Purchaser in accordance with Section 4.4(a)(i) above. 12 --------------------------------------------------------------------------------               (v)      Upon the closing of the issuance, sale or exchange of all or less than all of the Refused Securities, the Purchasers shall acquire from the Company, and the Company shall issue to the Purchasers, the number or amount of Offered Securities specified in the Notices of Acceptance, as reduced pursuant to Section 4.4(a)(iv) above if the Purchasers have so elected, upon the terms and conditions specified in the Offer. The purchase by the Purchasers of any Offered Securities is subject in all cases to the preparation, execution and delivery by the Company and the Purchasers of a purchase agreement relating to such Offered Securities reasonably satisfactory in form and substance to the Purchaser and their respective counsel.                     (vi)      Any Offered Securities not acquired by the Purchasers or other Persons in accordance with Section 4.4(a)(iii) above may not be issued, sold or exchanged until they are again offered to the Purchasers under the procedures specified in this Agreement.                 (b)      The restrictions contained in paragraph (a) of this Section shall not apply to Excluded Stock.        4.5      Securities Laws Disclosure; Publicity. The Company shall, on the Closing Date, issue a press release or other public disclosure acceptable to the Purchasers disclosing all material terms of the transactions contemplated hereby. The Company shall, on or before the fourth Business Day following the Closing Date, file a Current Report on Form 8-K with the Commission (the “8-K Filing”) describing the terms of the transactions contemplated by the Transaction Documents and including as exhibits to such Current Report on Form 8-K this Agreement, in the form required by the Exchange Act; provided that, to the extend permitted by law, the Company may make such disclosures and filings on a periodic report on Form 10-K or 10-Q, and the filing of such periodic report shall be deemed the “8-K Filing,” provided that such periodic report is filed on or before the fourth Business Day following the Closing Date. Thereafter, the Company shall timely file any filings and notices required by the Commission or applicable law with respect to the transactions contemplated hereby and provide copies thereof to the Purchasers promptly after filing. Except with respect to the 8-K Filing and the press release referenced above (a copy of which will be provided to the Purchasers for their review as early as practicable prior to its filing), the Company shall, at least two Trading Days prior to the filing or dissemination of any disclosure required by this paragraph, provide a copy thereof to the Purchasers for their review. The Company and the Purchasers shall consult with each other in issuing any press releases or otherwise making public statements or filings and other communications with the Commission or any regulatory agency or Trading Market with respect to the transactions contemplated hereby, and neither party shall issue any such press release or otherwise make any such public statement, filing or other communication without the prior consent of the other, except if such disclosure is required by law, in which case the disclosing party shall promptly provide the other party with prior notice of such public statement, filing or other communication. Notwithstanding the foregoing, the Company shall not publicly disclose the name of any Purchaser, or include the name of any Purchaser in any filing with the Commission or any regulatory agency or Trading Market, without the prior consent of such Purchaser, except to the extent such disclosure is required by law or Trading Market regulations, in which case the Company shall provide the Purchaser with prior notice of such disclosure. Subject to the foregoing, neither the Company nor any Purchaser shall issue any press releases or any other public statements with respect to the transactions contemplated hereby; provided, however, that the Company shall be entitled, without the prior approval of any Purchaser, to make any press release or other public disclosure with respect to such transactions (i) in substantial conformity with the 8-K Filing and contemporaneously therewith and (ii) as is required by applicable law and regulations (provided that in the case of clause (i) Purchaser shall be consulted by the Company in connection with any such press release or other public disclosure prior to its release). 13 --------------------------------------------------------------------------------      4.6      Use of Proceeds. The Company shall use the net proceeds from the sale of the Shares hereunder for capital expenditures and working capital purposes. Unless otherwise approved in writing by SAIF, the Company shall not use the net proceeds to redeem any Company equity or equity-equivalent securities or to settle any litigation outstanding on the Closing Date.        4.7      Inspection Rights.Purchasers shall have the right to visit and inspect any of the properties of the Company or any of its subsidiaries at such reasonable times and as often as may be reasonably requested; provided, however, that the Company shall not be obligated under this Section 4.7 with respect to information which the Board determines in good faith is confidential or attorney-client privileged and should not, therefore, be disclosed.        4.8      Reports. So long as Purchasers and/or their Affiliates continue to hold at least 10% of the outstanding Common Stock, the Company shall, upon request of the Purchasers, provide Purchasers with all materials submitted to the Board at the same time and in the same manner as such materials are provided to the directors.        4.9      Board Representation.                 (a)      From and after the Closing until Purchasers and/or their Affiliates no longer hold at least 10% of the outstanding Common Stock, Purchasers shall have the right to designate one (1) member of the Board; from and after the Closing until Purchasers and/or their Affiliates no longer hold at least 15% of the outstanding Common Stock, Purchasers shall have the right to designate a second member of the Board; from and after the Closing until Purchasers and/or their Affiliates no longer hold at least 20% of the outstanding Common Stock, Purchasers shall have the right to designate a third member of the Board; from and after the Closing until Purchasers and/or their Affiliates no longer hold at least 40% of the outstanding Common Stock, Purchasers shall have the right to designate a fourth member of the Board; and from and after the Closing until Purchasers and/or their Affiliates no longer hold at least 50% of the outstanding Common Stock, Purchasers shall have the right to designate a fifth member of the Board (collectively, the “Investor Directors”).The Company shall recommend the election of the Investor Directors at each meeting of shareholders where the election of directors is considered and shall use its best efforts to cause the Investor Directors to be elected and re-elected to the Board. Purchasers shall have the right to remove or replace any of the Investor Directors by giving notice to such Investor Director and the Company, and the Company shall use its best efforts to effect the removal or replacement of any such Investor Director. Unless prohibited by applicable law, Investors shall have the right to have two Investor Directors, as determined by Purchasers, be members of each committee of the Board, and the Company shall use its best efforts to appoint and maintain such Investor Directors on each committee of the Board, as requested by Purchasers. Any Investor Director who is not a member of a committee of the Board shall have the right to attend all meetings of such committee as a non-voting observer.                 (b)      Subject to any limitations imposed by applicable law, the Investor Directors shall be entitled to the same perquisites, including stock options, reimbursement of expenses and other similar rights in connection with such person’s membership on the Board, as every other non-employee member of the Board. 14 --------------------------------------------------------------------------------      4.10      Restrictive Covenants. For so long as Purchasers and/or their Affiliates continue to hold at least 15% of the outstanding Common Stock, without the prior written consent of Purchasers, the Company shall not (and shall cause its respective Subsidiaries not to):                 (a)      purchase or redeem any securities of the Company other than pro rata from all stockholders pursuant to a tender offer;                 (b)      sell, transfer or otherwise dispose of all or substantially all of the Company’s assets or take any action which results in the holders of the Common Stock prior to the transaction owning less than 80% of the voting power of the Company’s capital stock after the transaction;                 (c)      take any action that may result in the Common Stock ceasing to be registered pursuant to Section 12 of the Exchange Act;                 (d)      amend the Company’s articles of incorporation or bylaws;                 (e)      issue any equity securities senior to the Common Stock (including as to liquidation, dividends or participation in earnings);                 (f)      issue any common stock or securities convertible into or exercisable for Common Stock other than to employees, directors or other service providers pursuant to plans approved by the Board;                 (g)      liquidate or dissolve the Company;                 (h)      declare or pay any dividends;                 (i)      change the authorized number of directors; or                 (j)      agree to do any of the foregoing. 15 --------------------------------------------------------------------------------      4.11      Future Acquisitions. The Company acknowledges and agrees that the Board has approved any and all "business combinations" (as that term is defined in the Act) by and between the Company and any one or more of the Purchasers and/or any one or more "affiliates" and/or "associates" thereof (in each case, as the Act defines those terms) (a "Purchaser Business Combination"); provided that if the future Purchaser Business Combination would otherwise have been prohibited by the Act (a "Covered Combination"), then (1) the Company shall first obtain an opinion from a nationally-recognized financial advisor retained by and reporting to a committee of the Board (which committee is hereby authorized and shall consist solely of those Board members who, at such time, are disinterested directors) that such transaction is either fair to the shareholders of the Company from a financial point of view or necessary for the continued financial viability of the Company; and (2) in addition, if such Covered Combination is a transaction for which shareholder approval is required by law, then, such transaction must be approved by a majority of the shareholders that are unaffiliated with the Purchasers; and provided further that notwithstanding the foregoing, neither of the restrictions in clause (1) or (2) of the preceding proviso shall apply to any Purchaser Business Combination if the primary purpose of such transaction is to reincorporate the Company in another jurisdiction and following such transaction the common stock of the surviving corporation is beneficially owned by substantially the same persons and in substantially the same percentages as the common stock of the Company was beneficially owned immediately prior to the transaction. ARTICLE V CONDITIONS      5.1      Conditions Precedent to the Obligations of the Purchaser. The obligation of Purchasers to acquire Shares at the Closing is subject to the satisfaction or waiver by Purchasers, at or before the Closing, of each of the following conditions:                 (a)      Representations and Warranties. The representations and warranties of the Company contained herein shall be true and correct in all material respects as of the date when made and as of the Closing as though made on and as of such date.                 (b)      Performance. The Company and each other Purchaser shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by the Transaction Documents to be performed, satisfied or complied with by it at or prior to the Closing.                 (c)      Board Approval. The Board shall have taken all necessary actions to approve the Transaction Documents and the sale of the Shares in accordance with applicable laws, including the Act, as applicable.                 (d)      Compliance Certificate. The Company shall have delivered to Purchasers a certificate executed by the Chief Executive Officer or Chief Financial Officer of the Company, certifying that the conditions specified in subsections (a) and (b) of this Section 5.1 have been satisfied. 16 --------------------------------------------------------------------------------      5.2      Conditions Precedent to the Obligations of the Company. The obligation of the Company to sell Shares at the Closing is subject to the satisfaction or waiver by the Company, at or before the Closing, of each of the following conditions:                 (a)      Representations and Warranties. The representations and warranties of the Purchaser contained herein shall be true and correct in all material respects as of the date when made and as of the Closing as though made on and as of such date; and                 (b)      Performance. The Purchaser shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by the Transaction Documents to be performed, satisfied or complied with by the Purchaser at or prior to the Closing.                 (c)      Special Committee and Board Approval. The Special Committee of the Board and the Board shall have taken all necessary actions to approve the Transaction Documents and the sale of the Shares in accordance with applicable laws, including the Act, as applicable.                 (d)      Fairness Opinion. The Company shall have received a fairness opinion from Management Planning, Inc. ARTICLE VI REGISTRATION RIGHTS      6.1      Registration. With respect to the Shares, the Purchasers shall be entitled to the rights and subject to the obligations as set forth in Article VI of the Common Stock Purchase Agreement dated September 29, 2004 by and among the Company and the investors named therein, as amended by Amendment No. 1 dated as of March 21, 2005 by and among the Company and the investors named therein. ARTICLE VII MISCELLANEOUS      7.1      Fees and Expenses. Upon receipt of an invoice from P&A Law Offices, attorneys for SAIF, the Company shall pay legal fees of up to $10,000 to P&A Law Offices to cover SAIF’s legal fees and expenses incurred in connection with the preparation and negotiation of the Transaction Documents. Except as expressly set forth in the Transaction Documents to the contrary, each party shall pay the fees and expenses of its advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement. The Company shall pay all Transfer Agent fees, stamp taxes and other taxes and duties levied in connection with the issuance of the Shares.        7.2      Waiver. The Purchasers hereby waive compliance by the Company with Section 4.5 of that certain Common Stock Purchase Agreement, dated as of September 29, 2004 (“2004 Agreement”), among the Purchasers and the Company, to the extent that the transactions contemplated hereby may be considered a "Subsequent Placement" for purposes of the 2004 Agreement. 17 --------------------------------------------------------------------------------      7.3      Entire Agreement. The Transaction Documents, together with the Exhibits and Schedules thereto, contain the entire understanding of the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, oral or written, with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits and schedules. At or after the Closing, and without further consideration, the Company will execute and deliver to the Purchaser such further documents as may be reasonably requested in order to give practical effect to the intention of the parties under the Transaction Documents. Notwithstanding anything to the contrary herein, the Shares may be assigned to any Person in connection with a bona fide margin account or other loan or financing arrangement secured by such Shares.        7.4      Notices. Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of (a) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in this Section prior to 5:00 p.m. (New York City time) on a Trading Day, (b) the next Trading Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in this Section on a day that is not a Trading Day or later than 5:00 p.m. (New York City time) on any Trading Day, (c) the Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service, or (d) upon actual receipt by the party to whom such notice is required to be given. The addresses and facsimile numbers for such notices and communications are those set forth on the signature pages hereof, or such other address or facsimile number as may be designated in writing hereafter, in the same manner, by such Person.        7.5      Amendments; Waivers. No provision of this Agreement may be waived or amended except in a written instrument signed, in the case of an amendment, by the Company and the Purchasers holding a majority of the Shares or, in the case of a waiver, by the party against whom enforcement of any such waiver is sought. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of either party to exercise any right hereunder in any manner impair the exercise of any such right.        7.6      Construction. The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party.        7.7      Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns. The Company may not assign this Agreement or any rights or obligations hereunder without the prior written consent of the Purchasers. Any Purchaser may assign its rights under this Agreement (other than the rights under Sections 4.4 and 4.7 through 4.10) to any Person to whom such Purchaser assigns or transfers any Shares, provided such transferee agrees in writing to be bound, with respect to the transferred Shares, by the provisions hereof that apply to the “Purchasers.” Notwithstanding anything to the contrary herein, Shares may be assigned to any Person in connection with a bona fide margin account or other loan or financing arrangement secured by such Shares. 18 --------------------------------------------------------------------------------      7.8      No Third-Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person, except that each Indemnified Party is an intended third party beneficiary of Section 6.4 and (in each case) may enforce the provisions of such Section directly against the parties with obligations thereunder.        7.9      Governing Law; Venue; Waiver of Jury Trail. All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by and construed and enforced in accordance with the laws of the state of New York. THE COMPANY AND PURCHASERS Hereby Irrevocably Submit To The Exclusive Jurisdiction Of The State And Federal Courts Sitting in The BOROUGH OF MANHATTAN, IN THE STATE OF NEW YORK for The Adjudication Of Any Dispute BROUGHT BY THE COMPANY OR ANY PURCHASER Hereunder, In Connection Herewith Or With Any Transaction Contemplated Hereby Or Discussed Herein (Including With Respect To The Enforcement Of Any Of The Transaction Documents), And Hereby Irrevocably Waive, And Agree Not To Assert In Any Suit, Action Or ProceedinG BROUGHT BY THE COMPANY OR ANY PURCHASER, Any Claim That It Is Not Personally Subject To The Jurisdiction Of Any Such Court, OR That Such Suit, Action Or Proceeding Is Improper. Each party Hereby Irrevocably Waives Personal Service Of Process And Consents To Process Being Served In Any Such Suit, Action Or Proceeding By Mailing A Copy Thereof Via Registered Or Certified Mail Or Overnight Delivery (With Evidence Of Delivery) To Such Party At The Address In Effect For Notices To It Under This Agreement And Agrees That Such Service Shall Constitute Good And Sufficient Service Of Process And Notice Thereof. Nothing Contained Herein Shall Be Deemed To Limit In Any Way Any Right To Serve Process In Any Manner Permitted By Law. The Company AND PURCHASERS Hereby Waive All Rights To A Trial By Jury.        7.10      Survival. The representations, warranties, agreements and covenants contained herein shall survive the Closing and the delivery of the Shares.        7.11      Execution. This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile signature page were an original thereof.        7.12      Severability. If any provision of this Agreement is held to be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Agreement shall not in any way be affected or impaired thereby and the parties will attempt to agree upon a valid and enforceable provision that is a reasonable substitute therefor, and upon so agreeing, shall incorporate such substitute provision in this Agreement. 19 --------------------------------------------------------------------------------      7.13      Rescission and Withdrawal Right. Notwithstanding anything to the contrary contained in (and without limiting any similar provisions of) the Transaction Documents, whenever any Purchaser exercises a right, election, demand or option under a Transaction Document and the Company does not timely perform its related obligations within the periods therein provided, then such Purchaser may rescind or withdraw, in its sole discretion from time to time upon written notice to the Company, any relevant notice, demand or election in whole or in part without prejudice to its future actions and rights.        7.14      Replacement of Securities. If any certificate or instrument evidencing any Shares is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof, or in lieu of and substitution therefor, a new certificate or instrument, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction and customary and reasonable indemnity, if requested. The applicants for a new certificate or instrument under such circumstances shall also pay any reasonable third-party costs associated with the issuance of such replacement Shares.        7.15      Remedies. In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, each of the Purchasers and the Company will be entitled to specific performance under the Transaction Documents. The parties agree that monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations described in the foregoing sentence and hereby agrees to waive in any action for specific performance of any such obligation the defense that a remedy at law would be adequate.        7.16      Payment Set Aside. To the extent that the Company makes a payment or payments to any Purchaser hereunder or any Purchaser enforces or exercises its rights hereunder or thereunder, and such payment or payments or the proceeds of such enforcement or exercise or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside, recovered from, disgorged by or are required to be refunded, repaid or otherwise restored to the Company by a trustee, receiver or any other Person under any law (including, without limitation, any bankruptcy law, state or federal law, common law or equitable cause of action), then to the extent of any such restoration the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred.        7.17      Adjustments in Share Numbers and Prices. In the event of any stock split, subdivision, dividend or distribution payable in shares of Common Stock (or other securities or rights convertible into, or entitling the holder thereof to receive directly or indirectly shares of Common Stock), combination or other similar recapitalization or event occurring after the date hereof, each reference in any Transaction Document to a number of shares or a price per share shall be amended to appropriately account for such event. [SIGNATURE PAGES FOLLOW] 20 --------------------------------------------------------------------------------      IN WITNESS WHEREOF, the parties hereto have caused this Common Stock Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.   INTELLIGROUP, INC.       By: /s/ Madhu Poomalil   Name: Madhu Poomalil   Title: Chief Financial Officer       Address for Notice:       499 Thornall Street   Edison, New Jersey 08837   Facsimile No.: (732) 362-2497   Telephone No.:   Attn: Legal Department [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK SIGNATURE PAGES FOR PURCHASERS FOLLOW] --------------------------------------------------------------------------------      IN WITNESS WHEREOF, the parties hereto have caused this Common Stock Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.   SB ASIA INFRASTRUCTURE FUND, L.P.       By: /s/ Andrew Y. Yan   Name: Andrew Y. Yan   Title: Authorized Signatory       Purchase Price: $5,000,000       Number of Shares to be acquired at Closing: 3,333,333       Address for Notice:       SB Asia Infrastructure Fund L.P.   Ugland House   P.O. Box 309   George Town   Grand Cayman, Cayman Islands     With a copy to:           SAIF Advisors Limited   Suites 2115-2118   2 Pacific Place   88 Queensway   Hong Kong   Facsimile No.: 852-22349116   Telephone No.: 852-219182200   Attn: Brandon Lin or Jason So --------------------------------------------------------------------------------      IN WITNESS WHEREOF, the parties hereto have caused this Common Stock Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.   VENTURE TECH ASSETS LTD.       By: /s/ Sandeep Reddy                  Name:  Sandeep Reddy   Title: Director       Purchase Price: $5,000,000       Number of Shares to be acquired at Closing: 3,333,334       Address for Notice:       4 Whitcome Mews,   Richmond TW9 4BT   United Kingdom       Facsimile No.:   Telephone No.: +44-208-876-2141   Attn:     With a copy to:           Venu Chittoory   96, Dr. R K Salai, Mylapore   Chennai 600 004, India   Facsimile No.:   Telephone No.: _+91-98400-89419   Attn: --------------------------------------------------------------------------------      Exhibits: A      Transfer Agent Instructions Exhibit A Transfer Agent Instructions (Company counsel to complete) INTELLIGROUP, INC. 499 Thornall Street Edison, NJ 08837 ______________ [__], 2006 [Name of Transfer Agent] [Address] [Address] Attention: [___________] Re: Shares Issuance Instructions Ladies and Gentlemen: We hereby instruct you, as transfer agent of the shares of Common Stock, par value $0.01 per share (the “Common Stock”), of Intelligroup, Inc., a New Jersey corporation (the “Company”), to issue an aggregate of [_________]shares of Common Stock (the “Shares”) pursuant to the Common Stock Purchase Agreement dated ___________ [__], 2006 (the “Agreement”) in the name of [insert name of Purchaser] (the “Purchaser”) and to deliver, on our behalf, the certificate representing the Shares to or for the account of the Purchaser. The Shares have not been registered under the Securities Act of 1933 and should include the legend listed on Exhibit A. The Company has authorized the issuance of the Shares pursuant to the resolutions attached hereto as Exhibit B. [Remainder of this page intentionally left blank.] -------------------------------------------------------------------------------- Thank you very much for your attention to the above.              Very truly yours,              INTELLIGROUP, INC.              By:    _________________________________          Vikram Gulati          Chief Executive Officer -------------------------------------------------------------------------------- Exhibit A Legends “THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. NOTWITHSTANDING THE FOREGOING, THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY SUCH SECURITIES.” -------------------------------------------------------------------------------- Exhibit B RESOLUTIONS ADOPTED BY THE BOARD OF DIRECTORS --------------------------------------------------------------------------------

Exhibit 10.4 SECOND AMENDMENT TO EMPLOYMENT AGREEMENT THIS SECOND AMENDMENT TO EMPLOYMENT AGREEMENT (this “Amendment”) between Allscripts LLC, a Delaware limited liability company (“Company”), and William J. Davis (“Executive”) is made and entered into as of July 7, 2006. WITNESSETH: WHEREAS, Allscripts, Inc. and Executive entered into an Employment Agreement, dated as of October 8, 2002, as restated December 31, 2004, and an Amendment to Employment Agreement dated as of December 31, 2004 (collectively, as the same may be further amended, supplemented or otherwise modified from time to time, the “Employment Agreement”); and WHEREAS, the Compensation Committee of the Board of Directors of Parent (the “Board”), after comprehensive review of employment arrangements with executive officers, has determined that it is advisable and in the best interests of Parent, Company and Parent’s stockholders to modify such arrangements to extend the term of the Employment Agreement, and to more appropriately reflect the current business and legal environment and risk profile of Parent and its subsidiaries; and WHEREAS, Company and Executive desire to amend the Employment Agreement upon the terms and conditions set forth herein. NOW, THEREFORE, in consideration of the foregoing premises, and the mutual promises and agreements herein contained, the parties hereto agree as follows: 1. Amendment Date. This Amendment shall be deemed effective as of July 8, 2006 (the “Amendment Date”). Except as specifically set forth in this Amendment, all capitalized terms used in this Amendment shall have the same meaning as set forth in the Employment Agreement. 2. Renewal and Rights Upon Expiration/Termination. (a) Section 2 of the Employment Agreement is hereby amended and restated as follows: The initial term of Executive’s employment by Company under this Agreement shall commence as of October 8, 2002 (the “Effective Date”) and shall continue in effect through December 31, 2007 unless earlier terminated as provided herein. Thereafter, the Company may elect to renew this Agreement upon the expiration of the initial term or any renewal term by providing written notice of renewal to Executive at least ninety (90) days prior to the expiration of the then current term. If such notice is not provided, Executive must notify Company that Company failed to provide a notice of renewal. If Company does not cure such failure within five (5) business days, this Agreement will terminate at the expiration of the then current term. If Company elects not to renew this Agreement at the end of the initial term or any renewal term, such nonrenewal shall be treated as a termination of the Employment Period without cause by Company for the limited purpose of determining the payments and benefits available to Executive (i.e., Executive shall be entitled to the severance/benefits set forth in Section 4.5.1). If -------------------------------------------------------------------------------- Executive elects not to renew this Agreement, the same shall constitute a termination of the Employment Period by Executive without cause, and Executive shall only be entitled to the payments and benefits set forth in Section 4.5.3. As used herein, the term “Employment Period” shall mean the period from the Effective Date until the termination of the Agreement (i) for non-renewal pursuant to this Section 2, or (ii) pursuant to Section 4 herein. (b) Section 4.5.3 of the Employment Agreement shall be amended to delete the words “or a non-renewal under Section 2” and in lieu thereof add the words “or Executive terminates the Employment Period by a non-renewal by Executive under Section 2” following “if Executive terminates the Employment Period other than as a result of a Constructive Discharge” in the first sentence of said Section. (c) Section 4.5.5 of the Employment Agreement is hereby deleted in its entirety and shall be replaced with the words “Intentionally Omitted.” 3. Termination by Company Without Cause or for Constructive Discharge. Section 4.5.1(iv) of the Employment Agreement is deleted in its entirety and shall be replaced with the words “Intentionally Omitted.” 4. Miscellaneous. Except as modified by this Amendment, the Employment Agreement shall continue in full force and effect and is hereby ratified and confirmed. To the extent that any provision of this Amendment is inconsistent with the Agreement, the terms of this Amendment shall control. This Amendment and the Employment Agreement (a) are complete, (b) constitute the entire and original understanding between the parties with respect to the subject matter hereof and thereof, and (c) supersede all prior agreements, whether oral or written. No waiver, modification, or addition to this Amendment or the Employment Agreement shall be valid unless in writing and signed by the parties hereto. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed as of the day and year first above written.   ALLSCRIPTS LLC     William J. Davis By:   /s/ Glen Tullman       /s/ William J. Davis   Title:   Chief Exeuctive Officer         2

Exhibit 10.58(c) Schedule A Notice of Restricted Stock Grant   Participant:    [•] Company:    WellPoint, Inc. Notice:    You have been granted the following award of restricted shares of common stock of the Company in accordance with the terms of the Plan and the attached Restricted Stock Award Agreement. Plan:    WellPoint 2006 Incentive Compensation Plan Grant:    Grant Date: [•]    Number of Shares of Restricted Stock: [•] Period of Restriction:    The Period of Restriction applicable to the number of Shares of your Restricted Stock listed in the “Shares” column below shall commence on the Grant Date and shall lapse on the date listed in the “Lapse Date” column below.   Shares    Lapse Date          However, in the event that a Change of Control occurs before your Termination, the Period of Restriction shall immediately lapse. In addition, if you participate in the WellPoint, Inc. Executive Severance Plan, the lapsing of the Period of Restriction upon, or in connection with, a “change of control” (as defined in the Severance Plan) will be determined in accordance with Sections 4.1 and 4.3 of the Severance Plan. Rejection:    If you do not want to accept your Restricted Stock, please return this Agreement, executed by you on the last page of this Agreement, at any time within sixty (60) days after the Grant Date to WellPoint, Inc., 120 Monument Circle, Indianapolis, Indiana 46204, Attention: Stock Administration. Do not return a signed copy of this Agreement if you accept your Restricted Stock. If you do not return a signed copy of this Agreement within sixty (60) days after the Grant Date, you will have accepted your Restricted Stock and agreed to the terms and conditions set forth in this Agreement and the terms and conditions of the Plan. -------------------------------------------------------------------------------- Restricted Stock Award Agreement This Restricted Stock Award Agreement (this “Agreement”) dated as of the Grant Date (the “Grant Date”) set forth in the Notice of Restricted Stock Grant attached as Schedule A hereto (the “Grant Notice”) is made between WellPoint, Inc. (the “Company”) and the Participant set forth in the Grant Notice. The Grant Notice is included in and made part of this Agreement. 1. Period of Restriction. The Period of Restriction with respect to the Restricted Stock shall be as set forth in the Grant Notice (the “Period of Restriction”). The Participant acknowledges that prior to the expiration of the applicable portion of the Period of Restriction, the Restricted Stock may not be sold, transferred, pledged, assigned, encumbered, alienated, hypothecated or otherwise disposed of (whether voluntary or involuntary or by operation of law by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy)). Upon the expiration of the applicable portion of the Period of Restriction, the restrictions set forth in this Agreement with respect to the Restricted Stock theretofore subject to such expired Period of Restriction shall lapse, except as may be provided in accordance with Section 9 hereof. 2. Ownership. The Participant agrees that the Participant’s ownership of the Restricted Stock will be evidenced solely by a “book entry” (i.e., a computerized or manual entry) in the records of the Company or its designated stock transfer agent in the Participant’s name. Upon expiration of the applicable portion of the Period of Restriction, the Company shall transfer the vested shares to the Participant’s account with the Company’s captive broker. 3. Termination. (a) Retirement. If the Participant’s Termination is due to Retirement (for purposes of this Agreement, defined as the Participant’s Termination after attaining age fifty-five (55) with at least ten (10) completed years of service, the restrictions upon the Restricted Stock shall continue to lapse throughout the Period of Restriction except on those shares required to meet the minimum income tax liability; provided, however, that if the Participant’s Termination due to Retirement is during the calendar year of the Grant Date, the Restricted Stock shall be forfeited on a pro-rata basis, measured by the number of months in that calendar year during which the Participant was employed by the Company or an Affiliate (e.g., if the Participant’s Retirement occurs in September, 25% (or 3/12) of the Restricted Stock will be forfeited), and the Period of Restriction on the non-forfeited portion of the Restricted Stock shall continue to lapse throughout the Period of Restriction except on those shares required to meet the minimum income tax liability. (b) Death and Disability. If the Participant’s Termination is due to death or Disability (for purposes of this Agreement, as defined in the applicable WellPoint Long-Term Disability Plan), then the Period of Restriction shall immediately lapse, causing any restrictions which would otherwise remain on the Restricted Stock to immediately lapse. (c) Other Terminations. If the Participant’s Termination is by the Company or an Affiliate or by the Participant for any reason other than death, Disability or Retirement, then all Restricted Stock for which the Period of Restriction had not lapsed prior to the date of such Termination shall be immediately forfeited. (d) Clawback Provision. If the Participant is an Executive (as defined by WellPoint) at the time of the Participant’s Termination, the Restricted Stock shall be forfeited if the Participant breaches any provision of Section 3.6 or 3.10 of the WellPoint, Inc. Executive Severance Plan (the “Severance Plan”), regardless of whether the Participant is then a participant in the Severance Plan, in which case the Participant shall be subject to the “Return of Consideration” provision contained in Section 3.7 of the Severance Plan. 4. Transferability of the Restricted Stock. The Participant shall have the right to appoint any individual or legal entity in writing, on a Designation of Beneficiary form as his/her beneficiary to receive any Restricted Stock (to the extent not previously terminated or forfeited) under this Agreement upon the Participant’s death. Such designation under this Agreement may be revoked by the Participant at any time and a new beneficiary may be appointed by the Participant by execution and submission to the Company, or its designee, of a revised Designation of Beneficiary form to this Agreement. In order to be effective, a designation of beneficiary must be -------------------------------------------------------------------------------- completed by the Participant on the Designation of Beneficiary form and received by the Company, or its designee, prior to the date of the Participant’s death. If the Participant dies without such designation, the Restricted Stock will become part of the Participant’s estate. 5. Taxes and Withholdings. Upon the expiration of the applicable portion of the Period of Restriction or such earlier dates as the Participant elects pursuant to Section 83(b) of the Code, or as of which the value of any Shares of Restricted Stock first becomes includible in the Participant’s gross income for income tax purposes, the Participant shall notify the Company if the Participant wishes to pay the Company in cash, check or with shares of WellPoint common stock already owned for the satisfaction of any taxes of any kind required by law to be withheld with respect to such Shares; provided, however, that pursuant to any procedures, and subject to any limitations as the Compensation Committee of the Board of Directors of the Company (“Committee”) may prescribe and subject to applicable law, if the Participant does not notify the Company in writing at least 14 days prior to the applicable lapse of the Period of Restriction, then the Participant will satisfy such withholding obligations by withholding Shares otherwise deliverable to the Participant pursuant to the Restricted Stock (provided, however, that the amount of any Shares so withheld shall not exceed the amount necessary to satisfy required Federal, state, local and non-United States withholding obligations using the minimum statutory withholding rates for Federal, state, local and/or non-U.S. tax purposes, including payroll taxes, that are applicable to supplemental taxable income). Any such election made by the Participant must be irrevocable, made in writing, signed by the Participant, and shall be subject to any restrictions or limitations that the Committee, in its sole discretion, deems appropriate. In the event that the Participant elects immediate Federal income taxation with respect to all or any portion of this award of Restricted Stock pursuant to Section 83(b) of the Code, the Participant agrees to deliver a copy of such election to the Company within ten (10) days after filing such election with the Internal Revenue Service. 6. Rights as a Shareholder. The Participant shall have all rights of a shareholder (including, without limitation, dividend and voting rights) with respect to the Restricted Stock, for record dates occurring on or after the Grant Date and prior to the date any such Shares of Restricted Stock are forfeited in accordance with this Agreement, except that any dividends or distributions paid in Shares or other securities (including, without limitation, any change in the shares of Restricted Stock pursuant to Section 4.3 of the Plan) with respect to the Restricted Stock shall, during the Period of Restriction, be deposited with the Company or any holder appointed pursuant to Section 2 hereof, together with a stock power endorsed in blank or other appropriate instrument of transfer, or credited to the Participant’s book-entry account established under Section 2 hereof, as applicable, and shall be subject to the same restrictions (including, without limitation, the Period of Restriction) as such Restricted Stock and otherwise considered to be such Restricted Stock for all purposes hereunder. 7. No Right to Continued Employment. Neither the Restricted Stock nor any terms contained in this Agreement shall confer upon the Participant any express or implied right to be retained in the employment or service of the Company or any Affiliate for any period, nor restrict in any way the right of the Company, which right is hereby expressly reserved, to terminate the Participant’s employment or service at any time for any reason. The Participant acknowledges and agrees that any right to have restrictions on the Restricted Stock lapse is earned only by continuing as an employee of the Company or an Affiliate at the will of the Company or such Affiliate, or satisfaction of any other applicable terms and conditions contained in the Plan and this Agreement, and not through the act of being hired, being granted the Restricted Stock or acquiring Shares hereunder. 8. The Plan. This Agreement is subject to all the terms, provisions and conditions of the Plan, which are incorporated herein by reference, and to such regulations as may from time to time be adopted by the Committee. In the event of any conflict between the provisions of the Plan and this Agreement, the provisions of the Plan shall control, and this Agreement shall be deemed to be modified accordingly. The Plan and the prospectus describing the Plan can be found on the Company’s HR intranet. A paper copy of the Plan and the prospectus shall be provided to the Participant upon the Participant’s written request to the Company at WellPoint, Inc., 120 Monument Circle, Indianapolis, Indiana 46204, Attention: Corporate Secretary, Shareholder Services Department. -------------------------------------------------------------------------------- 9. Compliance with Laws and Regulations. (a) The Restricted Stock and the obligation of the Company to sell and deliver Shares hereunder shall be subject in all respects to (i) all applicable Federal and state laws, rules and regulations and (ii) any registration, qualification, approvals or other requirements imposed by any government or regulatory agency or body which the Committee shall, in its discretion, determine to be necessary or applicable. Moreover, the Company shall not deliver any certificates for Shares to the Participant or any other person pursuant to this Agreement if doing so would be contrary to applicable law. If at any time the Company determines, in its discretion, that the listing, registration or qualification of Shares upon any national securities exchange or under any state or Federal law, or the consent or approval of any governmental regulatory body, is necessary or desirable, the Company shall not be required to deliver any certificates for Shares to the Participant or any other person pursuant to this Agreement unless and until such listing, registration, qualification, consent or approval has been effected or obtained, or otherwise provided for, free of any conditions not acceptable to the Company. (b) The Shares received upon the expiration of the applicable portion of the Period of Restriction shall have been registered under the Securities Act of 1933 (“Securities Act”). If the Participant is an “affiliate” of the Company, as that term is defined in Rule 144 under the Securities Act (“Rule 144”), the Participant may not sell the Shares received except in compliance with Rule 144. Certificates representing Shares issued to an “affiliate” of the Company may bear a legend setting forth such restrictions on the disposition or transfer of the Shares as the Company deems appropriate to comply with Federal and state securities laws. (c) If, at any time, the Shares are not registered under the Securities Act, and/or there is no current prospectus in effect under the Securities Act with respect to the Shares, the Participant shall execute, prior to the delivery of any Shares to the Participant by the Company pursuant to this Agreement, an agreement (in such form as the Company may specify) in which the Participant represents and warrants that the Participant is purchasing or acquiring the shares acquired under this Agreement for the Participant’s own account, for investment only and not with a view to the resale or distribution thereof, and represents and agrees that any subsequent offer for sale or distribution of any kind of such Shares shall be made only pursuant to either (i) a registration statement on an appropriate form under the Securities Act, which registration statement has become effective and is current with regard to the Shares being offered or sold, or (ii) a specific exemption from the registration requirements of the Securities Act, but in claiming such exemption the Participant shall, prior to any offer for sale of such Shares, obtain a prior favorable written opinion, in form and substance satisfactory to the Company, from counsel for or approved by the Company, as to the applicability of such exemption thereto. 10. Notices. All notices by the Participant or the Participant’s assignees shall be addressed to WellPoint, Inc., 120 Monument Circle, Indianapolis, Indiana 46204, Attention: Stock Administration, or such other address as the Company may from time to time specify. All notices to the Participant shall be addressed to the Participant at the Participant’s address in the Company’s records. 11. Other Plans. The Participant acknowledges that any income derived from the Restricted Stock shall not affect the Participant’s participation in, or benefits under, any other benefit plan or other contract or arrangement maintained by the Company or any Affiliate.   WELLPOINT, INC. By:     Printed:   William J. Ryan Its:   Chairman, Compensation Committee   WellPoint, Inc. Board of Directors I DO NOT accept this Restricted Stock:   Signature:           Printed Name:         Date:    

  Exhibit 10.9 THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. THIS WARRANT AND THE COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS WARRANT UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO ICORIA, INC. THAT SUCH REGISTRATION IS NOT REQUIRED. Right to Purchase up to 825,472 in Shares of Common Stock of Icoria, Inc. (subject to adjustment as provided herein) FIVE –YEAR COMMON STOCK PURCHASE WARRANT No.                        Issue Date: October 19, 2004      ICORIA, INC., a corporation organized under the laws of the State of Delaware (“ICOR”), hereby certifies that, for value received, LAURUS MASTER FUND, LTD., or assigns (the “Holder”), is entitled, subject to the terms set forth below, to purchase from the Company (as defined herein) from and after the Issue Date of this Warrant and at any time or from time to time before 5:00 p.m., New York time, through the close of business October 19, 2009 (the “Expiration Date”), up to 825,472 fully paid and nonassessable shares of Common Stock (as hereinafter defined), $0.01 par value per share, at the applicable Exercise Price per share (as defined below). The number and character of such shares of Common Stock and the applicable Exercise Price per share are subject to adjustment as provided herein.      As used herein the following terms, unless the context otherwise requires, have the following respective meanings:      (a) The term “Company” shall include ICOR and any corporation which shall succeed, or assume the obligations of, ICOR hereunder.      (b) The term “Common Stock” includes (i) the Company’s Common Stock, par value $0.01 per share; and (ii) any other securities into which or for which any of the securities described in (a) may be converted or exchanged pursuant to a plan of recapitalization, reorganization, merger, sale of assets or otherwise.      (c) The term “Other Securities” refers to any stock (other than Common Stock) and other securities of the Company or any other person (corporate or otherwise) which the holder of the Warrant at any time shall be entitled to receive, or shall have received, on the exercise of the Warrant, in lieu of or in addition to Common Stock, or which at any time shall be issuable or shall have been issued in exchange for or in replacement of Common Stock or Other Securities pursuant to Section 4 or otherwise.   --------------------------------------------------------------------------------        (d) The “Exercise Price” applicable under this Warrant shall be as follows:      (i) a price of $0.85 for the first 412,736 shares acquired hereunder; and      (ii) a price of $0.97 for 412,736 shares acquired hereunder.      1. Exercise of Warrant.           1.1 Number of Shares Issuable upon Exercise. From and after the date hereof through and including the Expiration Date, the Holder shall be entitled to receive, upon exercise of this Warrant in whole or in part, by delivery of an original or fax copy of an exercise notice in the form attached hereto as Exhibit A (the “Exercise Notice”), shares of Common Stock of the Company, subject to adjustment pursuant to Section 4.           1.2 Fair Market Value. For purposes hereof, the “Fair Market Value” of a share of Common Stock as of a particular date (the “Determination Date”) shall mean:      (a) If the Company’s Common Stock is traded on the American Stock Exchange or another national exchange or is quoted on the National or SmallCap Market of The Nasdaq Stock Market, Inc. (“Nasdaq”), then the closing or last sale price, respectively, reported for the last business day immediately preceding the Determination Date.      (b) If the Company’s Common Stock is not traded on the American Stock Exchange or another national exchange or on the Nasdaq but is traded on the NASD OTC Bulletin Board, then the mean of the average of the closing bid and asked prices reported for the last business day immediately preceding the Determination Date.      (c) Except as provided in clause (d) below, if the Company’s Common Stock is not publicly traded, then as the Holder and the Company agree or in the absence of agreement by arbitration in accordance with the rules then in effect of the American Arbitration Association, before a single arbitrator to be chosen from a panel of persons qualified by education and training to pass on the matter to be decided.      (d) If the Determination Date is the date of a liquidation, dissolution or winding up, or any event deemed to be a liquidation, dissolution or winding up pursuant to the Company’s charter, then all amounts to be payable per share to holders of the Common Stock pursuant to the charter in the event of such liquidation, dissolution or winding up, plus all other amounts to be payable per share in respect of the Common Stock in liquidation under the charter, assuming for the purposes of this clause (d) that all of the shares of Common Stock then issuable upon exercise of the Warrant are outstanding at the Determination Date.           1.3 Company Acknowledgment. The Company will, at the time of the exercise of the Warrant, upon the request of the holder hereof acknowledge in writing its continuing obligation to afford to such holder any rights to which such holder shall continue to be entitled after such exercise in accordance with the provisions of this Warrant. If the Holder 2 --------------------------------------------------------------------------------   shall fail to make any such request, such failure shall not affect the continuing obligation of the Company to afford to such holder any such rights.           1.4 Trustee for Warrant Holders. In the event that a bank or trust company shall have been appointed as trustee for the holders of the Warrant pursuant to Subsection 3.2, such bank or trust company shall have all the powers and duties of a warrant agent (as hereinafter described) and shall accept, in its own name for the account of the Company or such successor person as may be entitled thereto, all amounts otherwise payable to the Company or such successor, as the case may be, on exercise of this Warrant pursuant to this Section 1.      2. Procedure for Exercise.           2.1 Delivery of Stock Certificates, Etc., on Exercise. The Company agrees that the shares of Common Stock purchased upon exercise of this Warrant shall be deemed to be issued to the Holder as the record owner of such shares as of the close of business on the date on which this Warrant shall have been surrendered and payment made for such shares in accordance herewith. As soon as practicable after the exercise of this Warrant in full or in part, and in any event within three (3) business days thereafter, the Company at its expense (including the payment by it of any applicable issue taxes) will cause to be issued in the name of and delivered to the Holder, or as such Holder (upon payment by such Holder of any applicable transfer taxes) may direct in compliance with applicable securities laws, a certificate or certificates for the number of duly and validly issued, fully paid and nonassessable shares of Common Stock (or Other Securities) to which such Holder shall be entitled on such exercise, plus, any fractional share to which such holder would otherwise be entitled will be rounded to the nearest one full share and included in the aforementioned certificate or certificates, up to the number of shares available under this Warrant. Holder will also receive any other stock or other securities and property (including cash, where applicable) to which such Holder is entitled upon such exercise pursuant to Section 1 or otherwise.           2.2 Exercise. Payment may be made in cash, wire transfer or by certified or official bank check payable to the order of the Company equal to the applicable aggregate Exercise Price, for the number of Common Shares specified in such Exercise Notice (as such exercise number shall be adjusted to reflect any adjustment in the total number of shares of Common Stock issuable to the Holder per the terms of this Warrant) and the Holder shall thereupon be entitled to receive the number of duly authorized, validly issued, fully-paid and non-assessable shares of Common Stock (or Other Securities) determined as provided herein.      3. Effect of Reorganization, Etc.; Adjustment of Exercise Price.           3.1 Reorganization, Consolidation, Merger, Etc. In case at any time or from time to time, the Company shall (a) effect a reorganization, (b) consolidate with or merge into any other person, or (c) transfer all or substantially all of its properties or assets to any other person under any plan or arrangement contemplating the dissolution of the Company, then, in each such case, as a condition to the consummation of such a transaction, proper and adequate provision shall be made by the Company whereby the Holder of this Warrant, on the exercise hereof as provided in Section 1 at any time after the consummation of such reorganization, consolidation or merger or the effective date of such dissolution, as the case may be, shall be 3 --------------------------------------------------------------------------------   permitted to exercise the Warrant as if such exercise occurred previous to the reorganization, consolidation, merger, as set forth above, and receive the Common Stock (or Other Securities) issuable on such exercise prior to such consummation or such effective date, any other stock and other securities and property (including cash) to which such Common Stock holder would be entitled, all subject to further adjustment thereafter as provided in Section 4. Further, pursuant to an occurrence or transaction contemplated in this paragraph, the Company may, in its sole discretion, choose to redeem the then outstanding warrants for cash, rather than allow the warrants to remain outstanding subsequent to any occurrence or transaction contemplated in this paragraph. The cash value of the warrants will be the value of the consideration received by the Common Stock holders minus the then current exercise price of the warrants.           3.2 Dissolution. In the event of any dissolution of the Company following the transfer of all or substantially all of its properties or assets, the Company, concurrently with any distributions made to holders of its Common Stock, shall at its expense deliver or cause to be delivered to the Holder the same distributions made to holders of its Common Stock, pursuant to the exercise mechanism set forth above in Section 3.1, or, if the Holder shall so instruct the Company, to a bank or trust company specified by the Holder and having its principal office in New York, NY as trustee for the Holder of the Warrant (the “Trustee”).           3.3 Continuation of Terms. Upon any reorganization, consolidation, merger or transfer (and any dissolution following any transfer) referred to in this Section 3, this Warrant shall continue in full force and effect and the terms hereof shall be applicable to the shares of stock and other securities and property receivable on the exercise of this Warrant after the consummation of such reorganization, consolidation or merger or the effective date of dissolution following any such transfer, as the case may be, and shall be binding upon the issuer of any such stock or other securities, including, in the case of any such transfer, the person acquiring all or substantially all of the properties or assets of the Company, whether or not such person shall have expressly assumed the terms of this Warrant as provided in Section 4. In the event this Warrant does not continue in full force and effect after the consummation of the transactions described in this Section 3, then the Company’s securities and property (including cash, where applicable) receivable by the Holders of the Warrant will be delivered to Holder or the Trustee as contemplated by Section 3.2.      4. Extraordinary Events Regarding Common Stock. In the event that the Company shall (a) issue additional shares of the Common Stock as a dividend or other distribution on outstanding Common Stock, (b) subdivide its outstanding shares of Common Stock, or (c) combine its outstanding shares of the Common Stock into a smaller number of shares of the Common Stock, then, in each such event, the Exercise Price shall, simultaneously with the happening of such event, be adjusted by multiplying the then Exercise Price by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to such event and the denominator of which shall be the number of shares of Common Stock outstanding immediately after such event, and the product so obtained shall 4 --------------------------------------------------------------------------------   thereafter be the Exercise Price then in effect. The Exercise Price, as so adjusted, shall be readjusted in the same manner upon the happening of any successive event or events described herein in this Section 4. The number of shares of Common Stock that the holder of this Warrant shall thereafter, on the exercise hereof as provided in Section 1, be entitled to receive shall be increased to a number determined by multiplying the number of shares of Common Stock that would otherwise (but for the provisions of this Section 4) be issuable on such exercise by a fraction of which (a) the numerator is the Exercise Price that would otherwise (but for the provisions of this Section 4) be in effect, and (b) the denominator is the Exercise Price in effect on the date of such exercise.      5. Certificate as to Adjustments. In each case of any adjustment or readjustment in the shares of Common Stock (or Other Securities) issuable on the exercise of the Warrant, the Company at its expense will promptly cause its Chief Financial Officer or other appropriate designee to compute such adjustment or readjustment in accordance with the terms of the Warrant and prepare a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based, including a statement of (a) the consideration received or receivable by the Company for any additional shares of Common Stock (or Other Securities) issued or sold or deemed to have been issued or sold, (b) the number of shares of Common Stock (or Other Securities) outstanding or deemed to be outstanding, and (c) the Exercise Price and the number of shares of Common Stock to be received upon exercise of this Warrant, in effect immediately prior to such adjustment or readjustment and as adjusted or readjusted as provided in this Warrant. The Company will forthwith mail a copy of each such certificate to the holder of the Warrant and any Warrant agent of the Company (appointed pursuant to Section 11 hereof).      6. Reservation of Stock, Etc., Issuable on Exercise of Warrant. The Company will at all times reserve and keep available, solely for issuance and delivery on the exercise of the Warrant, shares of Common Stock (or Other Securities) from time to time issuable on the exercise of the Warrant.      7. Assignment; Exchange of Warrant. Subject to compliance with applicable securities laws, this Warrant, and the rights evidenced hereby, may be transferred by any registered holder hereof (a “Transferor”) in whole or in part. On the surrender for exchange of this Warrant, with the Transferor’s endorsement in the form of Exhibit B attached hereto (the “Transferor Endorsement Form”) and together with evidence reasonably satisfactory to the Company demonstrating compliance with applicable securities laws, which shall include, without limitation, the provision of a legal opinion from the Transferor’s counsel (at the Company’s expense) that such transfer is exempt from the registration requirements of applicable securities laws, and with payment by the Transferor of any applicable transfer taxes) will issue and deliver to or on the order of the Transferor thereof a new Warrant of like tenor, in the name of the Transferor and/or the transferee(s) specified in such Transferor Endorsement Form (each a “Transferee”), calling in the aggregate on the face or faces thereof for the number of shares of Common Stock called for on the face or faces of the Warrant so surrendered by the Transferor.      8. Replacement of Warrant. On receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of any such loss, theft or destruction of this Warrant, on delivery of an indemnity agreement or security reasonably satisfactory in form and amount to the Company or, in the case of any such 5 --------------------------------------------------------------------------------   mutilation, on surrender and cancellation of this Warrant, the Company at its expense will execute and deliver, in lieu thereof, a new Warrant of like tenor.      9. Registration Rights. The Holder of this Warrant has been granted certain registration rights by the Company. These registration rights are set forth in a Registration Rights Agreement entered into by the Company and Holder dated as of even date of this Warrant.      10. Maximum Exercise A. Notwithstanding anything contained herein to the contrary, the Holder shall not be entitled to exercise this Warrant on an exercise date, in connection with that number of shares of Common Stock which would be in excess of the sum of (i) the number of shares of Common Stock beneficially owned by the Holder and its affiliates on an exercise date, and (ii) the number of shares of Common Stock issuable upon the exercise of this Warrant with respect to which the determination of this proviso is being made on an exercise date, which would result in beneficial ownership by the Holder and its affiliates of more than 4.99% of the outstanding shares of Common Stock of the Company on such date. For clarity sake, the exercise of this Warrant is subordinated to the conversions under the Secured Convertible Term Note, and so long as the conversions under the Note are available, no warrants may be exercised and no shares issuable hereunder that will exceed 4.99% of the issued and outstanding shares of the Common Stock of the Company when combined with the Note conversions.      B. Beneficial ownership, as discussed in this paragraph 10, shall be determined in accordance with Section 13(d) of the Exchange Act and Regulation 13d-3 thereunder. Notwithstanding anything contained herein to the contrary, at no time shall the beneficial ownership exceed 19.99% of the Common Stock. Notwithstanding anything contained herein to the contrary, the number of shares of Common Stock issuable by the Company and acquirable by the Holder at a price below $0.49 per share pursuant to the terms of this Warrant, the Note made by the Company to the Holder dated the date hereof (as amended, modified or supplemented from time to time, the “Note”), the Purchase Agreement (as defined in the Note) or any Related Agreement (as defined in the Purchase Agreement), shall not exceed an aggregate of 7,261,022 shares of the Company’s Common Stock (subject to appropriate adjustment for stock splits, stock dividends, or other similar recapitalizations affecting the Common Stock) (the “Maximum Common Stock Issuance”), unless the issuance of shares hereunder in excess of the Maximum Common Stock Issuance shall first be approved by the Company’s shareholders. If at any point in time and from time to time the number of shares of Common Stock issued pursuant to the terms of this Warrant, the Note, the Purchase Agreement or any Related Agreement, together with the number of shares of Common Stock that would then be issuable by the Company to the Holder in the event of a conversion or exercise pursuant to the terms of this Warrant, the Note, the Purchase Agreement or any Related Agreement, would exceed the Maximum Common Stock Issuance but for this paragraph the Holder’s actions shall be stayed, and,the Company shall promptly within ninety (90) days call a shareholders meeting to solicit shareholder approval for      the issuance of the shares of Common Stock hereunder in excess of the Maximum Common Stock Issuance.      11. Warrant Agent. The Company may, by written notice to the each Holder of the Warrant, appoint an agent for the purpose of issuing Common Stock (or Other Securities) on the 6 --------------------------------------------------------------------------------   exercise of this Warrant pursuant to Section 1, exchanging this Warrant pursuant to Section 7, and replacing this Warrant pursuant to Section 8, or any of the foregoing, and thereafter any such issuance, exchange or replacement, as the case may be, shall be made at such office by such agent. 12.   Transfer on the Company’s Books. Until this Warrant is transferred on the books of the Company, the Company may treat the registered holder hereof as the absolute owner hereof for all purposes, notwithstanding any notice to the contrary.      13. Notices, Etc. All notices and other communications from the Company to the Holder of this Warrant shall be mailed by first class registered or certified mail, postage prepaid, sent by overnight courier, communicated through a facsimile transmission, at such address, or facsimile transmission number, as may have been furnished to the Company in writing by such Holder or, until any such Holder furnishes to the Company an address, then to, and at the address of, the last Holder of this Warrant who has so furnished an address to the Company.      14. Miscellaneous. This Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought. This Warrant shall be governed by and construed in accordance with the laws of State of New York without regard to principles of conflicts of laws. Any action brought concerning the transactions contemplated by this Warrant shall be brought only in the state courts of New York or in the federal courts located in the state of New York; provided, however, that the Holder may choose to waive this provision and bring an action outside the state of New York. The individuals executing this Warrant on behalf of the Company agree to submit to the jurisdiction of such courts and waive trial by jury. The prevailing party shall be entitled to recover from the other party its reasonable attorney’s fees and costs. In the event that any provision of this Warrant is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of this Warrant. The headings in this Warrant are for purposes of reference only, and shall not limit or otherwise affect any of the terms hereof. The invalidity or unenforceability of any provision hereof shall in no way affect the validity or enforceability of any other provision hereof. The Company acknowledges that legal counsel participated in the preparation of this Warrant and, therefore, stipulates that the rule of construction that ambiguities are to be resolved against the drafting party shall not be applied in the interpretation of this Warrant to favor any party against the other party. [BALANCE OF PAGE INTENTIONALLY LEFT BLANK; SIGNATURE PAGE FOLLOWS.] 7 --------------------------------------------------------------------------------        IN WITNESS WHEREOF, the Company has executed this Warrant as of the date first written above.                                     ICORIA, INC.               WITNESS:                     By:                           Name:                           Title:               8 --------------------------------------------------------------------------------   EXHIBIT A FORM OF SUBSCRIPTION (To Be Signed Only On Exercise Of Warrant) TO:     ICORIA, INC.      Attention:     Barry Buzogany, General Counsel      The undersigned, pursuant to the provisions set forth in the attached Warrant (No.                    ), hereby irrevocably elects to purchase (check applicable box):                                                          shares of the Common Stock covered by such Warrant                           The undersigned herewith makes payment of the full Exercise Price for such shares at the price per share provided for in such Warrant, which is $                    . Such payment takes the form of (check applicable box or boxes):                          $                    in lawful money of the United States                                                The undersigned requests that the certificates for such shares be issued in the name of, and delivered to                                                                                                         whose address is                                                                 .      The undersigned represents and warrants that all offers and sales by the undersigned of the securities issuable upon exercise of the within Warrant shall be made pursuant to registration of the Common Stock under the Securities Act of 1933, as amended (the “Securities Act”) or pursuant to an exemption from registration under the Securities Act.               Dated:                               (Signature must conform to name of holder as specified on the face of the Warrant)                       Address:                                               A-1 --------------------------------------------------------------------------------   EXHIBIT B FORM OF TRANSFEROR ENDORSEMENT (To Be Signed Only On Transfer Of Warrant)      For value received, the undersigned hereby sells, assigns, and transfers unto the person(s) named below under the heading “Transferees” the right represented by the within Warrant to purchase the percentage and number of shares of Common Stock of Icoria, Inc. into which the within Warrant relates specified under the headings “Percentage Transferred” and “Number Transferred,” respectively, opposite the name(s) of such person(s) and appoints each such person Attorney to transfer its respective right on the books of Icoria, Inc. with full power of substitution in the premises.                       Percentage     Transferees   Address   Transferred   Number Transferred                                                                                                                               Dated:                               (Signature must conform to name of holder as specified on the face of the Warrant)                       Address:                                                                     SIGNED IN THE PRESENCE OF:                                 (Name) ACCEPTED AND AGREED:         [TRANSFEREE]                                 (Name)         B-1